Risk management

Approach and Policies

Group Policy (Management Structure)

The Nomura Real Estate Group regards risk management as a “business management methodology that aims to improve corporate value by managing all risks related to the attainment of corporate group organizational and business objectives in an integrated and unified manner while controlling risk within the company’s risk tolerance limits.” With the aim of ensuring the soundness of business management through proper management and operation of risks, the Nomura Real Estate Group has established the Risk Management Regulations, in addition to the Group Policy.
As its basic policy in the Risk Management Regulations, the Group assures business continuity and stable development by implementing risk management and classifies its main risks into four categories, namely “A: Investment risk,” “B: External risk,” “C: Disaster risk,” “D: Internal risk.” Among them, risks listed below are regarded as important risks that should be managed, and performing effective and efficient risk management is provided according to the scale and characteristics of each risk. In addition, based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the Group is promoting the management of and response to climate related risks.

Important risks needing to be managed among main risks:
Risks that could have a major impact on Group management Risks that could have a major impact on society Risk of litigation or other serious problems Other major risks that should be managed by the Nomura Real Estate Group

Main Risks

Risk Category Main Risk Items
A: Investment risk Risks related to individual investments (real estate investment, strategic investment (M&A), etc.)

1. Risk associated with real estate investment

2. Risk associated with strategic investment (M&A) and new businesses

B: External risk Risks related to external factors influencing business

3. Risk associated with market changes

4. Risk generated by changes in economic conditions

5. Risk generated by changes in political and social conditions and systems (law, tax systems, accounting and others)

6. Risks due to lagging behind innovation and changes in the structure of society related to the business

C: Disaster risk Risks generated by disasters that have a large impact on customers and business continuity

7. Risks related to disasters (earthquakes, typhoons, floods, tsunamis, volcanic eruptions, major fires, epidemics of infectious diseases, etc.) that have a major impact on customers and business continuity

D: Internal risk Operational risks occurring at the Company and each group company

8. Risks related to the violations of laws and ordinances

9. Risks related to quality defects

10. Risks related to occurrence of information system crisis

11. Risks from inadequate responses to matters related to human resources

12. Risks related to occurrence of fraud, negligence

Special Feature: Response to the Task Force on Climate-related Financial Disclosures (TCFD)

Management

Risk Management Structure

To discuss various risks related to group management, the Company has prescribed the Management Committee as the integrated risk management body and operates a system to regularly monitor, evaluate and analyze the state of main risks, provide necessary guidance and advice to each business unit and Group company while regularly reporting details to the Board of Directors.

A: Investment risk
B: External risk
Directed, monitored and provided guidance by the Management Committee, which is the integrated management body.
C: Disaster risk
D: Internal risk
Regularly monitored, evaluated and analyzed by the Risk Management Committee, and established as a subordinate organization of the Management Committee. Basic response policies regarding risk prevention, response when risk occurs, prevention of recurrence, etc., are discussed by the Risk Management Committee.

Risk Management Committee

The Risk Management Committee, a subordinate body of the Management Committee, consists of directors and executive officers of Nomura Real Estate Holdings and each Group company appointed by the Board of Directors and is chaired by the officer in charge of the Group Legal Compliance Department (an executive officer of Nomura Real Estate Holdings).
Moreover, we established the Group Risk Meeting consisting mainly of directors and executive officers of each Group company appointed by the Chair of the Risk Management Committee to share risk information and response policies within the Group.

Risk Management System (conceptual diagram)

With regard to risk management, each business unit manager will supervise the risk management of their affiliated business unit and report on the situation to the Management Committee or Risk Management Committee as necessary. Concurrently, the president of each Group company (the head of each division at Nomura Real Estate Development Co., Ltd.) are responsible for reporting risk management matters to the business unit manager in a timely and appropriate manner. In addition, we defined the organization in charge of business in each group company as the “first line” of risk management, the organization in charge of corporate operations at the Company and each Group company as the “second line” of risk management, and the organization in charge of internal audits at the Company and each Group company as the “third line” of risk management. With each “line” playing its role in risk management, we have established an appropriate defense line.
The risk management system refers to ISO 31000 and the risk management framework of The Institute of Internal Auditors (IIA)—Japan.


For further details, refer to pages 10 to 20 of Financial Report.

Results

Risk Management Committee and Group Risk Liaison Committee meetings held

Item FY2018 FY2019
Number of meetings held 12 12

Risks of particular focus (in fiscal 2021) in the risk categories are as follows.

