Introduction

Message from the
President & CEO

Value Creation Story Business Strategies

Financial Strategy

Strategy to EnhanceNon-financial Capital

Governance

Data Section

Risk Management
Risk Management System Overview

Managing Risk Capital to Ensure Soundness

Overview of Risk Management Framework
Improve corporate value, achieve sustainable growth, resolve social issues

Management targets
Basicstrategy

Proper portfolio management
Improve profitability

Maintain soundness&Integrated risk management
Control of risks and returns

Portfolio
optimization
Businessmanagement

Profitgrowth

Proper evaluation of risks and returns
Asset allocationRisk capital
allocation

Monitoring of risks
and returns

Stress testing

Pricing, credit rating

Predictive asset
management

Observe risk
capitalmanagement
policyMaintaincapitaladequacy&Ensure liquidity

ALM
Asset liability management

Liquidity risk management
Interest-rate risk management

Operational risk management Maintain the stability of operational systems that underpin growth strategies

Integrated Risk Management
The Group engages in business operations that incorporate the framework of integrated risk management inorder to work toward sustainable growth by balancing
the maintenance of management soundness withimproving profitability. The major risks managed within
the framework of integrated risk management include
credit risk, asset risk, investment risk, market risk, liquidity risk, and operational risk. Risk management is conducted on a consolidated basis. Specifically, risk capitalis allocated to the respective risk category based on theCompanyʼs risk capital management policy after quantifying each risk using risk assessment methods tailoredto the characteristics of the asset or business.

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MITSUBISHI HC CAPITAL INTEGRATED REPORT 2023

Reasonable risk-taking is then carried out within thescope of risk tolerance.
Within this risk management framework, regularmonitoring is undertaken of the utilization of risk capitaland the status of portfolios, the results of which arereported to and discussed by the Risk Management
Committee, the Executive Committee, and the Board ofDirectors. In this way, efforts are made to ensure appropriate response measures and to promote effective
internal communication about risk. Arrangements are inplace to ensure that the Board of Directors is fully
informed of the risk management system and risk management status and that it maintains oversight thereof.

Risk capital allocation (initial)
Determine risk capital
available for allocation

Determine risk capital“Significance”
Ensures stability of business
continuation●Preparing for investment ingrowth●Response to unforeseen risks●Determine risk capital to allocate

Confirm risk capital usage(level of risk)

Additional risk capital
available for allocation

CapitalReservedRisk capital

Monitoring (throughout the fiscal year)

Risk capital
available forallocation

Credit risk
Asset risk
Investment risk
Market risk
Operational risk

Allocated risk capitalsider appropriate measures to address those risks, andreports promptly to the Executive Committee, a consultativeand decision-making body that controls the execution ofbusiness. Specifically, the Risk Management Committee,
which undertakes the comprehensive and systematic management of risks affecting all operational areas, meetsquarterly or as necessary primarily to discuss and consider
policies for reporting and responding to the status of risks.
The issues surrounding individual risks and the measures toaddress them are discussed by the Asset Liability
Management (ALM) Committee, Compliance Committee,
Disclosure Committee on J-SOX, and other committees.
Additionally, important matters at each committee arereported to and discussed by the Board of Directors.

Allocated risk capitalOf the business and other related risks of the Mitsubishi HCCapital Group, the main items with potential for important
impact on investorsʼ decisions are managed comprehensively in the framework set out below under “1. Integrated
Risk Management.” An outline of the risk and a specificstatement of the main efforts to address it are given under“2. Major Risks Managed within Framework of Integrated
Risk Management.” The Group has established an appropriate system to manage these risks and strives to prevent
them from emerging or to minimize their impact if they occur.
To manage potential risk factors, we operate a system
whereby the division responsible for each category of risks
identifies issues arising from changes in the external environment and other factors, holds regular discussions to con-Credit risk
Asset risk
Investment risk
Market risk
Operational risk

Adjust equity capital to calculate

Major Risks Managed within Frameworkof Integrated Risk Management
The Mitsubishi HC Capital Group conducts businessactivities globally. The Group provides capital investments and services necessary for customer businesses
through leases and other means. The assets it holds forleases and related transactions are diversified, ranging
from general movable property, such as office equipment
and production equipment, to assets, such as aircraft,that are used in particular industries. Demand for capital
investment can decline considerably if a customerʼsbusiness environment deteriorates with a deceleration orslowdown in business at home or abroad. In that case, adecline in leases and other transactions could impact theGroupʼs business results and financial position.
Additionally, losses arising from inadequacy of internal
processes, personnel, or systems or their failure tofunction, or exogenous events could impact the Groupʼsbusiness results and financial position.
The major items among these envisioned risks aremanaged within the framework set out under Integrated
Risk management.
Please refer to our website for details.
https://www.mitsubishi-hc-capital.com/english/sustainability/governance/
risk_management.html

Other Major Risks
In addition to risk addressed in the framework of integrated risk management, the Group recognizes the majorrisks listed below. These risks are managed within theintegrated risk management framework, including individual impact and combined impacts across multiple risk

items, according to their individual characteristics andstatus. The Group explores a unified response and formulates a response policy as necessary and additionallyconducts scenario analysis appropriate to the situation aspart of a multi-faceted verification of risk resilience.
1. Risk Related to Expansion of Operating Base,
Strategic Partnerships, and M&As
2. Global Pandemic Risk
3. Climate Change Risk
4. Human Rights Violation Risk
5. Risk associated with Expansion of Business Domains
6. Intensifying Competition
7. Risk related to Personnel Recruitment
8. Risk related to Labor and Employment Management

Stress Tests
In the execution of management strategy, the Groupmakes efforts to gauge the degree of impact of stressperiods caused by various risk events with potential
impact on its business, such as deterioration in market
conditions, including economic downturns and market
fluctuation. Specifically, the Group has posited a numberof potential high-stress scenarios, ranging from a deterioration in the overall world economy to market fluctuation, deterioration in credit, and the emergence oflarge-scale concentrations of risk in individual businessfields. Based on these scenarios, it has undertaken
analysis and verification of the potential degree of
impact of stress conditions on profitability and equity ineach fiscal period.
These multifaceted verifications enable the Group toconfirm its risk resilience and to ensure that the risk-return balance of management plans does not exceed
tolerable levels.

MITSUBISHI HC CAPITAL INTEGRATED REPORT 2023

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