Enterprise Risk Management (ERM)

To achieve sustainable growth and enhance medium to long-term corporate value, the JACCS Group positions risk management as a top management priority and is working to advance risk management by promoting Enterprise Risk Management (ERM) based on our "Basic Risk Management Regulations." The JACCS Group comprehensively identifies risks*1 confronting the Group, and carries out both quantitative and qualitative assessment of these risks. The Group’s basic policy is to work to avoid or reduce losses by taking preemptive measures, while managing appropriate risk taking within the parameters set for risk tolerance.
JACCS has established a Risk Management Committee and an Investment Deliberation Committee as bodies chaired by the President, COO and Representative Director. The Risk Management Committee receives reports from the Credit Risk Management Committee, which comprehensively manages credit risks related to proper merchant management and customer credit; the ALM Operating Committee, which manages interest rate and liquidity risks; and the Operational Risk Management Committee, which manages proper business execution and incidents. The committee identifies, evaluates, reviews, and determines countermeasures for significant risks affecting the group, discusses and deliberates on appropriate levels and ranges of risk-taking, and monitors their implementation status.
The Investment Deliberation Committee evaluates appropriate growth potential, profitability, and risks when making strategic investment decisions for new businesses and products necessary for the group's further growth. The content discussed and deliberated on in each committee is reported to the Management Committee and Board of Directors as necessary to ensure the effectiveness of ERM. Through offensive and defensive systems, management makes decisions after understanding various risk situations.

Risk Management Structure Chart

The JACCS Group has established a risk management system based on the concept of "Three Lines of Defense." The first line takes responsibility for risk management operations as the risk owner. The second line monitors and supervises the risk management processes conducted by the first line and centrally manages risks. The third line, as the internal audit department, audits the effectiveness of business operations, internal controls, and risk management processes. Risk information extracted through internal audits is linked to the Risk Supervisory Department (second line) and reflected in improvements to the first line's risk management processes.

Three lines of defense

We quantify major risks such as credit risk, interest rate risk, and operational risk, and aim to ensure financial soundness and improve risk-adjusted profitability and capital efficiency by controlling the balance of earnings, risk, and capital. In April 2023, we established the Risk Supervisory Department as the department overseeing risk management to promote ERM. While conventional risk management was defensive risk management focusing on qualitative evaluation and risk reduction centered on operational risk, in response to changes in the internal and external risk environments surrounding the JACCS Group, we have established an offensive risk management system to appropriately take risks through quantification of risks including risk appetite. We conduct unified management of the JACCS Group's risk management ensuring risk management soundness, and aim to advance business portfolio management in addition to verifying capital adequacy through risk quantification.

We quantify credit risk, interest rate risk, and operational risk, and verify and monitor capital adequacy by comparing these risk amounts with equity capital. (Refer to the image diagram below) After securing a risk buffer for fluctuations in risk amounts against equity capital, we set a risk capacity (maximum acceptable risk amount), and use the difference between risk capacity and risk appetite (types and amounts of risks we actively seek to take) as surplus capital for strategic decision-making aimed at enhancing corporate value, such as growth investments and shareholder returns.
The risk amount measured as of the end of March 2024 is within the range of risk capacity, ensuring sufficient financial soundness to execute current business strategies.

The JACCS Group is working on business portfolio management that considers and implements resource allocation based on evaluating profitability and growth potential against business risk assets to take appropriate risks and secure risk-adjusted returns. We have also established basic policies regarding the business portfolio and are formulating and implementing business portfolio strategies centered on four main axes: Credit, Payment, Finance, and Overseas, based on domestic and overseas business segments. Furthermore, we have established an Investment Deliberation Committee to understand appropriate growth potential and profitability and manage risks when making strategic investments such as new businesses and M&A, in addition to investing resources to promote existing business growth. Through these initiatives, we evaluate and monitor each business's growth potential, capital efficiency, risk-adjusted profitability, and growth strategies comprehensively, and regularly examine their positioning in the group and business operation policies in the Management Committee and supervise them in the Board of Directors to take appropriate risks.

