Management of Top Risks

We have identified “top risks” (i.e., risks that are recognized to have a major potential impact on the Mizuho group) as follows, while taking into consideration factors such as changes in the internal and external business environment.

In fiscal 2023, understanding that interest rate hikes in Japan accompanying changes in monetary policy could lead to an economic slowdown and to an expansion of concerns regarding fiscal policy, we added “a shift in monetary policy and growing fiscal concerns” as a top risk.

In addition, considering the risk that the prolongation of high inflation in the US and Europe and the continuation of interest rate hikes could cause a worsening of credit and spill over to a worsening of the foreign currency procurement environment and also the further heightening of geopolitical risk, for “high inflation and global recession” and “accelerating global division,” which were identified as top risks in fiscal 2022, the risk scenario was revised to “continuation of high inflation and spillover to credit risk” and “global decoupling and growing geopolitical risks.”

We also revised our risk scenarios for other top risks upon considering factors such as changes in the business environment.

For designated top risks, we have decided on additional risk control measures, including measures for preventing the designated top risks and follow-up responses, and we are monitoring the status of risk control throughout the fiscal year and reporting to the Risk Committee and Board of Directors.
(Please see Risk Governance for more on our management of top risks.)

Top risks Primary risk control measures
Risk event Risk scenario
Continuation of high inflation and spillover to credit risk
  • Inflation remaining high with the prolongation of wage increases and high resource prices, and pressure on the economy due to continuation of interest rate hikes in the US and Europe
  • Worsening of corporate cash flow and increasing credit-related expenses due to increased interest payment burden and the stricter lending stance of financial institutions
  • Expanding valuation losses on bonds and increasing foreign currency procurement costs caused by overseas interest rate hikes
  • Credit risk: Analyze the credit-risk impact from changes in monetary policy in Japan and an economic slowdown in the US, and conduct trial calculations of the impact when geopolitical risk emerges.
  • Market risk: Flexibly review the monitoring structure based on interest rate increases and other market developments, and conduct trial calculations of the impact of changes in domestic monetary policy.
  • Foreign currency liquidity risk: Reinforce medium- to long-term and other stable procurement, and examine response measures to the emergence of geopolitical risk.
A shift in monetary policy and growing fiscal concerns
  • Contraction in housing and capital investment, pushing down the economy, caused by increase in interest rates in Japan accompanying a shift in monetary policy, and increase in credit-related expenses due to worsening of corporate performance
  • Increase in interest rates in Japan, reminding people of higher interest payments on government bonds and increasing fiscal concerns
Escalating US-China conflict and sluggish Chinese economy
  • US-China conflict reflecting economic security and human rights and the Taiwan situation, restraining investment in China and nearby regions and obstructing continuous economic growth
  • Credit-related expenses increasing through worsening corporate performance with the stagnation of the Chinese economy due to the delayed response to the prolongation of the real estate market slump, excessive debt, and other structural problems. On the other hand, a sudden recovery of the Chinese economy might cause a sharp increase in resource prices.
Global decoupling and growing geopolitical risks
  • Acceleration of formation of camps based on values from the prolongation of the conflict over Ukraine
  • Acceleration of global decoupling with the formation of economic blocs and intensified confrontation leading to heightened military tension in each region of the world
  • Downward pressure on growth potential of the global economy and profitability of companies due to disruption of supply chains and obstacles to the international business development of global companies
Worsening impact of climate change
  • Increasing climate-related risks due to delayed response to climate change by each country and company, the return to coal-fired thermal power, and the loss of natural capital, leading to stricter regulation and supervision of financial institutions
  • Loss in corporate value due to increased criticism from insufficient efforts by the Mizuho group, while emergence of transition and physical risk result in higher future credit-related expenses
  • Advance improvement of the management structure through risk importance assessment, etc.
  • Implement risk control of the carbon-related sector
  • Monitor regulatory trends, trends at other banks, and other main changes in the external environment
IT system failures
  • System failures resulting from factors such as human negligence, hardware failures, or disasters causing wide-spread inconvenience or disadvantage to customers and damaging trust, leading to the loss of business opportunities
  • Implementation of inspections and measures to prevent system failures, strengthening of response capabilities when failures occur, and upgrading of internal control systems
  • System risk monitoring from multifaceted perspectives
  • Attacks by specific countries for intelligence activities or sabotage and by criminal or terrorist organizations for monetary demands that result in suspension of services, exposure of information, and/or unauthorized fund transfers, causing wide-spread inconvenience or disadvantage to customers and damaging trust, leading to the loss of business opportunities
  • Advance the upgrading of the group’s global cybersecurity management structure by identifying vulnerabilities, strengthening supervision systems, strengthening incident response capabilities, and improving the governance system
Money laundering / Financing of terrorism
  • Financial services being misused for criminal acts, resulting in criticism from the international community, damaging trust with customers and with other financial institutions, and leading to the loss of global business opportunities
  • Improve the ability to grasp risk conditions, strengthen risk mitigation measures for high-risk customers, products, and services, strengthen the control system for offices outside Japan, and otherwise promote upgrading of the structure for countermeasures to money laundering, etc.
Improper acts and omissions by executive officers/employees
  • Damage to trust and loss of business opportunities stemming from criticism accompanying the occurrence in or outside Japan of legal/regulatory infractions, business operations that are not customer-oriented and other improper acts and omissions that is not consistent with the social responsibility and duty sought by the Mizuho group, or out of line with social norms
  • Analyze the causes when an incident occurs and formulate improvement measures
  • Enhance predictive management toward reducing instances of misconduct
Stagnation of sustainable growth due to talent shortages
  • Stagnation in strategy implementation and deterioration in capacity for providing services due to difficulties in securing employees and employee development with the increased mobility in the labor market accompanying diversification of career aspirations and increased wages
  • Promote efforts to improve employees’ sense of fulfillment through reducing long working hours and career development support, and strengthen recruitment from outside the company
  • Build a structure toward upgrading the management of human capital risk
Changes in the competitive environment
  • Changes in the competitive environment due to the emergence of new services along with technological innovation and deregulation, the entry of companies from other industries, and the heightened orientation toward interest rates and awareness of sustainability, damaging the Mizuho group’s business foundations
  • Clarify “DX focus areas” considering the Mizuho group’s strengths and customer needs
  • Prepare the groundwork to advance DX including the formulation of human resources development programs and examinations of the use of generative AI

Note: The risks described here are only some of the possible risks we are aware of. For more comprehensive information on the Mizuho group’s risks, please refer to the annual securities report, Form 20-F, and other related documents.

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