Management Foundation Supporting Corporate Value

Message from an Outside Director
We will work to further enhance andstrengthen corporate governance toimprove corporate value.
Naotaka Obata
Outside Director
Chairperson of the Board
Nomination Committee Chairperson
Remuneration Committee Chairperson

Roles to Be Fulfilled as an Outside Director andChairperson of the Board
I was appointed as an outside director in 2019, when Japan
Securities Finance (“JSF”) transitioned to a “Company with aNominating Committee, etc.” structure. For the past three
years, I have served as chairperson of the Board of Directors,
as well as chairperson of both the Nomination Committee
and the Remuneration Committee. A Company with aNominating Committee, etc. is designed to clearly separate
supervision and execution of management. In this structure,
the role of the Board of Directors is to determine basic
medium- to long-term management policies and to supervise
executive officers to ensure that they are executing businessappropriately based on those policies.
As chairperson of the Board of Directors of JSF, I havealways had a mindset of maximizing its effectiveness as aso-called “monitoring board.” I feel that the diverse
knowledge of board members, who are mainly outside
directors, has helped deepen and broaden discussions atboard meetings.
In supervising the execution of business by the president
and other executive officers, outside directors must
sometimes give harsh opinions, and at other times encourage
management to take on new challenges.
When deliberating on important management mattersand overseeing business execution, outside directors are
expected to act from an objective standpoint with anoutsider’s point of view. At the same time, we must constantly
bear in mind JSF’s corporate philosophy of contributing to
the development of the securities market while always
maintaining a keen awareness of its public role.
In FY2022, the focus of the Board of Directors will be on
deliberating and deciding the next mid-term management
plan based on the medium-term management policy
formulated in 2021. As chairperson, I intend to continue
leading those discussions.

Working to Improve the Effectiveness of theBoard of Directors
Three years have passed since JSF transitioned to a Company
with a Nominating Committee, etc. structure. During that time,
we have been working in cooperation with the secretariat of34

Japan Securities Finance Co., Ltd. Integrated Report 2022

regarding sustainability, the Company has been promoting
the recruitment of female talent and mid-career hires under apolicy of developing and retaining diverse human resources.
Meanwhile, it has been steadily working on the formulation of
ESG-conscious management strategies and the developmentof governance systems, including a system for the disclosureof climate change information, based on therecommendations of the Task Force on Climate-related
Financial Disclosures (TCFD).
As an outside director, I will do my utmost to contributeto the achievement of the Company’s management goals set
forth in the medium-term management policy and therealization of its vision for the future by expeditiously
addressing diverse issues in order to achieve the level ofgovernance expected of a listed company.

As Nomination Committee Chairperson

the Board of Directors to enhance the effectiveness of theboard as a monitoring board by creating an environment thatencourages lively discussions at board meetings. Initiatives
include enhancing training to acquire knowledge about theCompany’s operations, holding regular meetings for outside
directors to enable them to share information with one
another, and creating opportunities for outside directors anddepartment heads to exchange opinions.
I believe that mutual understanding of each other’s
knowledge and expertise and a shared awareness of businessexecution issues will enable outside directors to speak frankly
at board meetings, thereby deepening discussion. Moreover,to facilitate such rich discussion, it is essential to provide afoundation of information and support for directors. To that
end, the Corporate Governance Office was established toserve as secretariat of the Board of Directors. I feel this hasenhanced support for the board.
We conduct annual evaluations of the effectiveness of theBoard of Directors, identifying issues related to the operationof the Board of Directors, and working in cooperation withthe secretariat of the board to make improvements. I am
happy to say that we have received many candid and forwardlooking proposals from directors on various issues, such as
expanding opportunities for outside directors to exchange
opinions with one another.

Enhancing and Strengthening Corporate Governanceto Improve Corporate Value
With changes in JSF’s operating environment in FY2021, suchas revisions to the Corporate Governance Code and thetransition to new market segments by the Tokyo Stock
Exchange, the Company formulated its medium-term
management policy in November 2021.
The Corporate Governance Code includes three newrequirements: enhanced Board of Directors’ functions,diversity in core personnel, and response to issues regarding
sustainability.
In order to further enhance the functions of the Board of
Directors, in 2022 the Company took steps to structure aboard with multiple layers of complementary skills by
appointing two new outside directors whose backgrounds
and expertise differ from those of existing board members.
To ensure diversity of core personnel and address issues

The Nomination Committee decides on director candidates,
prepares succession plans for the representative executive
officer and president, decides on candidates for the positionof executive officer, and considers policies regarding theappointment and dismissal of individuals in these management
positions. In FY2021, we discussed how to approach various
Board of Directors’ issues, such as its composition, as well as
how to approach the appointment of executive officers.
First, with regard to the composition and other aspects of
the Board of Directors, since the 2019 transition to a Company
with a Nominating Committee, etc., JSF has maintained asystem of five directors, including three outside directors.
Under this system, I believe that the Board of Directors has
been appropriately formulating management policies andsupervising the execution of business. It has also been
evaluated and confirmed to be effective. However, duringthat time there have been remarkable changes in the
Company’s internal and external environment, such as
Corporate Governance Code revisions and the Tokyo Stock
Exchange’s transition to new market classifications, as well as
further progress of digitalization and internationalization. The
Company is also at the stage of formulating and implementing
its next mid-term management plan based on its latest
medium-term management policy. We therefore examinedthe composition and other aspects of the Board of Directors
from the perspective of further enhancing its functions. We
concluded that the Board of Directors was currently made up
of directors with the necessary skills and that the board was
effectively performing its function of supervising businessexecution. However, given the importance of having a board
with multiple layers of complementary skills to respond tomatters including changes in the environment, as well as theneed to balance the number of supervisors and executives,
and to diversify the board in terms of age and gender, theCompany decided at its June 2022 general meeting ofshareholders to add two new outside directors.
When deciding on new director candidates, the Nomination
Committee first confirmed the skill matrix, discussed andformulated a preliminary list of candidates, and interviewed
each candidate on the list with a focus on their experience,and their awareness of issues required of an outside director.
Based on the results of the interviews, the final candidates
were selected after an evaluation of whether they could be
expected to make an adequate contribution to the Company
as a director.
The committee also comprehensively examined theapproach to appointing executive officers from the perspectiveof building an execution system for promoting the mid-term
management plan. Based on the public role and special
characteristics of the securities finance business, the Company
formerly sought executive officer candidates with qualities
such as the ability to fully recognize the Company’s publicrole in the execution of business and extensive knowledge ofthe overall finance and securities markets, but we have newly
broadened the qualities required to include having aninternational outlook, a high degree of knowledge andexperience in business management and risk management,
and a high degree of knowledge and experience in financeand accounting.
By organizing our approach in this way, we can selectspecific candidates based on their character from a preliminary
list of qualified candidates from within the Company, the public
sector, and the securities and financial sectors. This process,which includes discussions at Board of Directors meetings andprior briefings, enables Nomination Committee members todeepen their understanding of the qualities and character of
each executive officer. In addition, we communicate withmanagerial-level individuals other than officers through various
opportunities such as business briefings, and strive to identify
their capabilities. In this way, Nomination Committee members
work both inside and outside the committee to collect information
for the selection of candidates. As the leader among theexecutive officers who possess these qualities, and the person
responsible for management, the representative executive
officer and president is required to have the ability to oversee
business execution and improve corporate value, and otherqualities such as high ethical standards as the representativeof a company that plays a public role. Furthermore, thecommittee regularly arranges opportunities for interviews anddiscussions with candidates to help create a mental picture
while gathering information to make decisions on selection.

