Risk Management
Tokyo Century takes a systematic approach to minimize the risk of losses, proactively preparing appropriate measures based on its severity and likelihood.
To ensure appropriate risk management within the Company, the Board of Directors has formulated the Basic Risk Management Policy.
We have established the Risk Management Committee to identify and assess overall risks associated with the Company and take appropriate qualitative and quantitative actions as necessary. Based on the Committee’s regulations, the Committee conducts comprehensive risk management. Following deliberations by the Risk Management Committee, the risk management system, methods, and other relevant matters are approved at the Management Meeting and stipulated in the "Comprehensive Risk Management Rules." The Risk Management Committee regularly—and as necessary—reports on the total risk volume and risk management status across the entire Company to the Management Meeting and the Board of Directors. In addition, the Chief Risk Officer reports on risk-related matters to the President & CEO from time to time. Under the oversight provided through these reports, the Company verifies, evaluates, and continuously reviews the effectiveness of its risk management.
Major Risks and Management Frameworks
Non-Financial (Non-Quantitative) Risks
As our business domain grows and we branch out from the financial sector to provide business services, it is becoming increasingly important to account for non-financial operational risks that cannot be measured quantitatively. Based on this recognition, Tokyo Century has established key risk indicators (KRIs) for non-financial risks. Regular monitoring of these KRIs is performed, and the results are reported to the Board of Directors and other relevant bodies. KRIs have been set pertaining to human resources, information security, accidents, compliance, climate change, legal affairs, and corruption. We are also expanding our range of environmental KRIs in relation to renewable energy, CO2 emissions, and the portion of our portfolio accounted for by fuel-efficient aircraft and electrified vehicles and have broadened the scope of personnel and labor risk (from non-consolidated to consolidated) amid the rising importance of tracking and managing human rights and climate change risks. Nevertheless, stakeholder concern for non-financial risks is constantly rising. From the perspective of sustainability, Tokyo Century will continue to bolster its range of effective indicators related to human rights and climate change risks as well as to other environmental, social, and governance (ESG) factors and to the United Nations Sustainable Development Goals (SDGs).
Risk Heatmap
The Basic Risk Management Policy and the Comprehensive Risk Management Rules define risk categories. The Group assesses annual secular changes in its business operations and maps these categories using a matrix that measures the level of impact and frequency of occurrence. This is reviewed every year in comprehensive consideration of various factors, such as trends in risk scenarios in risk audits, the amount of risk in each risk item, initiatives, and incidents or accidents.
Risk Categories and Risk Items
Scrollable horizontally
| Risk Categories | Risk Items |
|---|---|
| Credit risk | Bad debt risk |
| Country risk | Country risk |
| Market risk | Interest rate risk, Foreign exchange risk |
| Investment risk | Equity investment risk, Business investment risk |
| Asset risk | Unguaranteed residual value risk of assets, Real estate risk, Ship risk, Aircraft risk, Power plant asset risk |
| Liquidity risk | Liquidity risk |
| Operational risk | Administration risk, Fraud risk, System risk, Information security risk, Legal risk, Personnel and labor risk, Human rights and workplace environment risk, Disaster (including infectious diseases) risk, Regulatory and system change risk, Climate change risk, Reputational risk |
