Integrated Risk Management
To realize sustainable growth by maintaining sound management and improving profitability, the Company is conducting business operations that incorporate frameworks to manage integrated risks. Specifically, the Company has in place a structure for distributing risk capital to each risk category based on the Risk Capital Management Policy and after quantifying each risk through risk assessment methods that correspond with the characteristics of each asset and business. This structure also supports rational risk-taking within an acceptable range. In addition to implementing integrated risk management frameworks, the Company promotes the regular monitoring of the status of risk capital use and asset portfolios. This status is reported to the Risk Management Committee and the Management Committee as well as to the Board of Directors, which is responsible for managing this information. This structure facilitates enhanced internal communication in relation to risks as well as more appropriate responses to risks. In addition, the Company conducts stress tests based on multiple scenarios to verify its resistance to risks from a wide variety of perspectives.
Major Risks and Management Frameworks
Credit RiskWhen examining individual projects, the Company works to ensure appropriate returns based on the risks involved in the project while keeping its focus on transaction and credit status as well as country risk. Taking into account the decentralization of risk across its entire portfolio, the Company manages credit limits while regularly measuring credit risk amounts. The Company adopts a system in which the status of credit risk is reported to the Risk Management Committee, which thereby controls risks accordingly.
Asset RiskWhen examining individual projects involving lease properties and other operating assets, the Company works to ensure appropriate returns based on the risks involved in the project while keeping a sharp focus on future property value. In addition, while taking into account the decentralization of risk across its entire portfolio, the Company regularly measures the amount of risk related to fluctuations in asset value. The Company has in place a system for reporting the status of asset risk to the Risk Management Committee, which thereby controls risks accordingly.
Investment RiskWhen evaluating whether to invest in a project or business, the Company carefully reviews the impact of value fluctuations on investment assets caused by changes on the investee side or in business conditions. Moreover, in addition to ongoing management at the project level, the Company monitors the status of its entire portfolio and takes periodic accounts of overall investment risks. The Company adopts a system in which the status of investment risk is reported to the Risk Management Committee, which thereby controls risks accordingly.
Market RiskThrough comprehensive asset liability management (ALM), the Company monitors the condition of interest rate mismatches and controls the risk of interest rate fluctuation. In addition, the Company regularly measures the amount of market risk related to fluctuations in interest rates, exchange rates, and security prices. The Company adopts a system in which the status of market risk is reported to the Risk Management Committee and the ALM Committee, which thereby control risks accordingly.
Liquidity RiskThe Company makes efforts to ascertain the Groupwide condition of fund management and promotes adjustments to the balance of long-term fund procurement and the diversification of fund procurement methods. In doing so, the Company is working to procure funds in a stable manner. In addition, by taking steps to replenish liquidity in times of crisis, starting with the acquisition of commitment lines, the Company is securing a sufficient amount of fund liquidity. The results of evaluations made regarding the stages of liquidity risk are reported to the Risk Management Committee and the ALM Committee, which thereby control risks accordingly.
Operational RiskThe Company has established a management structure for its information systems that detects and prevents damage caused by system failure and abnormal interruption, inappropriate access from external sources, penetration of computer viruses, and cyberattacks. Furthermore, the Company continuously carries out internal educational activities related to information security and administrative management. In addition, the Company places compliance as its most important management issue and conducts its business activities with a high level of ethics and in accordance with internal regulations. At the same time, the Company implements compliance-related educational activities on a regular basis and has established measures to prevent inappropriate conduct. The status of operational risk is reported to the Risk Management Committee and the Compliance Committee, which control risks accordingly.
Risk Management System
Subjects We have put in place a set of risk management rules, disaster response rules, and response manuals as a precaution to minimize the impact on operations of natural disasters, manmade disasters, accidents, or other events. Having learned lessons from the Great East Japan Earthquake, we have additionally put in place a practical business continuity plan (BCP*1) and carry out related drills regularly.
- BCP:Business Continuity Planning