As Remuneration Committee Chairperson
The Remuneration Committee decides on the remunerationof directors and executive officers, and policies regarding the
remuneration of officers and other matters. In its officer
remuneration system, the Company has been working tofurther link executive officer remuneration to performance,and has revised bonuses for executive officers to reflect thedegree of progress and achievement of the management
goals in the mid-term management plan. In FY2021, the firstyear after this revision, we worked to manage the systemappropriately. Going forward, we will consider revising officer
remuneration based on the new mid-term management plan,
which is aimed at achieving the management goals set out inour medium-term management policy. Moreover, in recent
years companies have been expected to actively address
sustainability issues, and there have been moves to reflect theresults of such efforts in officer remuneration. I would like theRemuneration Committee to discuss officer remunerationfrom this perspective as well.

Board of Directors Initiatives and Policies
Going Forward
Going forward, as the Company’s management begins to stepup efforts to implement the medium-term management policy,
I would like the Board of Directors to contribute to theCompany’s development by conducting appropriate
supervision based on the launch of the mid-term management
plan and the monitoring of its progress through free andopen discussion among directors with various backgrounds.

Japan Securities Finance Co., Ltd. Integrated Report 2022

35

Management Foundation Supporting Corporate Value

Corporate Governance
Composition of the Board of Directors

Basic Concept
As an institution specializing in securities finance, JSF has a
mission to contribute to the development of the securities
market by proactively meeting the diverse needs of the
securities and financial sectors and to enhance the long-term
interests of users, while always maintaining a keen awarenessof its public role. Based on this thinking, the Company
aims to gain the firm trust of society through soundbusiness operations.

Under this corporate philosophy, the Company has
adopted the Company with a Nominating Committee, etc.
structure under the Companies Act, based on which it strives
to clarify the separation of supervision and execution ofbusiness operations, further strengthen supervision by having
mainly outside directors to ensure sound management, andachieve prompt business execution that responds quickly tochanges in the business environment.

Corporate Governance System
Management Decision-Making

The Board of Directors comprises a variety of directors with diverse expertise, experience and other characteristics, based on askill matrix formulated by the Company. To the extent designated in the Articles of Incorporation, JSF secures the appropriate
number of members to maximize the effectiveness and efficiency of the board’s functions. In addition, multiple outside directors
independent from the Company and possessing abundant experience and expert knowledge of business management and othermatters have been appointed to the board to ensure appropriate business operations while enabling objective and neutral
management supervision from external viewpoints.
The Board of Directors currently comprises seven members (including five outside directors), with an outside director serving
as chairperson. At the general meeting of shareholders held in June 2022, the number of outside directors was increased fromthree to five, taking into consideration factors such as balancing the number of people engaged in oversight and execution,
diversification in terms of age and gender, and the need for multifaceted skills in light of changes in the operating environment,such as the revisions to the Corporate Governance Code, the transition to new market segments by the Tokyo Stock Exchange,
and further progress in internationalization and digital transformation.

Overview of the Board of Directors (As of June 23, 2022)

Non-Executive Directors

Independent Outside
Directors

6 7

5 5

85.7%

100%

General Meeting of Shareholders

Organization Form

Company with a Nominating
Committee, etc.

Chairperson of the Board

Outside director

Maximum Number of
Directors as Stipulated in the
Articles of Incorporation

8

Number of Directors

7

Number of Outside Directors(Independent Directors)

5 (5)Board of Directors (7 members)
Accounting Auditor

Nomination Committee (4 members)
Remuneration Committee (5 members)
Survey and report, etc.

Audit Committee (4 members)
Inside Director

Entrustment andsupervision ofbusiness execution

Audit

Cooperation
Cooperation

Audit
Department
Internal audit

ReportCorporate Governance Office

Risk Management Committee

Audit

Secretariat

Business Execution

Representative Executive
Officer & PresidentManagement Committee

Outside Director

Compliance Committee

Executive Officers

Compliance Department

ReportManagement administration and report, etc.

Risk Management Department

Mutual checks

Business Departments

External Reporting Contact Desk

Cooperation

Consult andreportJSF Group Companies
Note: Entities in area enclosed by dashed outlines are subject to internal audit.

Overview of the Board of Directors and Status of Initiatives
JSF has strengthened the supervisory function of the Board of Directors as a Company with a Nominating Committee, etc., basedon which it has separated supervision and execution. Excluding matters to be resolved by the Board of Directors, such as those
designated by laws and regulations and the Articles of Incorporation, decisions on business execution are, in principle, delegatedto executive officers, thereby building an effective and efficient governance system that enables the Company to respond quickly
to changes in its operating environment. The Board of Directors is responsible for determining basic management policies and forsupervising the execution of business by executive officers. As a specific example, under this system the chairpersons of theBoard of Directors and the three statutory committees, who are all outside directors, engage in extensive study and discussion
from various angles in formulating the mid-term management plan. In addition, in order to appropriately supervise the executionof business, the Company strives to enhance the provision of information to directors, in ways such as reviewing report content
and holding business briefings.

36

Japan Securities Finance Co., Ltd. Integrated Report 2022

Initiatives in FY2021
In light of changes in JSF’s operating environment in FY2021,
such as the revisions to the Corporate Governance Code andthe shift to new market segments by the Tokyo Stock Exchange,
the Company announced its medium-term management policy
in November 2021 after discussing the Vision for JSF in the
Future, medium-term management goals, strategies for achieving
those goals, and shareholder returns. Of particular note, theCompany decided to use ROE as an indicator for managementtargets. Having estimated the cost of equity capital to bearound 4.5%, the Company set an ROE target of 5% for the
next mid-term management plan to exceed this figure, to beachieved by FY2025. The Company also deliberated andannounced a basic policy for its business portfolio based on
the fundamental nature of the Group’s business and the
purpose of the Corporate Governance Code.
Moreover, as an initiative for corporate governance, theBoard of Directors worked to further enhance its role bydeliberating and studying its composition, as well as thequalities required of executive officers. In addition, the Company
established a Corporate Governance Office with improved
functions as the secretariat of the Board of Directors.
JSF has clarified its basic policy for sustainability
promotion and ESG-related initiatives as follows: “The JSF
Group provides a variety of services, including the loans for
margin transactions business, as a part of the infrastructure ofJapan’s securities market, and works to improve the liquidityof the country’s securities and financial markets as well as theconvenience for market participants. Through these activities,
we aim to play a part in initiatives to realize a sustainable
society, including supporting market participants who are
engaged in similar initiatives.”
Main Agenda for FY2021
Corporate Governance• Formulation of the medium-term management policy• Formulation of a business portfolio policy• Examination of sustainability issues (formulation of basic thinking,identification of material issues, etc.)• Disclosure of climate-related financial information based on
TCFD recommendations• Formulation of an approach to the composition and other aspects of
the Board of Directors and appointment of executive officers• Consideration of response to the new market segments of the Tokyo
Stock Exchange (transition to Prime Market)• Evaluation of the effectiveness of the Board of Directors
Risk Management• Status of risk appetite indicators and risk management• Implementation status of internal audits
Capital and Financial Policy• Examination of shareholder returns policy• Evaluation of cross-shareholdings• Status of dialogue with investors
Mid-Term Management Plan
• Progress of the mid-term management plan

