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Gate 4 Management Foundation

Global Group Risk Management

Our broad range of businesses across the globe face various risks. In addition, the environment surrounding our management and businesses is undergoing rapid change, leading to higher levels of uncertainty. Amid these circumstances, we need to heighten our awareness of risks and carry out a swift response to address them. Issues resulting from changes in the external environment, which are difficult to address in our frontline operations, need to be resolved through collaboration between the front lines and management. To that end, we have in place the following risk management structure to ensure such collaboration.

1. In the Event of a Crisis 1. In the Event of a Crisis

1. In the Event of a Crisis

Pursuant to the Rules on the Crisis Management Headquarters, Mitsui established a Crisis Management Headquarters, headed by the President, as an organization to limit damage and loss by rapidly determining and implementing concrete measures to respond to crisis appropriately. Based on Rules on Business Continuity Management, in the event that business continuity is disrupted by earthquakes, flooding, terrorism, pandemics, power shortages, etc., and assuming that a crisis situation will be drawn out, Emergency Management Headquarters shall be established, headed by the Managing Director in charge of the Human Resources & General Affairs Division, for the purpose of quickly restoring and resuming distributed business operations in the wake of a disaster.

CASE Our Response to COVID-19

Mitsui set up the Emergency Management Headquarters in January 2020, centralizing the management of information, including for affiliated companies, while rapidly deciding and implementing measures to bring employees home from overseas locations, and to change work systems, including at overseas trading affiliates.

2. Companywide Risks 2. Companywide Risks

2. Companywide Risks

Centered on the Corporate Management Committee and the Portfolio Management Committee, an advisory body to the Corporate Management Committee, Mitsui has put into place a comprehensive risk management structure to integrate Groupwide risk management, while facilitating the design, establishment and development of risk management structures on a Global Groupwide level, and handle significant risks. In addition, each division of the corporate units is responsible for surveillance of all of Mitsui’s positions, control within the range of their authority, and support of the relevant Directors and Managing Officers.

3. Frontline Operational Activities 3. Frontline Operational Activities

3. Frontline Operational Activities

Each Head Office Chief Operating Officer and Regional Chief Operating Officer manages business within the scope of the authority granted to them based on the various rules on delegation of authority, including the Rules on Delegation of Authority for Head Office Chief Operating Officers, and manages risk of loss relating to their businesses within the scope of their authority. Transactions that exceed the authority delegated to each Head Office Chief Operating Officer and Regional Chief Operating Officer require approval via Mitsui’s internal approval system. In other words, approval needs to be obtained from the Corporate Management Committee or a relevant representative director or senior managing officer, depending on the importance of the situation (please refer to page 113). Measures taken by each business unit to manage quantitative risks*1 include setting position limits and loss-cut limits as well as monitoring positions by divisions with relevant expertise. For the management of qualitative risks,*2 the business units are obligated to observe related internal regulations.

  • Credit risks, market risks, business risks arising from the businesses of subsidiaries, country risks, etc.
  • Compliance risks and operational risks, etc.

Business Risks

Through its integrated risk management structure, Mitsui looks across organizational boundaries for Groupwide risks, and identifies material risks within the context of risk frequency, the scale of projected damage and Groupwide risk tolerance. We also promote a wide range of initiatives to hedge and control risks. As of March 31, 2020, Mitsui has identified the following material risks.

Importance   Risk Countermeasures
Risks
from COVID-19
pandemic
Action Plan for the Fiscal Year Ending March 31, 2021
Business
investment
risk
Portfolio management
Risk asset monitoring, stress checks
Country risk Financing through export credit agencies in each country
Qualitative and quantitative monitoring of state of country risk, etc.
Risks regarding
climate change
(physical risk)
Insurance coverage, creation of crisis management policies, reinforcement of facilities, etc.
Risks regarding
climate change
(transition risk)
Halve GHG emissions impact by 2030 (compared with 2020) to achieve net-zero emissions in 2050
Commodity
market risk
Devise and implement policies to manage risk, including setting position limits and loss limits, use commodity swaps and other derivatives to hedge against risks, etc.
Foreign
currency risk
Devise and implement policies to manage risk, including setting position limits and loss limits, use forward exchange contracts, currency swaps and other derivatives to hedge against risks, etc.
Risk of change
in price of
shareholdings in
listed companies
Periodically review stock portfolio
Credit risk Credit line management, monitoring of delinquent recovery periods, require provision of collateral as necessary
Fund procurement
risk
Financial strategy
Operational
risk
Examine risk mitigation measures and loss prevention measures, insurance coverage, etc.
Compliance
risk
Global Groupwide compliance structure
Risk regarding
information
systems
and information
securities
Internal controls on information systems and information security
Risk relating to
natural disasters,
terrorism,
and riots
Business continuity plan (BCP) for crises, disaster contingency manuals, etc.

In addition to these specific material risks, Mitsui has identified the following major risks that could adversely impact its financial health, operating performance, and cash flows.

  • Risk of changes in global macroeconomic factors
  • Risk associated with laws and regulations
  • Risk due to competition
  • Risk associated with constraints of human resources
  • Interest rate risk
  • Risks regarding pension costs and defined benefit obligations

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the carrying value of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. For details, please refer to our Annual Securities Report for the fiscal year ended March 31, 2020.