Mito Securities Co., Ltd.

If the company fails to secure and develop the personnel who underpin the quality of its financial services, this may hinder the achievement of business objectives and sustainable growth. Given the intensifying competition for talent within the securities industry, the likelihood of this risk materializing is judged to be high. As countermeasures, the company is enhancing its education and evaluation systems, raising salary levels, and conducting mid-career hiring of highly specialized personnel.

The company's principal revenue sources, brokerage commissions received and trading gains/losses, are highly dependent on fluctuations in stock and foreign exchange markets. If markets stagnate due to deteriorating domestic or overseas political and economic conditions, business performance could fluctuate significantly. The likelihood of this risk materializing is judged to be high. As countermeasures, the company aims to mitigate risk through product proposals that take portfolios into account, and to expand its stable revenue base by increasing Fund Wrap fees and Investment Trust Sales & Agency commissions.

If accurate administrative processing is not executed due to intentional acts, negligence, or accidents by officers and employees, this may lead to financial losses or a loss of social credibility. In particular, erroneous order entries carry the risk of losses resulting from the transmission of incorrect data to exchanges, and including minor incidents, the likelihood of this risk materializing is judged to be high. The company has established an in-house "Administrative Error Review Committee," through which the Compliance Department, Administrative Management Department, and Business Guidance Department collaborate to thoroughly disseminate improvement measures.

With respect to domestic and foreign securities held for the company's own account, sudden price fluctuations or the suspension/restriction of trading arising from abrupt changes in political and economic conditions could result in losses. The likelihood of this risk materializing is judged to be high. As countermeasures, the company sets and manages risk limits and loss limits, while keeping securities held as trading products to a minimum.

If a failure occurs in business computer systems due to quality defects, line troubles, unauthorized external access, disasters, or other causes, the company may be forced to scale back or suspend transactions. The likelihood of this risk materializing is judged to be medium. The company has established an emergency business execution structure and, in the event of a large-scale disaster, has arranged for a DR site (remote backup system) provided by a systems company.

If customer information is leaked externally due to fraudulent means or negligence, this could lead to the occurrence of damages and a loss of social credibility. Including minor incidents, the likelihood of this risk materializing is judged to be medium. The company conducts monthly personal information inspections at each department and branch, has established an in-house CSIRT, and conducts 24/7/365 monitoring via SOC services.

As a financial instruments business operator, the company conducts its operations under numerous laws and regulations. Strengthening, relaxation, or new introduction of regulations could impose constraints on existing operations or intensify competition, potentially reducing earnings. In addition, if the capital adequacy ratio falls below the prescribed level, there is a risk of being ordered to suspend operations, among other measures. The likelihood of this risk materializing is judged to be low, and the company currently maintains a high capital adequacy ratio.

If violations of laws and regulations occur due to intentional acts or negligence by officers and employees, the company may be subject to administrative sanctions, resulting in a loss of social credibility and a decline in transactions. There is also a risk of being sued due to disputes with customers or business partners. The likelihood of this risk materializing is judged to be relatively low, and the company conducts monitoring and prevention through its Compliance Department and Audit Department, as well as monthly compliance training.

The company relies primarily on its own funds and borrowings from financial institutions to finance its business operations, but if credit concerns spread, this could lead to a significant increase in fundraising costs or difficulty in raising funds, thereby constraining business operations. The likelihood of this risk materializing is judged to be low. The company addresses this through holding funds in preparation for emergencies, conducting stress tests on fund liquidity, and establishing a "Fund Liquidity Crisis Response Manual."

If natural disasters caused by climate change, or large-scale earthquakes, tsunamis, or other events, significantly affect the regions forming the company's business base, such as by restricting power supply, this could constrain business operations. The outbreak of new infectious diseases poses a similar risk. The likelihood of this risk materializing is judged to be low, and the company conducts regular drills based on its Business Continuity Plan (BCP) and has established a business continuity structure for emergencies.