Japan Securities Finance Co., Ltd. Integrated Report 2022

37

Management Foundation Supporting Corporate Value

Corporate GovernanceEvaluation of the Effectiveness of the Board of Directors

Overview of Each Statutory Committee and Status of Initiatives

In FY2021, based on an evaluation by each of the directors,

Nomination Committee
To ensure that the Board of Directors can adequately
determine management policies and supervise execution, theNomination Committee deliberates and decides on generalmatters related to the appointment and dismissal of theCompany’s management team (directors, executive officers
and corporate officers) such as the composition of the Boardof Directors, including the skill matrix, determination of
director candidates, consideration of succession plans,qualifications required of executive officers and corporate
officers, the policy for their appointment and dismissal, anddetermination of specific candidates. The committee currently
consists of four directors (including three outside directors),
and is chaired by an outside director.
Main Agenda for FY2021
 onsideration of and deliberation on the skill matrix for directors,C
the composition and other aspects of the Board of Directors• Consideration of and deliberation on the approach to theappointment of executive officers• Nomination of director, executive officer and corporate officer
candidates for FY2022•

The Remuneration Committee deliberates and decides on
general matters related to amounts of remuneration for senior
management (directors, executive officers and corporate
officers) for the steady implementation of the medium-term
management policy and management plans based on thispolicy. These matters include making sure the remuneration
system is consistent with the implementation of the
management policy and related plans, deciding on
remuneration for individual members of senior management,

and the policy for determination thereof. The committee
currently comprises five directors (including four outside
directors), and is chaired by an outside director.

Governance Office. This office serves as a dedicatedthe directors’ personal efforts, as well as an evaluation of thesecretariat to strengthen support for the Board of Directors

three statutory committees, namely, the Nomination Committee,

and the statutory committees in ways such as providing

the Remuneration Committee and the Audit Committee.

directors with appropriate information on corporate

For the analysis and evaluation, a questionnaire wasadministered to all directors. The Company has chosen to
receive recommendations from an external organization
regarding the content of the questionnaire and, in principle,
to send responses directly to that organization. The board’s(1) Overall Evaluation

 etermination of FY2021 remuneration amounts for individualD
directors and executive officers• Future officer remuneration based on the formulation of the mediumterm management policy•

The committee currently comprises four directors (including
three outside directors), and is chaired by an outside director.

of Directors has been ensured. However, given that the
number of directors was increased in FY2021, efforts willcontinue to further improve the effectiveness of the Board of
Directors, including by enhancing the provision of informationand training and by improving the functions of the secretariat.
In FY2022, the Board of Directors will focus on considerationof the medium-term management policy announced in November
2021. Accordingly, the Company will work to enhance board

The statutory committees were also confirmed to be

discussions through a proper understanding of the progress

operating appropriately.

of the current mid-term management plan, which is the premise

effectiveness of its Board of Directors has been ensured.

further enhance discussions at Board of Directors meetings.
Another issue recognized by participants in the evaluation was
the need to strengthen support for the Board of Directors andof discussions, and by providing accurate information on
trends inside and outside the Company. In addition, sincevarious considerations regarding nomination and remuneration
will take place in relation to the formulation of the next
mid-term management plan, the Company will work to further
improve the effectiveness of the statutory committees.
The Company will work to address these issues to further
improve the effectiveness of the Board of Directors.

statutory committees in order to improve their effectiveness.

FY2021 Meeting AttendanceInternal
Finance,Financial
Outside/ Corporate
International Legal affairs,
control, risk
securities,
affairs,
Inside management
affairs
complianceeconomics
accounting management

NaotakaObata

Outside

100%
11/11

100%
8/8

100%
5/5

—

Shoko
SuginoOutside

100%
11/11

100%
8/8

100%
5/5

100%
11/11

Shuya
IimuraOutside

100%
11/11

—

—

100%
11/11

Kensuke
Futagoishi

Outside—Takayoshi
Yamakawa

Outside——Inside

100%
11/11

100%
8/8

100%
5/5

—

Inside

100%
9/9 2

—

—

100%
9/9 2

Japan Securities Finance Co., Ltd. Integrated Report 2022

The Company concluded that the effectiveness of the Board

aspects of the Board of Directors are all appropriate.

opportunities for directors to exchange opinions in order toName: Chairperson,(3) Issues Raised in FY2022

that the composition, operation, support system and other

The FY2020 evaluation yielded feedback that we should increase usiness operation status, risk management, compliance,Binternal auditing• Reports from the accounting auditor (audit plans, major audit
matters, etc.)•

initiatives were judged to be appropriate.

of the next mid-term management plan toward the realization(2) Initiatives in FY2021 to Address Issues Raised in FY2020

Main Agenda for FY2021

governance and on execution of Company business. These

The questionnaire responses and other findings confirmed

Based on these findings, the Company judged that the

Area of Expertise

38of the Board of Directors, the support system for directors andadministration of the questionnaire.

Director Expertise (Skill Matrix), Attendance at Board of Directors and Other Meetings

Hiroshi
Asakuraexchange opinions and established the Corporate

meeting, including with the outside directors, held prior toMain Agenda for FY2021

In addition to carrying out tasks such as auditing theexecution of duties of directors and executive officers andpreparing audit reports, the Audit Committee deliberates anddetermines the content of proposals (including those onelection and dismissal of the accounting auditor) to besubmitted to the general meeting of shareholders.

Shigeki Kushida

to its effectiveness including the composition and operation

report of the aggregated results and an opinion exchange

Audit Committee(Representative Executive
Officer & President)

provided multiple opportunities for outside directors toanalysis and evaluation is based on the external organization’s

Remuneration Committee

Responding to this feedback, in FY2021 the Company

the Board of Directors analyzed and evaluated matters related: Member

ESG

Board ofDirectors

Nomination Remuneration
Audit
Committee Committee Committee

1

1. Appointed in June 2022

1

Policy on the Composition of the Board of Directors and Appointment of
Executive Officers
Composition and Other Aspects of the Board of Directors
the progress of globalization and digitalization, as well as the prolonged COVID-19 pandemic. In addition, revisions to the
Corporate Governance Code and the transition by the Tokyo Stock Exchange to the Prime Market necessitate the establishmentof a more advanced governance system. As a listed company, JSF is expected to further enhance profitability and address new—

1

The situation in the securities and financial markets affecting the Company is undergoing major changes due to factors such as

issues such as sustainability.
1

In light of issues related to this situation both inside and outside the Company, the Nomination Committee and the Board of
Directors deliberated and reviewed the composition and other aspects of the board from the perspective of further enhancing theroles of the Board of Directors in regard to determining basic management policies and carrying out supervisory functions. Theirconclusions were as follows.