• Based on the growth potential and capital efficiency of each business segment, the Company determines the medium- to long-term direction
• By optimizing the business portfolio, the Company realizes sustainable growth

Growth potential: Top line growth rate
Capital efficiency: Return on risk-weighted assets (RORA)

• *
  The mapping shown above is for illustrative purposes only.

The risks surrounding the JACCS Group are diversifying and becoming more complex due to changes in the internal and external management environments. We practice risk management operations according to the following process to review risk management as appropriate in response to various environmental changes and respond to new risks.

The JACCS Group extracts possible risks for each risk category annually through risk assessment without omission, analyzes and evaluates their importance based on the impact and frequency of risk events, and formulates and implements countermeasures.
Risks extracted through risk assessment are evaluated from a company-wide perspective, and important risks that should be prioritized for countermeasures are visualized as a risk map. Risks recognized as particularly important, are reduced and maintained by managing risk measures and their progress and results through PDCA.
The response status to each risk is monitored through incident management, and improvement measures are considered as necessary.
Furthermore, this series of risk management processes and response status is regularly reported to and discussed by the Risk Management Committee, and reported to the Management Committee and Board of Directors as necessary.

The JACCS Group classifies risks to be managed into "risks related to management strategy" (risks related to strategic management decision-making) and "risks related to business execution" (risks related to daily business operations) and manages them comprehensively. We also visualize important risks as a risk map based on risk assessment and implement risk measures according to their importance.

• *
  This was recognized as a risk in March 2024.

Risk map

• *1
  Various risks are extracted in each risk category. Items marked with (*) indicate main risks extracted from risk categories.
• *2
  The risk map shows what was recognized as of August 2023.

• 1 Risk related to business strategy

  Risk content/impact

  The JACCS Group comprises the parent company and seven affiliates, principally operating in the consumer credit industry. The Group’s long-term vision is to “establish JACCS’ position as a leading brand among Asian consumer finance companies.” In the three-year medium-term business plan "MOVE 70" starting in fiscal 2022, we are considering and implementing the development of various new products and services, new businesses, and capital investments to realize our long-term vision, but if the business environment changes dramatically and we are exposed to unexpected risks, it may adversely affect the JACCS Group's performance and financial condition. Although JACCS Co., Ltd., accounts for a very high proportion of revenue and income within the Group’s consolidated operations—indicating a high ratio of non-consolidated to consolidated business operations—if risks related to the business of one or more of the Company’s affiliates were to significantly materialize, this may affect the Group’s operating performance. The Group identifies each type of risk outlined in this section as major risks, which have the potential to impede the Group’s various business strategies. Through the execution of countermeasures, the Group strives to reduce the level of risk.

  Response

  In executing each business strategy, we are working on business portfolio management that considers and implements evaluations and resource allocation based on business profitability and growth potential with awareness of risk-return. To make disciplined management decisions within this framework, we have established a system where the Investment Deliberation Committee evaluates profitability, growth potential, and related risks concerning new businesses and products. New investments executed after evaluation by the Investment Deliberation Committee are continuously verified through monitoring at the Management Committee for a certain period. Furthermore, we recognize various risks shown in this section as significant risks that could hinder each business strategy and implement countermeasures to reduce risks.

• 2 Risk related to the economic and competitive environment

  Risk content/impact

  (Deterioration of the economic environment and increase in uncertainty) The Group’s mission is to “contribute to the realization of a future inspired by dreams and an affluent society.” Through the credit business, payment business, and financing business, the Group provides financial services aimed at consumers. Hence, trends in personal consumption have a large impact on the Group’s business performance. In the future, if personal consumption were to decline owing to the impact of a global economic downturn or rising inflation and interest rates, this may affect the Group’s operating performance and financial position. (Intensification or deterioration of the competitive environment) The competitive environment of the consumer credit industry in which the Group operates is rapidly changing, reflecting not only the entry of rival companies from within the industry, but also of companies from other industries and fintech companies. If the Group’s market competitiveness were to fall, owing to a decline in profitability stemming from intensified competition with rivals from within the industry, or a delay in developing and providing new services based on the promotion of a digital transformation (DX) and the subsequent inability to enhance operational efficiency, this may affect the Group’s operating performance and financial position.

