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, 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 significant 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 corresponding measures. In the fiscal year ended March 2022, these efforts were reported to the Corporate Management Committee and the Board of Directors through discussions at the Portfolio Management Committee.
Mitsui Risk Management Structure (image)
Current Situation of Integrated Risk Management
In the fiscal year ended March 2022, the impact of the COVID-19 pandemic, changes in the market environment due to increasing geopolitical risk, semiconductor shortages, logistics bottlenecks and other supply constraints led to downward pressure. Nevertheless, we leveraged our diversified supply sources and other global trading functions built up over many years and utilized our comprehensive strengths, including our logistics functions, to support the stable supply of items such as resources, materials, food and products that are indispensable for the development of society and to enhance earning power. From a risk management perspective, these changes in the external environment may lead to the combined occurrence of risks associated with credit risk as result of fulfillment of contracts with suppliers and purchasers, and country risks. In addition to these risks, we respond to issues such as increasingly stringent regulations in various countries and growing cybersecurity risks by ensuring that related Corporate Staff Divisions cooperate and advise each other, helping to avoid losses caused by the emergence of risks at Headquarter Business Units and regional business units. There is growing uncertainty in the global economy, and major changes in the business environment, such as the emergence of geopolitical risks, supply chain disruption, and rising inflation, have both positive and negative impacts on Mitsui. In this environment, we will endeavor to continue the reliable fulfillment of supply responsibilities while also aiming to reach new heights by enhancing our crises response and preparation for multiple scenarios, reviewing our timeline and priorities in a flexible manner, improving steady capturing of upsides in light of changes in market conditions and practicing integrated risk management that includes evaluation of risks relating to climate change and other non-financial information.
Material Risks as of the End of March 2022
Mitsui's businesses sometimes expose the Company to risks that could cause the value of businesses to deteriorate due to changes in political, economic or social conditions in various countries. Therefore, we implement appropriate risk hedging measures according to the content of the project, such as usage of financing from export credit agencies. We periodically grasp risk exposures for each country in which we hold positions as well as carrying out qualitative and quantitative monitoring of the country risk situation for each country except, in principle, for developed countries, and implement risk control policies in consideration of country risk management. Furthermore, monitoring of our overall portfolio confirms the appropriateness of asset size in accordance with each country as well as each business area. In addition, as of March 31, 2022, our total balance of investments, loans and guarantees in Russia was 426.0 billion yen, which is approximately 4% of the balance of investments, loans and guarantees held by Mitsui and its consolidated subsidiaries. In FY March 2022, the Russian LNG business reported a fair value measurement decrease of 80.6 billion yen (other comprehensive income) and a loss of 20.9 billion yen.
Integrated Report 2022 (P97 Major Risk Exposure by Country) (PDF 18MB)