• As of the end of FY2021, the Company’s Board of Directors comprises directors with the necessary skillsets, and is effectively
performing its function of supervising execution.

2. Appointed in June 2021

Japan Securities Finance Co., Ltd. Integrated Report 2022

39

Management Foundation Supporting Corporate Value

Corporate Governance• It is appropriate to appoint directors who have multiple layers of skills, given the Company’s steady growth in recent years

Overview of the Officer Remuneration Systemcentered on the securities finance business, progress in the diversification and sophistication of operations, the need to respondto changes in the operating environment such as further progress in globalization and digital transformation, and the desirabilityof having a system that allows members with diverse backgrounds to engage in multifaceted consideration.

• It is also important to balance the number of people engaged in oversight and execution, and to diversify in terms of age and gender.

Proportion of Total
Remuneration Paid

Fixed or Variable
Remuneration

65%

Fixed

Basic

Payment Standards
Position

Chairperson

President

Vice
President

Senior Managing
Executive Officer• B ased on these conclusions, the number of directors was increased by two at the general meeting of shareholders held in June 2022.
• To enable speedy decision-making, and taking the size of the Company into account, the upper limit on the number of directors

Basic profit*<YoY change>

based on the skill matrix was revised to allow a certain amount of leeway relative to the actual number of directors.

Qualities Required of Executive Officers

Bonus

20%

Performancelinked

Base calculation
amount according
to position

Linked to short-term
performance

Number of loanable stock issues
Performancelinked coefficient<YoY change>
Consolidated profit

In light of the public role and special characteristics of securities finance services such as loans for margin transactions, the<YoY change>

Company believes that in addition to the generally required knowledge and leadership in areas such as corporate governance,
legal affairs and finance, executive officers should have the following qualities.

• The ability to fully recognize JSF’s public role in the execution of business• Extensive knowledge of the overall securities and finance markets• Well versed in the Financial Instruments and Exchange Act and other various laws and regulations• Knowledge and experience involving JSF’s highly specialized business• The internationality required in the advance of JSF’s business• A high degree of knowledge and experience in business management and risk management• A high degree of knowledge and experience in finance and accounting• Ability to flexibly respond to the various changes affecting JSF in the securities and finance sectors

Officer Remuneration System

Managing Executive
Officer

Sharebased

15%

Linked to medium- tolong-term performance• Determination of points according to position• Points are added if the standard value exceeds the average value of consolidated ordinary

profit for the past three years, and subtracted if the standard value falls below the average.

* Basic profit is defined as ordinary profit estimated based on the assumed gross operating profit of the loans for margin transactions business (average over the past
three years) and the gross operating profit of businesses other than loans for margin transactions business. The loans for margin transactions business, which is our
main business, is susceptible to market fluctuations, and earnings fluctuate significantly.

Total Amount of Remuneration by Officer Classification
Officer Classification

Total Amount of
Remuneration Paid
(Thousands of yen)

Total Amount of Remuneration Paid by Type of Remuneration (Thousands of yen)
Basic

Number of
Eligible Officers

Non-monetary

Bonus(Share-based)

Director(Excluding outside directors)

8,400

8,400

—

—

2

Outside Director

46,56046,560——3

Executive Officer

298,873

194,160

75,25029,463

6

Policy for Determining the Amount of Remuneration for Officers and the Calculation Method Thereof
Details of Policy and Determination Method
Remuneration for Company officers shall be based on systems and standards in accordance with the respective roles andexpected functions of directors and executive officers, in order to achieve sustained growth and enhancement of corporate value
over the medium to long term based on the corporate philosophy and management principles. Specifically, individual amounts ofremuneration shall be determined by the Remuneration Committee based on the following policy decided on by the committee.

1. Directors concurrently serving as executive officers shall not receive remuneration as directors.
2. Performance indicators for performance-linked remuneration (bonuses) are the number of loanable stock issues, basic profit and consolidated profit, which in FY2021
were 2,661 stock issues, ¥8,454 million and ¥5,174 million, respectively.
3. The business performance index for calculating performance-linked share-based remuneration is consolidated ordinary profit (3-year average), which in FY2021 was¥5,872 million.

Directors• With a view to having supervisory functions carried out appropriately, directors shall receive only fixed monthly remuneration

Policy on Cross-Shareholdings(base remuneration). Performance-linked remuneration shall not be provided to directors.

• Remuneration for individual directors shall be determined in accordance with the responsibilities of each director, such aswhether that person is serving in a full-time or part-time capacity or as chairperson.

• Directors concurrently serving as executive officers shall not receive remuneration as directors.
Executive Officers• With a view to enhancing correlation with the Company’s business performance and share value, remuneration for executive
officers shall comprise fixed monthly remuneration (base remuneration), performance-linked officer bonuses and share-based
remuneration.

• Fixed monthly remuneration (base remuneration) shall be determined in accordance with each executive officer’s position.
• To clarify the responsibilities of management, officer bonuses shall be determined after the end of each fiscal year, in

The Company has been reducing cross-shareholdings. Between March 2018 and March 2022, it reduced shares of listed issues
held by 91% on a market value basis, and shares of total issues held including listed and unlisted issues by 78%.

Basic Policy(1) In order to contribute to sustainable growth and an increase in corporate value over the medium to long term, JSF strategicallyholds other companies’ shares it deems necessary for purposes such as strengthening business relationships.
(2) W ith respect to cross-shareholdings, the Company examines the status of dividends and valuation gains and losses, the statusof transactions with investee companies, the history and the effects of the shareholdings, and based on this examination,
reduces the number of shares in shareholdings for which cross-holding is not necessary.

accordance with the degree of achievement of management goals under the mid-term management plan and business

March 31, 2022

performance for the fiscal year, and are paid within three months after being decided.

• As for share-based remuneration, a Board Benefit Trust (BBT) scheme shall be used to award each executive officer points,

40

Number of Issues

Carrying Amount

Percentage ofTotal Assets

Percentage of
Net Assets

which are determined based on correlation with the Company’s medium- to long-term business performance. Upon retirement

Listed Shares2¥1,057 million

0.007%

0.766%

from office, executive officers are issued Company shares corresponding to the number of points they have accumulated.

Unlisted Shares

7¥1,759 million

0.012%

1.275%

Japan Securities Finance Co., Ltd. Integrated Report 2022

Japan Securities Finance Co., Ltd. Integrated Report 2022

41

Management Foundation Supporting Corporate Value

Officers(As of June 23, 2022)

Directors

Executive Officers

Director, Chairperson of the Board

Director

Director

Director

Chairperson

Naotaka Obata

Shoko Sugino

Shuya Iimura

Kensuke Futagoishi

Eizo Kobayashi

Apr. 1968	Joined The Mitsubishi Bank, Ltd.
May 1999	Managing Executive Officer of The
Bank of Tokyo-Mitsubishi, Ltd.
Jan. 2004	Senior Managing Executive
Officer of The Bank of TokyoMitsubishi, Ltd.

