Risk Management

In conducting its diverse business activities, Marubeni manages risks through a multifaceted approach encompassing micro, macro, quantitative and qualitative perspectives. In an environment where exchange rates, resource prices and other financial and commodity market variables remain prone to substantial volatility, Marubeni practices integrated risk management by quantifying its maximum risk on a consolidated basis and keeping this maximum risk within the amount of total equity, which represents its risk-bearing capacity. While rigorously screening prospective investments on a case-by-case basis and monitoring them after they have been funded, Marubeni is also upgrading its internal control systems to prevent unforeseen losses.

Overview of Marubeni’s Risk Management

Zoom

CLOSE

Integrated Risk Management

Marubeni practices integrated risk management across its diverse operations spanning a broad range of sectors and geographic areas. Its integrated risk management incorporates both a macro view of the entire Group and a micro focus on individual risks. In conducting inte-grated risk management encompassing all of its Group assets, Marubeni uses the VaR (value at risk) method to calculate its maximum risk.
Integrated risk management synthesizes various risk factors to quantify risk as a single monetary value. Marubeni precisely quantifies risk through computerized simulations that reflect the latest information. Based on the asset holdings of the Marubeni Group, maximum downside risk (risk assets), as quantified by the VaR method is, at present, within the amount of total equity which is the source of funds for unforeseen circumstances.

Management of Individual Deals, Investment Decision-Making Process

For individual deals such as significant business investments, Marubeni has a risk management regime spanning every step from entry through exit-based consensus decision-making and monitoring.
With regard to new deals, business groups must first submit project summaries and business plans. In response, the relevant corporate staff groups submit opinions on the result of risk analyses from both a quantitative and qualitative perspective. They are then discussed by the Investment and Credit Committee. The Investment and Credit Committee applies PATRAC*, the risk-adjusted profit after tax, as one guideline for quantitatively evaluating the deal while taking into account the feasibility of individual deals, risk analyses and company-wide concentration risks. The deal is then forwarded to the Corporate Management Committee for further scrutiny and approved by the President. Deals that exceed a certain materiality threshold are approved by a Board of Directors’ resolution.

PATRAC (Profit After Tax less Risk Asset Cost): A performance indicator developed by Marubeni to measure the extent to which returns exceed a minimum risk-adjusted return target

Once an investment has been made, the business group monitors it. Highly material investments, however, are monitored more closely to facilitate early problem detection and corrective action. The Investment and Credit Committee, Corporate Management Committee and the Board of Directors periodically receive reports on the current status of investments. The strategic, growth and profit potential of these investments is examined, with necessary investments considered from a variety of multifaceted angles and the determination regarding whether to revise and move forward or withdraw made in accordance with a consensus-based decision-making process.

Business Continuity Plans (for business continuity in the event of a major disaster)

Marubeni has formulated a Business Continuity Plans (BCP) to prepare for large-scale earthquakes, epidemics of new strains of infectious diseases, and situations in which the Tokyo Head Office loses its ability to function. In addition to BCPs for the Tokyo Head Office, Marubeni has also prepared individual BCPs for offices both in and outside Japan that are essential to the continuation of corporate activities. These plans are updated regularly to ensure they remain relevant.
When a massive earthquake hit Japan in March 2011, an emergency headquarters under the direction of the President was established in accordance with the initial response guidelines stipulated in the BCPs. Information on the safety of employees, the status of our infrastructure, and damage to facilities was quickly collected and necessary measures were taken in a timely manner.

Information Security

Marubeni established in-house regulations and other internal rules on IT security in 2001 to protect information assets and ensure the safe conduct of business activities. We are aware of the risks of unauthorized access, loss, alteration, and leaks of information assets, the necessary security measures are taken, and the effective use and credibility of information assets are maintained, while the importance of information security is emphasized throughout the company so that all employees are well informed.
For the Group companies, we created the Marubeni Group IT Governance Rules in April 2013, based on the above in-house regulations and other internal rules. The unification of the information security rules within the Group will contribute to stronger security.
Additionally, Marubeni has established IT General Control Guideline as a standard for strengthening control at Marubeni and key Group companies, in response to the FY2008 launch of the internal control reporting system based on the Financial Instruments and Exchange Act. These guidelines are continuously reviewed and improved.

Measures to Address Climate Change

The Marubeni Group is incorporating climate change perspectives into its risk management process to respond to risks and opportunities related to climate change.
Specifically, we are including climate change as an evaluation item in the integrated risk management process mentioned above, and are analyzing and making judgments on its potential impact on our businesses.
As a risk management measure for climate change, the Marubeni Group is analyzing the risks, opportunities and impacts on its businesses from climate change based on a Current Policies Scenario and a 2.0°C Scenario. We will use the results in formulating business plans and strategies.

Protection of Water Resources

In dealing with water problems in regions suffering from water shortages, the Marubeni Group conducts risk analysis and implements business risk assessments for new investments and existing businesses. We make decisions on whether to go ahead with projects after comprehensively analyzing and assessing not only local laws and regulations, but also the impact on the local environment and communities.

Risk Assessments of Human Rights Issues, Labor Problems and Corrupt Practices

The Marubeni Group conducts risk assessments on social issues such as human rights issues, labor problems (including child labor, forced labor and illegal employment) and corrupt practices. We make business decisions after conducting risk analysis and assessments for new loans and investments as well as existing businesses.