Risk Management System
At SBG, the Board of Directors appoints a Chief Risk Officer (CRO) who is responsible for risk management. We also have a Risk Management Office, supervised by the CRO, that spearheads Group-wide risk management activities.
To ensure a Group-wide understanding of the purpose of risk management and to clarify the basic roles of officers, employees, and risk managers, SBG established the Risk Management Policy, which applies to all officers and employees of SBG and the Group companies ensuring their active involvement in risk management activities. In accordance with the Risk Management Regulations and Group Company Management Regulations, which are set under the Risk Management Policy, SBG and the Group companies appoint risk managers. The risk managers are responsible for identifying and addressing risks that might arise during business activities. The Risk Management Office ensures the effectiveness of Group-wide risk management by receiving reports on important matters from the risk managers and confirming proper compliance with both sets of regulations. The policy and regulations are periodically reviewed and approved by the Board of Directors of SBG and other committees.
The Risk Management Office reports identified risks that are material to SBG and the Group companies and their countermeasures to the Board of Directors and the Group Risk and Compliance Committee (GRCC) on a quarterly basis. Accordingly, both governance bodies supervise the Risk Management Office. The GRCC consists of key Board Directors and Corporate Officers of SBG and works to enhance the risk management system across the Group.
Risk Management Initiatives
The Risk Management Office works to strengthen risk management activities by identifying and addressing risks, with the aims of mitigating factors that adversely affect the enterprise’s sustainable growth.
The Risk Management Office is pursuing the following initiatives to gain a comprehensive understanding of the various risks facing the entire Group.
Prior confirmation of important agenda items
When important matters are to be resolved by SBG’s Board of Directors and other committees, the Risk Management Office confirms the agenda items in advance and consults with the relevant departments if necessary. It also ensures that risk-related information that needs to be considered is reflected in the agenda.
Portfolio risk analysis
The Risk Management Office performs risk analysis over the entire Group’s investment portfolio from various perspectives. For example, we monitor the impacts on SBG’s financial ratios that are caused by changes in the external environment such as economic and monetary policies and other political conditions. We also monitor the concentration of investments in specific countries, regions, and sectors.
Gathering risk-related information from each Group company and department of SBG
The Risk Management Office gathers information on various risks from the major Group companies and each department of SBG. When the risks materialize, the relevant Group companies and departments of SBG escalate the issue to the Risk Management Office in a timely manner.
Responding to risks
Based on the information gathered through the above initiatives, the Risk Management Office identifies material risks at the Group level by analyzing and assessing the impact and likelihood of risk materialization. Material risks are reported to and discussed by the Board of Directors and the GRCC. Based on the results of those discussions, the Risk Management Office considers countermeasures and monitors the situation to confirm the effectiveness of those countermeasures.
Message from Our Chief Risk Officer (CRO)
Constantly strengthening risk management to increase resilience and ensure 300 years of growth
Q. What is the purpose of risk management?
A：We work to strengthen risk management activities with the aim of “mitigating factors that adversely affect the enterprise’s sustainable growth.” Through SVF1, SVF2, and LatAm Funds, SBG invests primarily in unlisted companies that seek to transform the world through the use of AI. Investments in unlisted companies target high returns and thus entail medium- to long-term risks, so failure to respond appropriately to changes in the external environment might result in missed profit opportunities and/or losses. Conditions for investment are particularly uncertain considering various factors, highlighting the increasing importance of risk management. These factors include the recent escalation of the U.S.-China conflict, the Chinese government’s tightening of regulations on emerging companies, the accelerating monetary tightening in the U.S., and the chaotic situation in Russia and Ukraine.
Under such circumstances, SBG’s Risk Management Office conducts ongoing stress tests for large-scale crisis and concentration risk analysis of specific sectors and regions. For example, we analyze the impact of a potential worldwide market event like the Global Financial Crisis on our NAV*1, LTV,*2 and the availability of funds to redeem bonds for the next two years, assuming several factors including negative impacts on the bond market and the recovery period in the equity market. For unlisted stocks, we also consider scenarios in which their valuation declines to the same extent as listed stocks during a market crisis.
NAV (Net Asset Value) = equity value of holdings – adjusted net interest-bearing debt. For details on calculation methods and the latest numbers, see “Net Asset Value per Share.”
LTV (Loan To Value) = adjusted net interest-bearing debt ÷ equity value of holdings. For details on calculation methods and the latest numbers, see “Net Asset Value per Share.”
Q. What non-financial risks do you focus on and how are they addressed?
A：Through regular collaboration with the relevant departments of SBG and major Group companies, the Risk Management Office focuses on understanding the risks that threaten the sustainable growth of the entire Group and how they are being addressed. In particular, the succession plan of President Son, which is of great interest to all stakeholders, is discussed regularly by the Nominating & Compensation Committee. In addition to information security and talent retention, we discuss various risks with stakeholders, including climate change, human rights, and other ESG matters. We also assess the materiality of various non-financial risks from the Group perspective and report risks that the Group should focus on and measures to address those risks to the Board of Directors and the GRCC, supporting management’s decision-making.
Q. Are there any mechanisms you have devised to manage risks given that the investments are made in a wide range of sectors and regions?
A：Under the Risk Management Policy, which applies to all officers and employees of SBG and the Group companies, each Group company appoints a risk manager and establishes an appropriate risk management system that considers the nature and size of its business. In addition, the Risk Management Office works with key Group companies to gather information on a regular basis. Especially for investment funds, such as SVF1, SVF2, and LatAm Funds, the Risk Management Office works to enhance its reporting systems for understanding and analyzing the status of new investments and post-investment monitoring. From the perspective of our Group-wide portfolio analysis, we strive to understand the degree of concentration in specific sectors and regions, and conduct stress tests based on scenarios that reflect the different risk characteristics of each industry and region.
Aiming to be a corporate group that can continue growing for 300 years, we invest in a variety of companies that use AI to transform the world. We will further enhance our resilience by strengthening risk management so we can deal with the transitory changes that we will face in the future.
CRO (Chief Risk Officer)
Head of Risk Management Office