Apr. 1973	Registered as an attorney
Joined Fujibayashi Law Office

Apr. 1987	Joined Tokyo Stock Exchange(TSE)

Apr. 1977	Joined The Sanwa Bank, Limited(currently MUFJ Bank, Limited)

Apr. 1994	Partner Attorney at Fujibayashi
Law Office (current position)

Jul. 2001	Chief of Public Relations Office ofGeneral Affairs Department, TSE

Apr. 1997	Professor for The Legal Training
and Research Institute of Japan

Jun. 2010	Director of Derivatives
Department, TSE
Mar. 2014	Director of Market Planning
Department, Osaka Exchange
Apr. 2016	Human Resources Department,
Japan Exchange Group
Jun. 2016	Audit & Supervisory Board
Member of Japan Securities
Finance Co., Ltd.

Apr. 2001	General Manager, Retail Banking
Planning Division, UFJ Holdings,
Inc. (currently Mitsubishi UFJ
Financial Group, Inc.)
Jan. 2002	General Manager, Gotanda Corporate
Sales Department and BranchManager, Gotanda Branch, UFJ Bank
Limited (currently MUFJ Bank, Ltd.)
Oct. 2003	Joined IY Bank Co., Ltd. (currently
Seven Bank, Ltd.)
Jun. 2004	Director of IY Bank Co., Ltd.
(currently Seven Bank, Ltd.)
Jun. 2006	Director, Executive Officer ofSeven Bank, Ltd.
Nov. 2007	Director, Managing Executive
Officer of Seven Bank, Ltd.
Jun. 2009	Director, Senior Managing Executive
Officer of Seven Bank, Ltd.
Jun. 2010	President and Representative
Director of Seven Bank, Ltd.
Jun. 2018	Chairman and Representative
Director of Seven Bank, Ltd.
Jun. 2022	Executive Advisor of Seven Bank,
Ltd. (current position)
Director of Japan Securities Finance	Co., Ltd. (current position)

Jun. 2004	Deputy President of The Bank ofTokyo-Mitsubishi, Ltd.

Apr. 2000	Tokyo Family Court Conciliation
Committee Member

Jun. 2005	President and CEO of Diamond
Lease Company Limited

Jul. 2005	Environment Dispute
Coordination Commission
MemberMar. 2007	Audit & Supervisory Board
Member of Kitoku Shinryo Co.,
Ltd. (current position)
Jun. 2018	Audit & Supervisory Board
Member of Takeei Corporation(current position)

Apr. 2007	President and CEO of Mitsubishi
UFJ Lease & Finance Company
Limited (currently Mitsubishi HC
Capital Inc.)
Jun. 2010	Chairman of Mitsubishi UFJ Lease& Finance Company Limited
Jun. 2012	Executive Advisor to the Board,
Mitsubishi UFJ Lease & Finance
Company Limited
Apr. 2013	Board member of Japan Pension
ServiceJun. 2018	Special Advisor, Mitsubishi UFJ
Lease & Finance Company
Limited (currently Mitsubishi HC
Capital Inc.) (current position)
Jun. 2019	Director, Chairperson of theBoard of Japan Securities FinanceCo., Ltd. (current position)

Jun. 2019	Director of Japan Securities
Finance Co., Ltd.
(current position)
Significant concurrent positions
Partner Attorney at Fujibayashi Law Office

Aug. 2018	Audit & Supervisory Board
Member of Intellex Co., Ltd.
(current position)
Jun. 2019	Director of Japan Securities
Finance Co., Ltd.
(current position)
Significant concurrent positions
Audit & Supervisory Board Member ofIntellex Co., Ltd.

Audit & Supervisory Board Member of
Kitoku Shinryo Co., Ltd.
Audit & Supervisory Board Member ofTakeei Corporation
Outside Director of Janome Corporation

Representative Executive Officer& President

Shigeki Kushida

Executive Vice President

Senior Managing Executive Officer

Shunichiro Higuchi

Yutaka Okada

Responsible for Internal Audit
Department, ComplianceDepartment

Responsible for Corporate
Governance Office, Business
Development Department, Treasury
Department, International Relations

Managing Executive Officer

Managing Executive Officer

Managing Executive Officer

Masaru Sekiguchi

Morikuni Shimoyamada

Shinichi Sugiyama

Responsible for Risk Management
Department, Human Resources
Department, Corporate Planning
Department, Group Companies
Relations

Responsible for Margin Loan
Department, Institutional Sales
Department, Retail Business
Department

Responsible for Settlement &Custody Department, Information
System Planning Department,
Osaka Branch

General Manager of Osaka Branch

General Manager of Human
Resources Department

General Manager of Business
Development Department

Wataru Sato

Yuji Yoshimoto

Corporate Officers
General Manager of ComplianceDepartment
Director

Director

Director

Takayoshi Yamakawa

Shigeki Kushida

Hiroshi Asakura

May 2008	Deputy Director-General of Personnel
and Corporate Affairs Department(Personnel Management), Bank ofJapan (BOJ)
Mar. 2009	Director-General of Personnel andCorporate Affairs Department, BOJ
Jun. 2010	Director-General of Monetary
Affairs Department, BOJ
May 2011	General Manager of Nagoya
Branch, BOJ
Mar. 2013	Executive Director of BOJ
Apr. 2017	Senior Advisor of American
Family Life Assurance Company(currently Aflac Japan Ltd.)May 2019	Advisor of Japan Securities
Finance Co., Ltd.
Jun. 2019	Director, Representative Executive
Officer & President of Japan Securities
Finance Co., Ltd. (current position)

Apr. 1978	Joined Japan Securities FinanceCo., Ltd.
Jun. 2002	General Manager of Planning
Department
Jun. 2005	General Manager of Margin Loan
Department
Jun. 2006	Corporate Officer & General
Manager of Margin Loan
Department
Feb. 2008	Corporate Officer & General
Manager of Loan Department
Jun. 2009	Managing Director
Jun. 2013	Senior Managing Director(retired in June 2016)
Jun. 2016	President of Nihon Building Co.,
Ltd. (retired in June 2021)
Jun. 2021	Director of Japan Securities
Finance Co., Ltd. (current position)

Apr. 1991	Joined Yokogawa Hewlett
Packard Co.
Oct. 1995	Joined The Boston Consulting
Group
Jan. 1997	Project Manager of The Boston
Consulting GroupMay 1999	Principal of The Boston
Consulting Group
Jun. 2000	Founder (co-established),
Director and CTO of Dream
Incubator Inc.
Jun. 2005	Vice Representative Director ofDream Incubator Inc.
Jun. 2006	Representative Director & CEO
of Dream Incubator Inc.
(retired June 2020)
Jul. 2020	Representative Partner ofBusiness Producer LLC(current position)

Jan. 2021	Outside Director of BitStar, Inc.
(current position)
Apr. 2021	Outside Director of
Baseconnect Inc.
(current position)
Jun. 2021	Outside Director of Akatsuki
Securities, Inc.
(current position)
Jun. 2022	Director of Japan Securities
Finance Co., Ltd.
(current position)
Significant concurrent positions
Representative Partner of Business
Producer LLC
Outside Director of Akatsuki Securities,
Inc.
Outside Director of FP Corporation