  Response

  Based on changes in the economic and competitive environments, we are executing various strategies and measures outlined in the three-year medium-term business plan "MOVE 70," including continuous improvement of products and services, continued investment, and quality and productivity improvement through web-based solutions and automation.

• 3 Country risk

  Risk content/impact

  The Company has operations in Vietnam, Indonesia, the Philippines, and Cambodia. Each local affiliate is exposed to a broad range of unpredictable country risks, including such geopolitical risks as war, riots and terrorism, political risk, economic risk, cultural risk, religious risk, and behavioral risk. In the case where such risks materialize, this may affect the Company's operating performance and financial position.

  Response

  The Group gathers information on the impacts on its business of the political situation and regulatory environment of the countries in which it operates. The Group also constantly exchanges and shares information with local affiliates, while working to secure the safety of expatriate and local employees. Furthermore, the Group provides support as the situation requires.

• 4 Risk related to laws and regulations

  Risk content/impact

  The Group is subject to the application of relevant laws, including the Installment Sales Law. If a law or regulation is newly enacted of revised, there is the possibility that this may affect the management of business operations, products and services. In addition, compliance expenses in relation to newly enacted or revised laws or regulations may increase. Furthermore, in the case that the Group were unable to comply with a law or regulation, there is the possibility that it may be subject to administrative penalties, punishments or restrictions on its business operations.

  Response

  We conduct business in compliance with laws and regulations, and continuously work to strengthen our compliance system by staying aware of trends in the establishment and revision of laws and regulations in a timely manner.

• 5 Climate change risk

  Risk content/impact	The Group recognizes climate change risk as a major risk that may affect the overall management of the Company. The Group also recognizes that if climate change risks were to materialize, it would have a flow-on effect on other types of risk to which the Company is exposed, centering on credit risk.
  Response	To manage this risk, the Group is pursuing the development of its risk management system, and working to respond appropriately by accurately identifying risks and reviewing climate change scenarios. Climate change

• 6 Credit risk

  Risk content/impact

  Since the JACCS Group primarily operates a consumer credit business, it is extremely important to appropriately manage credit risk that directly affects our performance and financial condition. The main events where credit risk affects performance and financial condition are as follows. (Risk of increase in allowance for doubtful accounts) In addition to increased delinquencies occurring at a certain rate with the increase in total receivables, there is a possibility of increasing allowance for doubtful accounts due to increased delinquencies resulting from decreased credit accuracy, decreased credit skills among credit screening staff, and increased fraudulent applications. In addition, if we need to increase allowance for doubtful accounts due to factors such as bankruptcy, merchant fraud, or changes in real estate market conditions caused by economic trends, increased personal bankruptcies, or deterioration of merchants' business conditions, it may adversely affect our performance and financial condition. (Member store risk) If merchants' business deteriorates or fails, there is a possibility that continuous service provision to customers who used our services at those merchants may stop or products may not be delivered, and if these problems occur, we may face lawsuits from customers claiming our merchant management system was inadequate.

