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 2022, we have identified two new risk events: the soaring energy and food prices due to the Russia-Ukraine situation and the shifts in global supply chains. Further, we have replaced two of the top risks designated during fiscal 2021 ("Intensified US-China friction" and "US inflation concerns and interest rate hikes") with "Growing US-China friction and accelerating global division" and "Continuation of high global inflation", and revised our risk scenarios.

In addition, with human capital taking on increased importance in achieving continuous growth for Mizuho and our employees, we added "Stagnation of growth due to factors such as labor shortages" as a new top risk, based on our recognition of the potential risk of labor shortages leading to deterioration in our capacity for providing services.

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
Prolonged impact of COVID–19
  • Rise in COVID-19 cases both in and outside Japan due to outbreaks of new variants, consequent increased credit costs
  • Worsening economic impact of prolonged global supply constraints
  • Credit risk: Taking into consideration the impact of COVID-19, soaring product prices due to the Russia-Ukraine situation, and the weakening of the Japanese yen, specify and review the areas of our portfolio requiring enhanced management and allocate additional reserves
  • Market risk: Taking into consideration the deterioration of the market environment, with rising interest rates and falling stock prices, continue enhancing our profit/ loss monitoring framework and conducting careful portfolio management
  • Foreign currency liquidity risk: In preparation for a more challenging fund raising environment, enhance monitoring frameworks related to short-term and medium- to long-term investment and funding, and reinforce stable funding
  • Predictive management based on monitoring changes in the external environment and other information.
Continuation of high global inflation
  • Increased demand accompanying post-COVID economic recovery and supply constraints due to a stagnating labor market recovery, in combination with soaring energy and food prices from the Russia- Ukraine situation, leading to continued global inflation
  • Economic deterioration due to sudden interest rate hikes causing an increase in credit costs
Growing US-China friction and accelerating global division
  • Geopolitical risks presented by the Russia-Ukraine situation, added to the growing and intensified pattern of confrontation between the US and China, leading to further formation of bloc economies and accelerated global division
  • Rise in credit costs due to deteriorated business performance and downgrade in corporate credit ratings resulting from factors such as global revisions to supply chains
Increasing severity of climate change impacts
  • Increased credit costs due to companies that delay climate change responses facing issues in raising funds and consequently suffering deterioration in business performance
  • Tightened regulations and supervision in relation to climate-related financial risks among financial institutions
  • Damage to our corporate value due to criticism of initiatives aimed at the decarbonization of the Mizuho group
  • Promotion and appropriate disclosure of business strategy responses to climate change
  • Formulation of risk control policy for sectors expected to face high risk, engagement with clients
  • Clarification of risk management framework for climate-related financial risks
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
  • Steady and ongoing implementation of assessments and other measures for preventing system failures, and improvements to the effectiveness of contingency plans enhancing our ability to respond to system failures
  • System risk monitoring from multifaceted perspectives
Cyberattacks
  • Attacks from criminal or terrorist organizations 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
  • Establishment of a monitoring system and enhancements to our resilience framework through analysis of computer viruses and development of multilayered defense systems
  • Cyberattack drills in preparation for incidents, plus employee training
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
  • Enhancement of frameworks for anti-money laundering measures and other efforts in line with laws/regulations and guidelines from the Financial Services Agency of Japan
  • Implementation of steady risk control through enhancing our legal and compliance personnel and raising group-wide knowledge and risk awareness
Inappropriate behavior or nonfeasance by executive officers / employees
  • Damage to trust and loss of business opportunities stemming from the occurrence in or outside Japan of legal/regulatory infractions or inappropriate behavior or nonfeasance deemed to be out of line with social norms
  • Analyze the cause of the incident and formulate improvement measures
  • Enhance predictive management in order to reduce instances of misconduct
Stagnation of growth due to factors such as labor shortages
  • Stagnation in strategy implementation and deterioration in capacity for providing services due to difficulties concerning employee turnover and employee development, which are linked to diversification of career aspirations and increased labor market flow
  • Improving employees’ sense of fulfillment through career development support and reducing the amount of overwork
  • Ensuring accurate understanding of personnel demands and enhancing mid-career hiring for better talent retention
Rapid development of digital society
  • Rapid expansion of revolutionary financial services, the rise of new economic landscapes, and the resulting intensification of competition as companies from other industries enter the field of finance
  • Clarifying our digital transformation strategy and developing and enhancing the skills of specialists

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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