Yutaka Osonoi

Jun Akabane

General Manager of Risk
Management Department

Ken Toda

Jun. 2022	Director of JSF Trust & Banking
Co., Ltd. (current position)
Significant concurrent positions

42

Japan Securities Finance Co., Ltd. Integrated Report 2022

Director of Denso Corporation

Japan Securities Finance Co., Ltd. Integrated Report 2022

43

Management Foundation Supporting Corporate ValueESG Initiatives
Specific Initiatives Related to Material Issues

Initiatives and Basic Approach to Sustainability

Classification

The development of infrastructure that forms the foundation

important to build a system that provides stable operationsof socio-economic activities is a key element in realizing aregardless of circumstances. To this end, we must not only

sustainable society, and it is also one of the Sustainable

respond to disasters in a narrow sense, but also ensure theDevelopment Goals (SDGs: Goal 9). The JSF Group provides

stability and high reliability of our business base. In addition,a variety of services, including loans for the margin trading

we believe that there are issues toward which the Group canbusiness, as a part of the infrastructure of Japan’s securities

also contribute by utilizing the know-how and other resourcesmarket, and works to improve the liquidity of the domestic

that it has cultivated over the years. Based on thissecurities and financial markets, as well as convenience forperspective, we are currently aware of the following material

market participants. Through these activities, we aim toissues. Our Group recognizes the roles expected of it incontribute to initiatives to realize a sustainable society,addressing these material issues and will advance various

including supporting market participants who are engaged ininitiatives while flexibly responding to future changes in thesimilar initiatives.

social environment.

E

IssuesReduce environmental impact

Promote financial and economic

S

education activities

Promote academic research activities
Contribute to overseas securities andfinancial market infrastructure
Realize diverse work styles for
employees

Enhance corporate governanceMaterial Issues That We Recognize

E

Climate change

E: Environmental S: Social G: Governance
IssuesG

Education• Promote financial and economic• Promote academic research activities

Human resources• Promote diversity• Develop and secure human resources and createa pleasant workplaceS
Human rights

Capital market

Corporate GovernanceBusiness continuity
plan (BCP)• Respect for human rights, non-discriminationand diversity• Enhance functions as infrastructure for Japan’s
securities and financial markets

See page 31 for details.

• Provide technical assistance and investment in securities finance in Indonesia

See page 25 for details.

• Provide support for childbirth, childcare and caregiving- Introduce Company-wide teleworking- Understand employee engagement- Ensure that the majority of directors are independent outside directors- Ensure that the chairpersons of the Board of Directors and the three statutory
committees are independent outside directors• Establish a dedicated department to address various corporate governance issues
with a sense of urgency• Implement RAF and establish a system to integrate business management and

Implement BCP• Continue to strengthen the BCP system and cyber security system to ensure stable

Compliance• Prepare manuals and establish Compliance Enhancement Monthrisk managementbusiness operations as a part of the infrastructure of securities and financial markets

We are promoting the following initiatives in order to gain and maintain the support and trust of our stakeholders.

• Hold financial results briefings for analysts and institutional investors (May and November 2021) and• Contribute to overseas securities and financial
market infrastructure

Shareholders
and Investors

Employees• Stably operate business that is not affected by disasters, etc.

• Operate business based on a high awareness of complianceindividual interviews• Conduct shareholder surveys and share survey responses with the Board of Directors• Introduction of hybrid shareholder meetings that enable both online and in-person participation(Live streaming of general meetings for shareholders unable to attend due to remote location or other reasons)• Continuously improve corporate governance• Implement the Risk Appetite Framework (RAF)

Lending Transactions Utilizing Distributed Ledger Technology)

Dialogue with Stakeholders

Business
Partners andOthersSociety

Risk management• Conduct joint empirical research with the University of Tokyo (Securities Lending and• Prohibit all types of harassment

G
ComplianceBlockchain Case Studies” at the Graduate School of Engineering at the University of TokyoSee page 25 for details.
• Hold various seminars on margin transactions• Hold seminars for investors and training for securities company employees, etc.

Implement risk management• Promote reduction in environmental impact

education activities• Improve Company facilities to conserve electricity, and be conscious of environmental impact• Promote paperless operations in all areas of the Company• Strive to enhance governance as a Company with a Nominating Committee, etc.

securities and financial markets, the Group believes it is

Item

Initiatives• Hold a lecture on “Financial and Securities Markets and Industry-Academia Alliance—

Because it is responsible for the infrastructure of theClassification

E: Environmental S: Social G: Governance• Hold dialogue sessions between top management and employees to share value(Online meetings for all employees, and regular small group dialogue sessions with voluntary participation)• Conduct employee surveys and DI* surveys to understand employee attitudes and opinions• Interviews and participation in international conferences• Hold various seminars on margin transactions for securities company employees• Support international cooperation and securities market development, and engage in academic research on
securities and financial markets• Donations for disaster relief* Diffusion Index: An index based on employee surveys that measures employee job satisfaction, changes in workplace conditions and other conditions

44

Japan Securities Finance Co., Ltd. Integrated Report 2022

Japan Securities Finance Co., Ltd. Integrated Report 2022

45

Management Foundation Supporting Corporate Value

Addressing Climate Change and Environmental Protection(Initiatives Based on the TCFD Recommendations)
In addition to engaging in initiatives aimed at bringing about a sustainable global environment through its business activities, JSF
is working to improve disclosure of climate change information in accordance with the TCFD* recommendations.

Type of Risk

Description

Acute
risks
Physical
Risks

Governance

Chronic
risks

recognizes climate change as a material issue for its business.

• The Management Committee (chaired by the representative executive officer & president) deliberates and decides onsustainability initiatives, including those concerning climate-related issues, and the Board of Directors oversees the progress onthese initiatives.

• Specific sustainability initiatives, including those concerning climate-related issues, are detailed in the action plan for the mid-term
management plan, and they are carried out across the organization under the oversight of the Corporate Governance Office.

ScaleTime Frame

Direct Medium

Short- tolong-term

Higher credit costs as a result of damage to counterparty businesslocations due to major storm and flood damage

Indirect

Small

Short- tolong-term

Business relocation costs incurred due to rising sea levels

Direct Medium

Long-term

Damage to owned real estate and facilities due to major storm and flood
damage, with damage to facilities affecting business continuity* Task Force on Climate-related Financial Disclosures: Established by the Financial Stability Board (FSB) in 2015 at the request of the G20 for the purpose of financial
stability. The final report on frameworks for disclosure of climate-related risks and opportunities (TCFD recommendations) published in 2017 calls on companies toassess the risks and opportunities of climate change, reflect them in their business strategy and risk management, understand their financial impact, and disclose
this information.

• To drive Group-wide climate-related efforts, the Board of Directors approved the ”Basic Stance on Sustainability,” in which it

Drop in prices of securities held as a result of worsening financial andsecurities markets due to the effects of extreme weather events

Higher credit costs as a result of damage to counterparty business location
Indirectdue to rising sea levels

systems that operate reliably regardless of conditions. Therefore, we believe that realizing a sustainable global environment is
crucial for the continuation of our business activities, and that climate change is a material issue for our business.