  Response

  To manage credit risk company-wide, we hold a Credit Risk Management Committee once a month, chaired by the director in charge of credit management and consisting of members from sales, screening, and credit management departments, to analyze and monitor delinquency trends and merchant management status across departments and discuss countermeasures. The main responses to the risks mentioned above are as follows. (Risk of increase in allowance for doubtful accounts) The sales department receives information about delinquency occurrence trends from the screening and credit management departments and reflects it in appropriate merchant management. The screening department regularly verifies delinquency occurrence trends and reflects them in the automated credit system as appropriate to maintain and improve credit accuracy, while implementing measures to promptly eliminate fraudulent applications to suppress delinquency occurrence and work to secure quality receivables. The credit management department works to strengthen collection of early delinquent receivables through the introduction of systems to improve debt collection efficiency and strives to suppress increases in allowance for doubtful accounts due to prolonged delinquency periods. Regarding interest repayment claims (so-called overpayment refund claims), since we have already set loan interest rates below the Interest Rate Restriction Act limits, we believe the impact on performance will continue to be minimal. (Member store risk) In individual credit purchase intermediation, we work to reduce risk by continuously reviewing the "merchant risk model" that quantifies merchant risks to detect signs of bankruptcy in advance. In comprehensive credit purchase intermediation, we strive for proper management by implementing site monitoring to monitor illegal sales items at e-commerce merchants. In addition, each department works on human resource development by promoting continuous training and acquisition of related field qualifications to improve employees' work skills and expertise, establishing an environment to maintain appropriate customer credit and merchant management.

• 7 Financial market-related risk

  Risk content/impact

  Since the JACCS Group requires substantial funding due to the nature of the consumer credit business, it is extremely important to appropriately manage risks such as rising procurement interest rates that directly affect our performance and financial condition. The main events that affect our performance and financial condition, such as rising procurement interest rates, are as follows. (Risk of increase in funding interest-rate) When funding interest rates rise, the Company’s financial expenses increase. However, in new contracts for operating receivables and loans receivable, since there are cases in which it may take a certain amount of time before installment finance fees and interest rates can be increased to reflect the rise in funding interest rates, this may affect the Group’s operating performance and financial position. If the Group's operating performance were to deteriorate, its credit ratings and creditworthiness would be downgraded and it would be forced to raise funds at higher interest rate levels than is the case currently. Consequently, this may affect the Company's operating performance and financial position. In addition, owing to such factors as changes in monetary policy by the financial authorities in each jurisdiction and geopolitical risk, market interest rates may rise, and this may lead to an increase in the Group’s funding interest rates. If such a scenario were to occur, this may have an impact on the Group’s operating performance and financial position. (Liquidity risk) The Group carries out fundraising through borrowings from banks and other financial institutions, the issuance of bonds and commercial paper on capital markets, and the securitization of receivables. If a deterioration were to occur in market conditions or in the Group’s financial position, it may become difficult to secure necessary levels of funding or the Group may be forced to raise funds at significantly higher interest rates than normal. They may have significant impact on our business activities and performance. (Risk of fall in prices of investment securities, etc.) As of March 31, 2024, the Group held investment securities amounting to ¥29,614 million (market-listed and unlisted shares, etc.) and property, plant and equipment amounting to ¥23,017 million (land, buildings and structures, etc.). There is the possibility that the Company may record valuation losses on such holdings owing to declines in market prices or impairment of investment value. (Exchange rate fluctuation risk) The financial statements of the Group’s overseas affiliates are presented in local currencies. Consequently, in the event of large fluctuations in exchange rates, the Group’s consolidated financial statements may be affected. In addition, a portion of fundraising by overseas affiliates is carried out in currencies other than the local currency.

  Response

  (Risk of increase in funding interest-rate) We implement ALM (Asset and Liability Management) and regularly hold ALM Operating Committee meetings to monitor and analyze financial conditions affecting interest rate changes and asset and liability status, and make recommendations for risk identification and appropriate responses. We strive to reduce the risk of rising procurement interest rates by using funding sources and financial instrument hedging transactions appropriate for the asset period and interest rate sensitivity. As of March 31, 2024, JACCS has received ratings of A+ for long-term debt and a-1 for commercial paper from Rating and Investment Information, Inc. (R&I), and A+ for long-term debt and J-1 for commercial paper from Japan Credit Rating Agency, Ltd. (JCR). (Liquidity risk) The ALM Operating Committee meets regularly to monitor and analyze risks in ALM (Asset and Liability Management) and makes recommendations for risk identification and appropriate responses. Particularly for funding from financial markets, which is susceptible to financial environment impacts, we work to reduce liquidity risk by diversifying procurement methods, setting liquidity backup lines, and managing on-hand liquidity as preparation for risks. (Risk of fall in prices of investment securities, etc.) With regard to investment securities, the Company regularly examines the holding purpose, results and rationality, and in cases where the holding is judged to be inappropriate, such securities are promptly disposed of through sales, etc. Regarding stockholding status, please refer to "Chapter 4 Status of Submitting Company, 4 Status of Corporate Governance, (5) Status of Stock Holdings" in the Securities Report for the fiscal year ending March 2024. (Exchange rate fluctuation risk) While some overseas affiliates' funding is in currencies other than local currencies, we strive to reduce foreign exchange risk by using financial instrument hedging transactions in operations.