Risk Category Specific Risks
A: Investment risk

Deterioration of profitability and delay in the real estate development business

Delays in the recovery of businesses substantially impacted by COVID-19 (fitness clubs business, hotel business, and other business)

B: External risk

Changes in the real estate trading market and stock market

Changes in people’s behavior due to COVID-19

Changes in the economic and real estate markets of overseas countries

slowness in taking advantages of continuously evolving digital technology

C: Disaster risk

Increase in natural disasters such as severe torrential rains

Impact of COVID-19 epidemics on business continuity

D: Internal risk

Occurrence of designs and construction defects in the real estate development business

Occurrence of information leakage, business dela, damage, etc. due to cyber attacks

Delays in the establishment of a human resources systems securing diverse personnel

Initiatives

Information Security Measures

The Group has established the Information Security Regulations, which prescribe personal information, trade secrets and other highly confidential information as important information, and which stipulate basic matters regarding the management system and handling of such information.
The regulations assign a chief information security officer (concurrently held by the chairperson of the Risk Management Committee), a document information officer and an electronic information officer (head of each department in charge) as administrators to maintain and improve the level of systemic information management and security. The Group will also strengthen its information security to keep pace with the increase in businesses using rapidly expanding digital technologies, as well as the surge in teleworking and the modal change in business due to the use of cloud computing.

Nomura Real Estate Holdings Personal Information Protection Policy

The Group considers the appropriate protection of personal information to be an essential aspect of its business operations, and manages customers’ personal information with great care, in accordance with the Act on the Protection of Personal Information and related laws and regulations.

Personal Information Protection Policy

Risk Management Relating to Society and the Environment

The Group is also aware of risks relating to social and environmental issues. The details are reported to the Sustainability Committee (chaired by the president and Group CEO of Nomura Real Estate Holdings), which is made up of directors and others from Nomura Real Estate Holdings and Group companies. Important issues are reported to the Board of Directors, which deliberates on how to deal with them.

Sustainability Management

Provision for Lawsuits Involving Violations of Laws and Regulations, and Environmental, Social, and Governance (ESG) Issues

There were no significant provisions at the end of March 2021 related to fines and settlements incurred in the future arising from cases prior to fiscal 2020.

Inquiries Desks

Inquiries Desks have been set up at Nomura Real Estate Holdings and at each Group company in order to respond quickly and appropriately when a problem with a product or service is found. Significant information gathered at the Inquiries Desks is reported to the Risk Management Committee and shared within the Group, and measures to prevent reoccurrence are implemented.

Business Continuity Plan Established for Emergencies

The Group formulated a business continuity plan (BCP) in anticipation of a major earthquake in the Tokyo Metropolitan region. The plan provides for the chain of command during an emergency and the allocation of duties for the continuation of business as well as the establishment of structures that can respond even at night and on days off and holidays so that the impact of a disaster can be minimized.
In addition, a disaster response headquarters establishment drill is conducted once a year with the president of Nomura Real Estate Holdings as the head and other members of the Disaster Response Headquarters participating. During the drills, implementation of initial responses specified in the business continuity plan (ensuring the safety of officers and employees, establishing a chain of command, and restoring business) is confirmed and other actions are taken to prepare for an earthquake and other emergencies.

Measures and Response to the Global Pandemic

Amid the globalization of its businesses, the Group has taken measures against the increasing risk of infectious diseases, such as new strains of influenza and new coronaviruses. With respect to COVID-19 in particular, which struck in 2020, the Group formulated a basic policy for response based on the business continuity plan that had been formulated to respond to a new influenza pandemic.
The Group also established a response headquarters led by the president of Nomura Real Estate Holdings to collect information issued by the national and local governments, and to examine and implement measures to ensure business continuity while prioritizing the health of its stakeholders, customers, employees and their families and the prevention of the spread of COVID-19.
Specifically, in response to the state-of-emergency declaration for COVID-19, which was issued by the national government on April 7, 2020, as well as to requests by prefectural governors for emergency measures, on April 8, the Group began scaling back its head office functions and some of its business activities in affected areas. On May 25, the government decided to lift the state-of-emergency declaration nationwide. Prioritizing the safety, security and health of its customers and employees, the Group, however, has maintained working systems that include teleworking and staggered working hours.
Other responses at some stores and facilities have included suspending business or shortening business hours. (As of June 23, 2021)
For further details, refer to the following.

Group Response to Spread of COVID-19 (Japanese only)
Health and Safety of Employees

Confirming the Safety of Officers and Employees

The Group introduced a safety confirmation system that uses the Internet and emails to rapidly determine the status of harm to and safety of officers and employees during emergencies, and conducts safety confirmation drills for Group officers and employees four times a year.

Sustainability