We look laterally across the Company to identify material risks and implement appropriate risk control measures. The Chief Operating Officer of each business unit and overseas regional business unit is responsible for managing risks in their business domain within the authority delegated to them as part of the execution of their duties. Meanwhile, each of the Corporate Staff Divisions provides support to business units and overseas regional business units regarding the aspects of risk management that they are responsible for, while also monitoring the company-wide position and reporting to management. In addition, the major committees develop and maintain risk management structures on a company-wide basis and handle material risks as advisory bodies and subordinate organizations to the Executive Committee. Mitsui has established an integrated risk management system that manages company-wide risks centrally through the Executive Committee and its advisory body, the Portfolio Management Committee. The Corporate Staff Divisions, which act as the secretariat, manage risks from a company-wide perspective. In coordination with related divisions, they identify material risks and take appropriate measures, considering the frequency of occurrence, expected scale of damage, and level of risk tolerance. In FY March 2024, these efforts were discussed by the Portfolio Management Committee and then presented to the Executive Committee and the Board of Directors.

Mitsui Risk Management Structure

Quantitative Analysis Using Risk Assets

Shareholder Equity and Risk Assets

 

As part of our integrated risk management, we conduct a quantitative risk analysis every year. The results are discussed by the Portfolio Management Committee as being "Mitsui's risk exposure and control," and then reported to the Executive Committee and the Board of Directors.
In addition to the total risk related to assets on the balance sheet, quantitative risk analysis is also used to assess off-balance sheet risks, such as market risk and guarantee liabilities, against defined criteria. Those that meet the criteria are designated as risk assets, and we regularly monitor the associated risk exposure. Risk assets are the basis on which integrated risk management is used to analyze the current situation from various perspectives, such as business investment risk, credit risk, and market risk, as well as by segment, country, and region. We have confirmed that risk assets have remained within the range of around 60–70% of shareholder equity over the past 10 years.
In addition to the ratio (level) of risk assets to shareholder equity, we calculate the ratio (level) of profit to risk assets. After FY March 2016, when we posted a loss, the ratio of profit to risk assets generally remained at around 15%, but fell to around 10% in FY March 2021, when the impact of the COVID-19 pandemic was evident. There after, it exceeded 20% from FY March 2022 through FY March 2024.
Moreover, we have conducted various stress tests such as for a downgrade in the internal ratings of our assets and sudden fluctuations in foreign exchange and stock markets, and examined the impact on risk exposure and its ratio (level) to shareholder equity.
Core Operating Cash Flow has been in the JPY 1 trillion level for three consecutive fiscal years. One mechanism underpinning this performance is our advanced risk management. We will continue to conduct appropriate risk management to be ready for downside risks to our financial performance.
Doing so will in turn lead to the enhancement of our corporate value.

Material Risks (As of end-March 2024)

*1 Report to the Executive Committee as deemed necessary
*2 Organization headed by the CHRO, established based on the "Rules on Business Continuity Management in case of Disasters".

Identification of New Material Risks

• Risk regarding limitation of human capital
• Risk regarding human rights

In FY March 2024, we identified risk regarding human capital limitation risks and human rights risks as new material risks.
We identified these risks due to changes in the external environment where there is an increased level of interest in sustainability initiatives in areas including human capital, human rights, and supply chains, as well as the increase in affiliated companies that recognize these risks as material risks through their Control Self-Assessment (CSA), which was introduced in FY March 2023.
Human capital limitation risks are associated with the loss of opportunities to create business value and the impairment of stable operations in the event of a shortage of human resources. To mitigate this risk, we are conducting human resources management, including securing, developing, evaluating, and remunerating our people appropriately to secure the human capital we need.
Human rights risks are associated with reputational damage due to human rights violations arising from our activities and business relationships within the supply chain and elsewhere, as well as the risk of incurring additional costs associated with eliminating or mitigating the impact of such damage. In addition to reducing risk through human rights due diligence, we take appropriate steps to correct and remedy issues when they arise.