• 8 Human rights risk

  Risk content/impact

  In recent years, corporate activities have become increasingly global, and cases of negative impacts on various stakeholders' human rights have been observed. In 2011, the United Nations established the "Guiding Principles on Business and Human Rights," requiring all nations and companies to respect human rights. In the JACCS Group, domestic and overseas employees, merchants, business partners, and outsourcing contractors are stakeholders in the supply chain. If the JACCS Group's business activities result in negative impacts on these stakeholders' human rights and we fail to address them appropriately, it may adversely affect our performance and financial condition through reputation damage and loss of human resources.

  Response

  Given the increasing importance of respect for human rights in corporate activities due to the diversification of human rights issues, we have newly established the "JACCS Group Human Rights Policy." Based on this policy, we will implement human rights due diligence to identify and address negative impacts on stakeholders' human rights related to business activities. In addition, we will establish a consultation desk accessible to those who have experienced or may experience negative human rights impacts and implement initiatives for remediation. Furthermore, human rights initiatives will be discussed at the management level and continuously monitored, with improvements made as necessary and reports made to the Board of Directors.

• 9 Disaster and epidemic risk

  Risk content/impact

  In the event of a large-scale natural disaster or other similar event, leading to severe damage to the Group’s physical and human assets, this may result in a situation in which the continuation of operations becomes problematic. Such a scenario may have a negative impact on the Group’s operating performance.

  Response

  To prepare for sudden and unpredictable situations, including earthquakes, large-scale disasters, and accidents, the Group has prepared a disaster response manual, formulated operational rules for its Emergency Response Committee, and established a Business Continuity Plan (BCP). These and other measures are focused on building the Group’s crisis management system. In addition, the Group has introduced a dedicated telecommunication system to facilitate rapid confirmation of employee safety and ascertainment of the situation in each local area in which it operates. These measures are aimed at minimizing damage to the Group in disaster situations. With regard to the possibility of a major earthquake including the earthquake directly hitting the Tokyo region—an event that would likely cause serious damage—the Group has built a complementary structure primarily in the Kinki region that would perform operations on a substitute basis. To make continuity of business operations possible, the Group holds regular annual training drills based on such disaster scenarios.

• 10 Cybersecurity risk

  Risk content/impact

  The JACCS Group's main businesses use computer systems and communication networks to process large volumes of diverse information. While systems for providing services to customers and merchants through the Internet are increasing, cyber attack methods against systems are becoming more sophisticated and ingenious daily. Furthermore, as cybersecurity risks are becoming increasingly serious, implementing security measures against cyber attacks is extremely important to provide safe and secure services without interruption. Owing to such contingencies as cyberattacks from external sources, other unauthorized access, and virus infection, there is the possibility that the Group’s computer systems may suffer information leaks, or experience service outages or malfunctions. In such cases, operations may be suspended and the Company may be liable for compensation for damages resulting from suspension of operations. In such cases, business interruption/confusion and resulting compensation could damage the JACCS Group's social credibility and adversely affect our business, performance, and financial condition.