• JSF anticipates and recognizes the following opportunities associated with tackling climate-related issues.
• Our initiatives with respect to these climate-related issues are incorporated into the action plan for the mid-term management
plan, and we are monitoring the progress of their implementation.

Markets for
Products andServices• After identifying the risks and opportunities of climate change that could impact our business activities, we qualitatively analyze

Description

Time Frame• Propelling resource and energy savings• Utilizing renewable energy

Short- tolong-term• Offering financial services that support the transition to a carbon-free society• Contributing to an environmentally sustainable society through investments in green bonds andother instruments• Increased demand for funding due to the expanding market for ESG investment• Gaining the trust of counterparties and capital markets as a result of appropriate initiatives andShort- tolong-term

disclosure in response to climate-related issues

those impacts and verify the resilience of our management strategy.

• In responding to the transformation into a carbon-free society, we support the efforts of the securities and financial markets

Long-term

Recognized Opportunities

Resourceefficient Energy
Sources• As a company responsible for Japan’s securities and financial market infrastructure, JSF recognizes the importance of building

Small

Note: Short-term, medium-term and long-term time frames are assumed to be 3 years or less, 3–10 years and 10 years or longer, respectively.

Opportunity

Strategy

DamageResilience• Ensuring business continuity in securities market infrastructure such as lending and borrowing
transactions by building a resilient BCP system

Short- tolong-term

participants that are grappling with climate-related issues by improving our financial services and the commercial appeal of our
products. At the same time, we are aiming to enhance our own corporate value.

Scenario Analysis

Recognized Risks• A qualitative analysis of the impact of climate on the JSF Group, based on two scenarios, is presented below. Under the 2°C• Climate change risks are divided into two categories for identification and recognition purposes. These are “transition risks,”
which are risks arising from the process of transitioning to a lower-carbon economy to address climate change, and “physicalscenario, global warming is curbed due to strict countermeasures, while under the 4°C scenario, global warming continues toprogress in the absence of drastic measures.

risks,” which are risks of losses arising directly from climate change.

• For recognized risks, assumptions have been made about the type of damage (direct or indirect), the scale of the risk (large,
medium or small), and the time frame (short- to medium- to long-term).

• JSF believes that the increase in its credit costs will be limited because most of its lending comprises securities-backed loans
to securities firms and banks.
Type of Risk

Description
Higher operating costs due to taxation changes related to climate change, such as
stricter regulation and carbon taxes

Transition
Risks

Decline in securities financing balance due to factors such as worsening economic
conditions, weak financial and securities markets and declining demand for funding
due to the effects of global warming
Decline in share prices due to stakeholder criticism of JSF’s response to global
warming and inadequate disclosure

46

Japan Securities Finance Co., Ltd. Integrated Report 2022

DamageDirectScale

Time Frame

Small

Medium- tolong-term

Indirect Medium

DirectMedium- tolong-term

Small

4°C Scenario2• Greenhouse gas emissions are curtailed through• Without drastic policy measures, greenhouse gas• There are advances in low-carbon technologies• Sudden storm and flood damage occurs more• Sudden storm and flood damage occurs at a

• Chronic changes, such as rising sea levels, have apolicy measures

Assumptions

emissions continue to increase at the current rate

and they are widely adopted

frequently and is larger in scale

similar scale and frequency as at present

significant impact on economic activity• Demand increases for funding in the financial andOpportunities

Medium- tolong-term

2°C Scenario1

securities markets due to growing ESG investment• Need increases for financial products and services
related to environmental protection• Demand increases for funding in connection
with investment in infrastructure fordisaster preparedness

1. 2°C Scenario: International Energy Agency (IEA) 2°C Scenario (2DS)
2. 4°C Scenario: Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathway (RCP) 8.5

Japan Securities Finance Co., Ltd. Integrated Report 2022

47

Management Foundation Supporting Corporate Value

Diversity and Inclusion

2°C Scenario1

4°C Scenario2• Stakeholders criticize JSF’s response to global
Transitionrisks

warming, causing its share price to decline

economy and financial markets deteriorate due tothe effects of global warming• Equipment costs rise as a result of measures to

cut greenhouse gas emissions and enhance BCP• Sudden extreme weather events are similar to

Risks
Physicalrisks• There is damage to owned real estate and facilities
due to major storms and flooding, affecting
business continuity (assumes limited increase incredit costs in conjunction with damage tocounterparty financial institutions)those at present, and no major financial impact is
expected• There is no irreversible climate change, such as

rising sea levels, and no major financial impact is
expected

Human Resource Development• Securities financing balances decline as the• Relocation expenses arise from damage to owned
real estate due to rising sea levels

1. 2°C Scenario: International Energy Agency (IEA) 2°C Scenario (2DS)
2. 4°C Scenario: Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathway (RCP) 8.5

JSF believes that it is important to respect diverse perspectives

We need to respond to changes in the businessand values in order to flexibly respond to changes in theenvironment and to address the demands and maintain theoperating environment of the securities and financial markets.

trust of stakeholders. To do so, we are working to improve

That is why we support further growth and active participation

productivity through human resource development. Initiativesof our diverse employees while leveraging their individual

include establishing various highly flexible training systems,

characteristics. In order to provide a work environment wheresuch as a support system that enables employees toall employees can actively participate over the long term withindependently develop their abilities and improve their skills

peace of mind and a sense of purpose, we will step up(for example, at a language school or graduate school, or

initiatives such as promoting health and productivity

through an overseas trainee assignment program).

management and providing flexible work styles.

Promoting Active Participation of Female Employees
Risk Management
In order to step up the active participation of female employees, we have set our target ratio for female graduate hires to total• JSF recognizes that climate change not only poses the risk of a significant impact on the global environment, but it could also
affect our financial position in the future.

• Because these climate change risks could cause or amplify financial risks (credit risk and market risk, for example), we manage
the risks associated with climate change within an integrated risk management framework.

new graduate hires at 40% or higher. In recent years, we have maintained this ratio at 50% or higher. In addition, we provide
career development support such as various training opportunities so that female employees can take on leadership roles at an
early stage of their careers. We also fully leverage the abilities and individuality of all of our employees by maintaining anenvironment in which they can balance active participation in work with childcare and nursing care. Through such measures, weplan to increase the ratio of women in managerial positions.

Employees

Managerial Positions(No.)

Metrics and Targets

300

30.1

31.0

31.5

31.2

32.4 33.0
27.5

250

• We are working to save resources and energy by promoting telework, using web conferencing both inside and outside
the Company, introducing an electronic decision-making system and a paperless meeting system, and digitalizing
document storage.

200• The JSF Group’s CO2 emissions (combined Scope 1 and Scope 2 emissions ) are shown below. The Group is working to further
reduce CO2 emissions.

100

CO2 emissions

FY2019FY2020

FY2021

868

853

809

770

79

78

179

174

77

78

2018
Male (Left axis)

2019

22.0
16.5

90

11.0

60

163

2020

2021

2022 (April 1)

Female (Left axis)

2.9

180

120

170

0

(No.)

