Risk management

In order to oversee overall risk management of the Company, we have established the Risk Compliance Committee which comprises our management team and the Internal Control Supervisory Manager as its members.
The Risk Compliance Committee reports to the Board of Directors on matters discussed at the Committee on a quarterly basis. The Board regularly discusses risks and risk management, and provides oversight and direction to business departments when necessary.

Three lines of defense

Every employee takes an active role in the risk management defined in the “Three Lines of Defense.”

First line of defense: Business Departments

We recognize that business departments have the primary responsibility to manage risks associated with revenue-generating business activities. The employees of each department manage day-to-day operational risks proactively and independently, following compliance and risk management practices.

Second line of defense: Compliance Department and Risk Management Department

The Compliance Department and the Risk Management Department are responsible for monitoring risks independent of the business departments and supporting them as needed. In addition, the Compliance Department and Risk Management Department work together to manage company-wide risks integratedly.

Third line of defense: Internal Audit Department

The Internal Audit Department verifies the compliance and risk management fully independent of the business departments, the Compliance Department and the Risk Management Department. Internal Audit takes corrective actions on various risks and provides advice and recommendations to the senior management to improve risk management.

Major risks that we face

Market risks

Market risk is the risk of decreasing our operating revenue due to fluctuations of financial markets including equities, interest rates, and foreign exchange.

Counterparty risks

Counterparty risk is the risk of financial losses caused by defaults on the contractual obligations by the other party of the transaction.

Operational risks

Operational risk is the risk of financial losses caused in the course of daily business operations, such as errors in paperwork. Please note that operational risks are often called “basic risks” under the Japanese regulations on broker/dealers.

System risks

System risk is the risk of losses for customers and/or us that occurs due to system malfunction including system crash and failure or due to unauthorized use of systems.

Liquidity risks

Liquidity risk is the risk of losses that occurs in the event that the Company is unable to secure necessary funds due to, for example, deterioration of its business performance or is forced to procure funds at significantly higher interest rates than usual. It also includes the risk of financial losses caused by being unable to trade in the market or being forced to trade at prices significantly unfavorable than usual due to factors such as market disruption.

Business continuity plan

We have set up the “Business Continuity Management Policy” and “Business Contingency Plan” in order to continue operating our business in case of emergency such as natural disasters, disorders and outages of social infrastructure or pandemic/epidemic. In view of the public nature of our business, we will strive to carry on important operations even during an unplanned disruption while securing the customers’ assets and our employees’ safety.