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 corporate staff unit provides support to business units and overseas regional business units, while also monitoring the company-wide position and reporting to management regarding the aspects of risk management that they are responsible for. 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 Units, which act as the secretariat, manage risks from a company-wide perspective. In coordination with relevant 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 2025, these efforts were discussed by the Portfolio Management Committee and then presented to the Executive Committee and the Board of Directors. Furthermore, under this structure, affiliated companies conduct Control Self-Assessment (CSA) as a means for autonomously evaluating risk and the effectives of controls, and are working to sustain and enhance appropriate risk management.

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 under the theme of "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. Thereafter, it exceeded 20% from FY March 2022 through FY March 2025. 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 at the 1 trillion yen level for four 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 2025)

*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"

Risk Management Supporting the Trading Business

We are working to expand our earnings base through our trading business by responding to the diverse needs of business partners. In recent years, the risk of losses due to contract non-performance has risen as a result of complex factors, including ongoing geopolitical risks, shifts in each country's national economic policies, rising price volatility, and the impact of prolonged inflation pushing interest rates upward.
Against this backdrop, in assessing credit risk we aim to properly evaluate rate of return, interest rate and foreign exchange costs, as well as risk-related expenses, and thereby maximize rate of return relative to risk and invested capital.
To that end, while employing risk adjusted return on risk (RAROR) as an internal benchmark, and quantifying contract non-performance risk, we measure and monitor returns to ensure they are commensurate with the level of risk. RAROR is a metric used in the trading business. It applies the same principles as ROE and measures returns after factoring in exposure to credit and other risk. In FY March 2025, we introduced new guideline values for RAROR as a systematic means for providing increased precision in our risk–return assessments.
Furthermore, we monitor ROIC in our trading business. Calculating return on invested capital provides periodic assessment of capital efficiency, enabling us to confirm that returns are at appropriate levels.
Through risk management using RAROR and ROIC, we aim to optimize the risk–return balance and raise our capital efficiency. Moreover, ongoing monitoring serves to increase the precision of risk awareness on the front lines of each business while also enabling us to gauge company-wide risk levels. In this way we are able to respond flexibly to changes in the business environment, and thus build and maintain a system that supports an appropriate risk appetite.