Resona Holdings, Inc.

If the business conditions of borrower companies deteriorate due to significant fluctuations in the financial and economic environment, geopolitical risks, or supply chain disruptions caused by changes in the trade environment, the Group may be forced to record write-offs and provisions exceeding initial expectations. As the Group's main business base is the Tokyo metropolitan area and the Kansai region, and loans to small and medium-sized enterprises and housing loans account for a large proportion of the credit portfolio, the impact of a regional economic downturn or concentration of credit in specific industries becoming apparent would be significant. As countermeasures, the Group has implemented a credit ceiling system, industry concentration risk control, and strengthened early warning management systems.

A rise in domestic and overseas market interest rates could cause the value of the held bond portfolio to decline, potentially resulting in valuation losses or realized losses. In addition, declines in stock prices could cause valuation losses or impairment on policy-held shares, and fluctuations in foreign exchange rates could cause foreign exchange losses, both of which could adversely affect business performance and financial condition. In response, the Group sets risk limits and loss limits commensurate with its management capacity, conducts various hedging transactions, and continuously reduces its Sale of Policy-Held Shares.

In the event of a sharp economic downturn, large-scale financial system instability, materialization of geopolitical risks, or deterioration in the Group's reputation (such as a credit rating downgrade or negative rumors), deposit outflows and rising market funding rates could impede cash flow management. In particular, foreign currency funding methods are limited, making foreign currency liquidity risk relatively high. As countermeasures, the Group secures assets that can be converted into cash, such as Bank of Japan current deposits and securities, establishes foreign currency funding facilities with other banks, and conducts continuous monitoring of social media and other sources.

The business environment is becoming increasingly severe due to deregulation in the financial industry, progress in digital transformation utilizing AI, entry by companies from other industries, and consolidation and reorganization of financial institutions, which may reduce the superiority and sustainability of the Group's existing business model. If the Group is unable to adequately respond to competition, this could result in stagnation in loan growth, difficulty securing profit margins commensurate with risk, and a decline in fee income. As countermeasures, the Group is working on growth of core businesses, creation of next-generation growth drivers, and structural reform of its management foundation.

Changes in accounting standards (such as IFRS) or in monetary policy, and the introduction or revision of various laws and regulations, could change the Group's risk profile and profit structure, adversely affecting business performance, financial condition, and capital adequacy ratio. If the capital adequacy ratio falls below the regulatory standard of 4%, there is a risk that the Group could be subject to prompt corrective action by the Commissioner of the Financial Services Agency, including suspension of all or part of its operations. The Finance Division takes the lead in establishing a reporting system to management, and the Group strives to secure sufficient capital under the "Basic Policy for Group Capital Management."

Failures or malfunctions in core banking and information systems, or cyberattacks such as DoS/DDoS attacks, malware infections, and targeted attacks, could cause critical operations such as settlement services to stop, resulting in customer information leaks or unauthorized fund transfers/withdrawals via internet banking. Attacks on critical infrastructure, including third-party outsourcing partners, are also within scope, potentially increasing recovery costs and customer compensation costs. The Group has established a dedicated department (Resona-CSIRT) to collect and analyze information, conduct regular drills and training, and develop contingency plans.

If the management framework for anti-money laundering and counter-terrorism financing is found to be inadequate, this could result in the termination of correspondent banking agreements leading to partial suspension of operations such as overseas remittance services, administrative penalties such as fines, and reputational damage, all of which could adversely affect business operations, performance, and financial condition. The framework of domestic laws and overseas regulations is constantly changing, requiring continuous strengthening of measures. The Group has positioned its AML/CFT response as one of its most critical management priorities and is implementing organizational structure development, personnel recruitment, and training.

If officers or employees fail to comply with laws and regulations, or if misconduct or scandals occur (such as various forms of harassment, embezzlement of customer deposits, or involvement in falsification of loan screening documents), this could result in administrative penalties, sanctions, or loss of customer trust, adversely affecting business operations, performance, and financial condition. In addition, financial crime methods are becoming increasingly sophisticated and complex, and large-scale financial crimes could increase countermeasure costs and customer compensation costs. The Group thoroughly disseminates its code of conduct "Resona STANDARD" and the "Group Anti-Corruption Policy," conducts regular training, and periodically analyzes the occurrence of misconduct to formulate recurrence prevention measures.

Delays in responding to climate change and biodiversity issues, or insufficient disclosure, could result in lost growth opportunities, stranded assets, and impairment of corporate value. The financial impact of climate change is likely to manifest itself in loans, the Group's largest asset, creating a structure in which customer risk directly translates into Group risk. While the Group is advancing customer support through SX support and developing a climate change risk management framework, insufficient response could lead to a decline in evaluation from investors and society.

If important information, including customer information, is leaked due to human error, internal fraud, external criminal activity, or system failures/cyberattacks at outsourcing partners, this could result in customer compensation costs and loss of credibility, adversely affecting business operations, performance, and financial condition. Inappropriate use of personal information could similarly lead to a decline in trust. The Group has established policies and regulations related to information management, conducts employee training, implements system security measures, and maintains a continuous management framework for outsourcing partners.