Risk Management

JAFCO Group considers risk management to be an important management issue and has established a system to ensure that operations are conducted appropriately.

Our risk management rules define the management system in accordance with the characteristics and importance of each risk. The risks that we manage are classified into categories including investment management risks, market risks, liquidity risks, human resource risks, compliance risks, information management risks, systems risks, and back-office risks. After deciding the degree of impact of risk materialization, each risk is assigned to departments in charge and managed.

The risk management system adopts the Three Lines of Defense model: risk management by each department in charge (first line), monitoring by the compliance officer and Administration Division (second line), and monitoring by the Internal Audit Division (third line).

As a preventive measure, the Board of Directors and the Board-Audit Committee evaluate the effectiveness of risk management based on management status reports. Investment Committee meetings and portfolio meetings are also held regularly to appropriately manage investment management risks, market risks, liquidity risks, and human resource risks, ensuring the enhancement of the risk management system.

Investment decisions are made after deliberation by the Investment Committee, whose members include the President & CEO and partners. When making decisions, the opinions of staff in charge of investment evaluation are sought separately from those of the Investment Division. The status of unlisted portfolio companies is reported on a regular basis at Investment Committee meetings, portfolio meetings, and fund valuation meetings, for reflection in the valuation of portfolio companies and discussion of appropriate ways to address issues.

To create a culture that ensures proper recognition and management of risks as an organization, we have put in place a system for prompt reporting and consultation by the relevant divisions in case risk management concerns or issues arise.  In addition, we have established and operate the JAFCO Hotline (internal reporting system) to enable the Company Group’s executives and employees, portfolio companies, candidate portfolio companies, clients, business partners, etc. to directly report information on actions that violate or may violate laws and regulations or which constitute workplace harassment.

※ The overseas subsidiaries are not included in the chart as they are scheduled to be transferred.

We recognize that there are principal risks that could have a significant impact on our financial position, operating results, and cash flow, and that these risks may materialize. We will continue to strengthen mechanisms to prevent their occurrence and to respond appropriately should they arise.