  Response

  The Group’s cybersecurity measures include the use of firewalls, an intrusion prevention system (IPS), Web application firewalls (WAF), continuous monitoring to detect external attacks, regular vulnerability assessments, vulnerability checks through penetration tests, and security information gathering, investigation and response by external organizations (Japan Computer Emergency Response Team Coordination Center (JPCERT/CC), etc.). Hence, the Group is working to strengthen its security in response to elaborate and rapidly evolving threats. In addition, to further promote management-led strengthening of security against cyber attacks, we have established a specialized cybersecurity organization. Furthermore, we have organized CSIRT (Computer Security Incident Response Team) to respond to cyber incidents and established a system to implement appropriate responses to prevent expansion of damage. We also conduct regular education to raise information security awareness among officers and employees, training against targeted attack emails, and implement measures to minimize damage in case of incidents.

• 11 System risk

  Risk content/impact

  The JACCS Group's main businesses use computer systems and communication networks to process large volumes of diverse information, making system stability extremely important. In the event of a major computer system or telecommunications network failure owing to such factors as natural disaster, cybersecurity incidents, computer virus, power outage, breakdown or malfunction, the Group’s operations may be suspended. They may have serious impacts on services to customers and merchants and adversely affect the JACCS Group's business, performance, and financial condition. In addition, since computer systems contain customer and merchant data, data leakage, alteration, or destruction could lead to decreased credibility of the JACCS Group and adversely affect our business, performance, and financial condition.

  Response

  In preparation for such contingencies, the Group’s information processing center has been built with an earthquake-resistant structure, has a duplicate power supply system and on-site backup power generation equipment. Hence, these measures provide system and network redundancy and maintain service availability. The Group has also taken such steps as implementation of 24-hour/365-day continuous system monitoring, regular data backup, and strict control of access to the system and data. Hence, on an on-going basis the Group implements programs to ensure stable day-to-day system operations as well as maintain and enhance security.

• 12 Information-related risk

  Risk content/impact

  The nature of the Group's business involves the acquisition, retention, and use of a large volume of personal information. Although the Group takes the utmost care when handling personal information, in the event of a leak or loss of personal information from the Group or its outside contractors, or personal information is damaged or used fraudulently, the Group may face a loss of credibility and liability for damages, which may affect the Company’s operating performance and financial position. In addition, if the Company were to commit a legal violation as a business operator that handles personal information, it may be subject to administrative measures, including penalties, recommendations and orders. In addition, in recent years there has been an acceleration in changes to the environment for data management, including an increase in instances where information terminals are taken outside the Group’s offices. This partly reflects changes in the style of sales operations. Consequently, the risk of data leaks has increased.

  Response

  We recognize personal information protection as one of our important management issues and strive to maintain proper handling and security management based on the "Basic Regulations for Personal Information Protection" and "Personal Information Protection Management Regulations." Specifically, the Personal Information Protection Committee, chaired by the President, COO and Representative Director, meets once every six months to consult with management about plans and progress of personal information protection management, including risk-based outsourcing management, and implements appropriate management and supervision. In addition, the Company and its three domestic consolidated subsidiaries have received Privacy Mark certification from the Japan Information Processing Development Corporation (JIPDEC). The Privacy Mark system assesses measures taken by organizations to protect personal information, and the Group works to ensure the effectiveness of its privacy system. Furthermore, to strengthen security measures against taking information terminals outside the Group has implemented a range of countermeasures, including VPN connection and finger vein-based biometric authentication as security measures for mobile devices, and restrictions on printouts. In addition, the Group is working to reduce information security risk by implementing ongoing training programs for employees.

• 13 Administrative risk

  Risk content/impact

  The Group conducts a wide variety and high volume of administrative processing within the operation of its businesses. If accidents or fraud occur due to failure to perform proper administrative processing, such as incorrect instructions or responses, significant delays in processing due to inability to improve operational efficiency, leading to personal information leaks, incorrect billing to customers, incorrect settlements with merchants or settlement delays, depending on the content and scale, it may affect customer trust and merchant businesses, resulting in liability for damages and decreased credibility, potentially adversely affecting the JACCS Group's performance and financial condition.

