We identify Company-wide material risks across organization and implement measures to control risks. The Chief Operating Officer of each business unit and regional business unit is responsible for managing risks in their business domain within the authorization delegated to them as part of the performance of their duties. Meanwhile, the Corporate Staff Divisions provide support to Business Units and Regional Business Units regarding the aspects of risk management that they are in charge of 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 Corporate Management Committee. Mitsui has established an integrated risk management system that centrally manages Company-wide risks, through the Portfolio Management Committee under the Corporate Management Committee. The Corporate Staff Divisions, which act as the secretariat, manage risks from a Company-wide perspective. They coordinate with related divisions, identify material risks in light of the frequency of occurrence, expected damage scale and Company-wide risk tolerance, and take appropriate measures. In the fiscal year ended March 2023, these efforts were reported to the Corporate Management Committee and the Board of Directors after discussions by the Portfolio Management Committee.
Mitsui Risk Management Structure (Illustration)
Our Approach to Integrated Risk Management
In the fiscal year ended March 2023, there were risk events including the complex manifestation of credit, market, and geopolitical risks associated with the situation in Russia and Ukraine, the aftereffects of the prolonged COVID-19 pandemic, and the impact of supply chain fragmentation, as well as the strengthening of regulations in various countries and the rise of cyber risks. The various sections of the relevant Corporate Staff Divisions worked in concert to monitor the diversification of Mitsui's business portfolio, and thoroughly manage risks in the trading business, working in conjunction with each business unit to minimize losses.
In addition, we introduced the Control Self-Assessment (CSA) for 522 of our affiliated companies.* Each company autonomously operates a PDCA cycle consisting of identifying management risks, formulating and implementing response policies, checking progress, and implementing new countermeasures, while continuously evaluating and improving the effectiveness of risks and controls, thereby promoting efforts to achieve organizational strategies based on an appropriate risk appetite. Going forward, we will continue to deepen our integrated risk management by pairing top-down risk management, which gives a bird's eye view of the entire Mitsui group, with CSA, which is carried out from a bottom-up perspective.
In the fiscal year ended March 2023, the growing importance of economic security and cybersecurity, as well as the need to increase sensitivity in risk perception relating to human rights were discussed in the Board of Directors, the Corporate Management Committee, and the Portfolio Management Committee. As a result of these discussions, we separated geopolitical risks from country risks and added them to our list of material risks, taking into consideration the impact of economic security on our supply chain and regulatory trends in various countries on our business operations, including our investments.
Since the outlook for the global economy is expected to remain highly uncertain during the period of the new Medium-term Management Plan, integrated risk management, which covers both financial (quantitative) and non-financial (qualitative) risks, will continue to play an important role. We will strengthen our crisis management response and preparedness for multiple scenarios, and flexibly review our timeframes and priorities to steadily fulfill our supply and delivery responsibilities and capture any upside in response to changing market conditions.
* These include companies which are sub-consolidated or accounted for under the equity method by subsidiaries and affiliated companies which are excluded from consolidate financial statement due to lower materiality.
Material Risks as of the End of March 2023
We have newly added "geopolitical risks" to our list of material by separating them from country risks from the beginning in the fiscal year ended March 2023, as we anticipate that heightened political and social tensions between countries and regions could have a wide range of effects on the business environment of Mitsui and its subsidiaries. We regularly monitor political and economic situations in countries and regions that are considered to have high geopolitical risks and we make prudent business decisions based on the risks that exist in each country and region and on changes in the business environment.
The international community is cooperating to impose sanctions in light of the situation in Russia and Ukraine. We are complying with these sanctions through a multifaceted and flexible system in which business units, regional business units, and the Corporate Staff Divisions are effectively coordinating their efforts. As of March 31, 2023, the balance of investments, loans and guarantees in Russia amounts to 362.5 billion yen, which is approximately 4% of the total balance of investments, loans and guarantees of Mitsui and its subsidiaries.