Monex Group, Inc.

As the Group conducts business globally, there is a risk that cyberattacks could result in leakage of important information or service disruptions. In particular, with respect to Coincheck's wallet management, there is a possibility that crypto assets held in hot wallets and cold wallets could be fraudulently transferred, which could affect business performance through reputational damage or claims for damages. As a countermeasure, the Group has established a global structure centered on the Monex Group CSIRT, and is promoting cybersecurity measures along four axes: organizational management, system response, human response, and external cooperation.

At Monex, Inc. (Equity Method Affiliate), the risk of unauthorized access and fraudulent transactions using authentication credentials stolen through phishing and other means has increased, and actual damage has occurred. Responding to customer damage, reputational decline, additional security measure costs, compensation and dispute handling, etc. could affect the Group's brand value, equity-method investment gains/losses, and business strategy. Monex, Inc. is prioritizing the prevention of unauthorized access as a top priority issue and strengthening security, including making passkey-based login mandatory.

If investment in growth areas does not proceed as planned, if losses are recorded due to unsuccessful investments, or if synergies among Group companies are delayed, profit growth may not be achieved and the 15% ROE target may not be met. In the Securities Business, acquiring major TradeStation clients and partner collaboration at Monex, Inc. are challenges; in the Crypto Asset Business, promoting M&A at Coincheck Group is a challenge; and in the Asset Management / Wealth Management Business, expanding assets under management is a challenge. While concrete growth initiatives are being pursued in each segment, there is a risk that these will not proceed as planned due to a challenging competitive environment or changes in the external environment.

In the Securities Business segment, credit is extended to customers through margin trading, futures, options trading, FX trading, and other means, and there is a possibility that customer advances arising from sharp fluctuations in stock and foreign exchange markets may not be fully recovered. While the manifestation of credit risk is considered limited due to the deposit of advance funds, margin, and collateral as well as daily monitoring, sharp fluctuations in market conditions could affect business performance. Credit VaR is calculated monthly and managed quantitatively using default rates based on past default records.

The Group is exposed to credit risk with respect to counterparty financial institutions and crypto asset exchange operators through FX and crypto asset cover transactions, securities lending transactions, and other activities. As counterparties are financial institutions and crypto asset exchange operators with established reputations in Japan and overseas, credit risk is considered limited; however, sharp fluctuations in market conditions could affect business performance. When information regarding credit concerns such as a rating downgrade is obtained, relevant departments coordinate to take risk-avoidance measures, and counterparty risk is managed quantitatively as part of VaR calculations.

In the Securities Business, Crypto Asset Business, and Asset Management / Wealth Management Business, if the core systems malfunction, lack sufficient processing capacity, or experience communication line failures, causing system dysfunction, there is a risk of serious disruption to business operations. Risks related to system construction are being mitigated through regular third-party vulnerability assessments and immediate response upon detection of vulnerabilities. System downtime or malfunction could result in losses for both customers and the Group.

As the Group provides financial services globally, it is exposed to the risk of being used for money laundering and terrorist financing. The Group identifies and addresses issues related to anti-money laundering measures through thorough countermeasures at each Group company and the establishment of a global reporting structure. If a legal violation occurs, it could have a material impact on business performance through regulatory sanctions or reputational decline.

There is a risk that deficiencies in cash flow management could make it difficult to secure funds, and balancing growth investment and shareholder returns with financial soundness is an important challenge. The Board of Directors monitors indicators such as Core CF, net debt-equity ratio, net leverage ratio, LTV, and wallet loss coverage ratio, and manages debt repayment capacity including in the event of a black swan event. The Group is working to diversify its funding methods through the use of direct and indirect financing, thereby reducing liquidity risk.

There is a risk of incurring losses, such as a decline in customer transactions, due to deterioration of the company's reputation caused by media reports, rumors, or speculation, including reputational deterioration due to delays in addressing environmental issues such as climate change. The occurrence of unauthorized access damage at Monex, Inc. has already manifested the risk of reputational decline, raising concerns about the impact on the Group's brand value. The Group works to minimize the risk of reputational damage through strengthened cooperation with media contacts and PR support firms, and through proactive disclosure of information regarding climate change response.

There is a risk that the achievement of business objectives may be constrained by imbalances in the talent portfolio, declining morale due to unfair or unjust personnel evaluations or discriminatory conduct, or labor shortages resulting from occupational accidents or mental health issues. For the Group, which conducts business globally, securing and retaining diverse talent is a source of competitiveness, and the loss of talent or a decline in organizational engagement could affect business performance. The Group addresses these risks through ensuring diversity of human resources, fair evaluation systems, various training programs, organizational engagement surveys, and thorough dissemination of the internal reporting system.