  Response

  Each department conducts administrative processing according to basic rules, continuously reviews regulations and manuals, reduces human operations through systemization and RPA, and improves business processing accuracy, prevents accidents and fraud, and enhances accuracy and efficiency by establishing systems to detect fraud and deficiencies through on-site visits and monitoring of departments and outsourcing contractors.

• 14 Compliance risk

  Risk content/impact

  The Group conducts a range of business operations that require registration with, or permits issued by, the supervisory government agency. These include money lending operations, credit card operations, installment sales finance operations, acquiring operations for credit card-handling member stores, fund settlement operations, and servicer operations. The Group’s businesses are subject to the application of such relevant laws, etc., as the Installment Sales Law, Specified Commercial Transactions Law, Money Lender Business Law, Fund Settlement Law, and Act on Prevention of Transfer of Criminal Proceeds. Consequently, the Group must ensure that its business operations are managed in compliance with relevant laws. In the event that the Group was found to have engaged in activity that was in violation of laws or regulations, the Group may be subject to punishment by the supervisory government agency pursuant to laws and regulations (business improvement order, partial or full business suspension order, revocation of registration, etc.), which may affect the Company’s operating performance and financial position.

  Response

  As departments to establish, maintain, and continue compliance systems, we designate internal management departments for each business to formulate and improve regulations and manuals for their operations, and verify whether operations are being conducted appropriately according to these regulations and manuals. If a problem is identified, we formulate improvement measures or revise regulations and ensure thorough awareness. We conduct training for officers at least once a year and provide continuous education for all group officers and employees to improve compliance awareness. The Compliance Committee, which should be the core of promoting the JACCS Group's compliance system, is regularly held with the President, COO and Representative Director serving as chairman to discuss and implement organizational responses to events that seriously violate or may violate laws and internal regulations.

• 15 Human risk

  Risk content/impact

  Since the Group undertakes business operations involving a wide array of fields, it has an ongoing program for recruiting high-quality personnel, and it is essential for the Group to develop and train its workforce. However, if the Group were unable to recruit or retain high-quality personnel, or it became unable to adequately train its employees, this may affect the Group’s operating performance and financial position.

  Response

  In relation to this, based on the recognition that the personal growth of each individual employee is the wellspring of the Company’s growth, the Group prioritizes the recruitment and nurturing of diverse human resources. In addition, to enable each individual to demonstrate their skills to the maximum extent possible, the Group is striving to develop its personnel system and create an employee-friendly work environment. Main initiatives are as follows: (Engagement improvement) Based on the results of continuous engagement surveys, we are working to build relationships where the company and employees can contribute to each other's growth. (Health and productivity management promotion) We strategically work on maintaining and improving employee health, aiming to realize work styles and workplace environments that balance work and life. (Women's advancement promotion) For sustainable development and innovation, we set targets for the percentage of female managers and promote women's advancement through education and active appointment.

• 16 Reputational risk

  Risk content/impact

  The Group's reputation is extremely important to the maintenance of its relationships with customers, member stores, investors, and society in general. If the Group were unable to prevent transactions that raise concerns over social responsibility, contravention of laws or regulations, employee fraud, or computer system failures, or if the Group were unable to adequately deal with such occurrences, it may lose current or future customers, member stores or investors, and this may affect the Group’s operating performance and financial position.

  Response

  To reduce the risk of such damage, the Group implements training programs for all officers and employees on an ongoing basis. In addition, to prepare for such contingencies, the Group is working to develop a system of countermeasures, including such measures as the execution of information monitoring of the Group on a day-to-day basis.

• *
  These risks are based on information available to the Group, and include key matters that may constitute business risks.
  The list of risks outlined below is not exhaustive, and new risks may arise owing to a range of unforeseen factors, including those relating to changes in future economic conditions and the business environment affecting the consumer credit industry.
  The summary of business risks outlined above was excerpted from the Company’s Securities Report (Yuka Shoken Hokokusho) submitted on June 28, 2024.