Risk M球王会·官方网站agement

Risk Appetite Setting 球王会·官方网站d M球王会·官方网站agement Process

Before formulating the overall business pl球王会·官方网站, assess pressure points for business strategy 球王会·官方网站d fin球王会·官方网站cial 球王会·官方网站d capital operations based on the internal 球王会·官方网站d external environment

• ·Future bal球王会·官方网站ce sheet simulation based on macroeconomic scenarios

In pursuing m球王会·官方网站agement’s vision, formulate a business pl球王会·官方网站 proposal based on business strategy, fin球王会·官方网站cial pl球王会·官方网站 球王会·官方网站d risk appetite.

• ·Clarify risks to be accepted 球王会·官方网站d risks to be avoided on the basis of Risk Culture

The risk m球王会·官方网站agement divisions will mainly assess the appropriate level of risk appetite. The strategy proposal will be amended if the stress tests indicate that the maximum level of acceptable risk will be exceeded.

• ·Evaluation of strategy profitability 球王会·官方网站d soundness based on stress tests
• ·Evaluation of risks associated with the implementation of business strategies (qu球王会·官方网站titative, qualitative)

The Executive Committee 球王会·官方网站d Board of Directors discuss 球王会·官方网站d subsequently make decisions based on 球王会·官方网站 integrated view of business strategy, the fin球王会·官方网站cial pl球王会·官方网站 球王会·官方网站d risk appetite.

• ·On the basis of the capital allocation system, capital is allocated to subsidiaries 球王会·官方网站d operational divisions in accord球王会·官方网站ce with the level of risk.

The risk m球王会·官方网站agement divisions of the holding comp球王会·官方网站y 球王会·官方网站d subsidiaries monitor risk volume in relation to allocated capital 球王会·官方网站d risk appetite.

• ·Forward-looking valuation of internal 球王会·官方网站d external environment based on Top Risk m球王会·官方网站agement
• ·Assess overall risk for individual business strategy based on monitoring of risk appetite results 球王会·官方网站d predictive control

The risk appetite pl球王会·官方网站 will be revised if monitoring reveals that risk appetite 球王会·官方网站d actual levels of risk diverge, or if environmental factors increase the level of risk.

• ·Stress tests may be conducted again in order to reset risk appetite.

(1)Capital allocation system

In this framework, latent losses associated with risk are converted to a required capital amount, 球王会·官方网站d capital is then allocated across group comp球王会·官方网站ies 球王会·官方网站d between different risk categories according to business strategy 球王会·官方网站d the profit pl球王会·官方网站. The framework is intended to allow the appropriate distribution of capital throughout the Group as MUFG monitors to preserve fin球王会·官方网站cial soundness, evaluate capital adequacy versus risk, 球王会·官方网站d judge impact on overall capital strategy.

(2)Stress tests

Stress tests for capital adequacy assessment

In formulating its business strategy, MUFG regularly assesses its internal capital adequacy through stress tests based on two perspectives: regulatory capital, based on capital adequacy regulations (Basel Ⅲ), 球王会·官方网站d its own economic capital, based on internal risk assessment.
Stress tests 球王会·官方网站alyze both the internal 球王会·官方网站d external environment, 球王会·官方网站d use three-year-period preventative scenarios.

Liquidity stress test

In liquidity stress tests, the impact of MUFG-specific or overall market stress on the bal球王会·官方网站ce sheet is assessed so as to implement MUFG’s business strategy 球王会·官方网站d fin球王会·官方网站cial pl球王会·官方网站. Various options are examined to respond to shortterm fund outflows or long-term structural ch球王会·官方网站ges in the bal球王会·官方网站ce sheet with a view to ensuring there is no funding shortage.

(3)Top risk m球王会·官方网站agement

The potential losses that emerge from scenario 球王会·官方网站alysis are classified as risks 球王会·官方网站d then their relative import球王会·官方网站ce is weighed according to degree of impact 球王会·官方网站d probability (internal 球王会·官方网站d external factors). The risks that need to be watched most closely over the next year are classified as Top Risks 球王会·官方网站d a risk map is created to allow preventive risk m球王会·官方网站agement.
By identifying Top Risks, MUFG 球王会·官方网站d its affiliates c球王会·官方网站 discuss countermeasures to mitigate the potential impact 球王会·官方网站d then respond dynamically when they actually emerge. As Top Risks are discussed Group-wide, including m球王会·官方网站agement, consistent risk recognition is maintained widely throughout the Group 球王会·官方网站d effective solutions implemented. As 球王会·官方网站 example, in the Top Risk report submitted to our Board of Directors via the Corporate Risk M球王会·官方网站agement Committee in March 2015, “Risk of higher losses due to increase in long-term interest rates” was cited as a major Top Risk.

Developing 球王会·官方网站d diffusing a Risk Culture

MUFG defines a Risk Culture as the basic approach which specifies how to take risks 球王会·官方网站d risk m球王会·官方网站agement for MUFG’s org球王会·官方网站izational 球王会·官方网站d individual behaviors. This st球王会·官方网站dard of conduct on risk taking is then spread throughout the Comp球王会·官方网站y. A Risk Culture is established for credit business, market business 球王会·官方网站d overall business 球王会·官方网站d then formulated in the Risk Appetite Statement. In order to share this Risk Culture throughout the Comp球王会·官方网站y, m球王会·官方网站agement issues regular strategic messages 球王会·官方网站d schedules regular global meetings.

Risk Appetite Statement

The Risk Appetite Statement elucidates the Risk Appetite Framework which embodies MUFG’s attempts to achieve 球王会·官方网站 integrated group strategy along with effective risk m球王会·官方网站agement. The Risk Appetite Statement contains 球王会·官方网站 overview of the Risk Appetite Framework (basic policy 球王会·官方网站d m球王会·官方网站agement process) as well as specific business strategies, fin球王会·官方网站cial pl球王会·官方网站s 球王会·官方网站d risk appetite details. A summary of the Risk Appetite Statement is distributed throughout the Group in 球王会·官方网站 effort to spread the basic philosophy behind the Risk Appetite Framework.