150

172

50

(t-CO2)FY2018

77

150

3

(%)

5.5

30

0.0

0

Ratio of female employees (Right axis)

2.1
2
94

2.2

2.2

3.0

(%)

2.5

2.1

2.0

2

2

3

90

90

93

100

2019

2020

2021

2022 (April 1)

2

1.5
1.0
0.5
0.0

2018
Male (Left axis)

Female (Left axis)

Ratio of female employees (Right axis)

3. Scope 1: Direct emissions (use of gas, gasoline, etc.); Scope 2: Indirect emissions (use of electric power)

New Graduate Hires
(No.)

8

80

66.7
6

2
0

2

2

2

1
2019

40.0

3

40
20

2

Male (Left axis)

Japan Securities Finance Co., Ltd. Integrated Report 2022

3

2

2018

48

60.0 60

60.0

50.0

4

(%)

2020

Female (Left axis)

3
2021

2

0

2022 (April 1)

Ratio of female employees (Right axis)

Japan Securities Finance Co., Ltd. Integrated Report 2022

49

Management Foundation Supporting Corporate Value

Promoting Active Participation of Mid-Career Hires

Promoting Work-Life Balance

In aiming for sustainable growth and improved corporate value, we will flexibly recruit talent from a wide range of industries in

We believe that the mental and physical health of ouraccordance with business development. This will include people who can supply diversified financial services, people who canemployees is an important foundation of management. We

help us enter new fields and people with specialized expertise, all regardless of nationality. We also support employees hired

are therefore working to establish a safe and healthy work

mid-career so that they can maximize their abilities in the workplace. We provide them with opportunities to acquire knowledge

environment.

both in their specialized fields and in our main business areas.

Detailed analysis of stress caused by the work
environment enables early identification of employees whoare having issues and individual follow-ups to help improvetheir situations.

Supporting Work-Life Balance

We are striving to achieve both improved productivity
and happiness for our employees at home and at work by

We have established various systems to support childcare and nursing care, as well as a framework for disseminating information
about changes in Company systems due to revisions of laws and regulations and other matters, and for addressing employee
requests by providing individual consultations. Together, these systems help employees balance work with childcare and nursing
care. For employees who wish to take a leave of absence to care for young children or another family member, we hold individualinterviews to get a grasp of their concerns, anxieties and needs, and create a plan that will facilitate their return to work.

flexible work styles. We support work styles that match

74.4

76.6

2018

2019

66.4

68.9

2020

2021

60
40
20
0
(FY)

nursing care, and encourage employees to minimize overtime
work and take leave at an appropriate frequency andduration.

Childcare and Nursing Care Support System• Childcare and nursing care leave of absence • Child and adult nursing care leave • Reduced working hours • Exemption fromovertime work • Childbirth support leave • Subsidies for babysitting expenses • Creation of support plan and implementation of
measures for returning to work after taking childcare leave • Support for returning to work and for continuing work • Distributing
pamphlets and raising awareness within the Company regarding in-house systems related to nursing care

employees’ work situation and pay attention to any changes,
as we use this information as a basis for making decisions
when planning policy.
Furthermore, by developing a telework environment, wehave enabled efficient and flexible working styles that are not

FY202080

individual circumstances such as marriage, childcare andof overtime hours worked to be important indicators of

FY2019(%)

100

creating an environment in which all employees can choose

We consider the rate of paid leave taken and the number

FY2018Rate of Paid Leave Taken

restricted by time or location. This has helped lighten the

FY2021

Overtime Hours Worked(Monthly Average per Employee)(Hours)

14.7

15
12

11.1

9

11.2
9.7

burden on employees raising children or taking care of otherFemale Employees
Number taking childcare leave (half-day, hourly)

10

10

8

13

family members. Telework is used by all employees, with the

Number taking a childcare leave of absence

3

6

8

6

average annual implementation rate remaining between 50%
and 59%.

Rate of female employees returning to work after
taking a childcare leave of absence

100%

100%

100%

100%

Number on reduced working hours system (childcare)

10

9

10

13

Number taking childcare leave (half-day, hourly)

14

15

11

12

Number taking special leave (childbirth support leave)

7

10

6

7

100%

100%

100%

89%

6
3
0
2018

2019

2020

2021

(FY)

Male Employees

Rate of male employees taking special leave (childbirth
support leave)

50

Japan Securities Finance Co., Ltd. Integrated Report 2022

Japan Securities Finance Co., Ltd. Integrated Report 2022

51

Management Foundation Supporting Corporate Value

Risk Appetite Framework
Risk Appetite Framework

Positioning
The JSF Group has made the risk appetite framework (RAF)

The main purpose of the Company’s RAF is to maintain

part of its corporate governance framework, defining it as “athe high degree of financial soundness required of a securities

framework that, based on the JSF Group’s social role andfinance company licensed under the Financial Instruments

management philosophy, clarifies the types and amounts ofand Exchange Act, and of a company responsible for therisks that should be willingly taken (risk appetite)1 and theinfrastructure functions of Japan’s securities market, whilerisks to be avoided2 in order to achieve the mid-term

achieving medium- to long-term corporate value as expected

management plan within the scope of the Group’s financialof a listed company. To this end, the RAF improves thestrength, and integrates business management and risk

transparency of the review and decision-making process for

management.”

establishing the Company’s overall risk-taking policy,

Risk culture

RAF operation structure
Corporate philosophy/Management strategy
Supervision

Board ofDirectors

Business management

including capital allocation and strengthening of profitability.

Risk management
Integrated
management

Mid-termmanagement plan

Furthermore, the RAF optimizes allocation of management
resources and strengthens monitoring.

Type and amount of risks to
be taken (Risk appetite)
Execution

Operation

detailed targets and decide plans for each business as wethe social role that JSF should play as infrastructure for Japan’s

promote the mid-term management plan, keeping in mind

securities market and its medium- to long-term vision for thethe risk management policy, risk appetite and risk appetite

future. At the same time, the board determines the basic items

indicators decided by the Board of Directors.

of the RAF, such as risk appetite and the risk appetite indicators

the effectiveness of the RAF on an ongoing basis by

the mid-term management plan. Risk appetite is set from amonitoring risk appetite and risk appetite indicators as itwide range of perspectives, including management stability

supervises the status of business execution. If risk appetiteand financial soundness, as well as the social responsibility ofindicators deviate from set levels, the board analyzes theserving as infrastructure for and contributing to Japan’s

causes and formulates and implements countermeasures.

Improvement

Corporate Planning
Department
Risk Management
Department

The Board of Directors works to improve and strengthenthat specifically reflect its components, in conformance with

Risk appetite indicators

Risk Management
Committee

In the execution of business management, we set morea risk management policy for overall management based on

Management
Committee

Integrated risk
management

Integrated Risk Management System
Board of Directors
President
Management
Level

Fostering and Instilling a Risk Culture and Risk GovernanceIn order to play a public role as part of the infrastructure of

Conduct for Officers and Employees and the risk management

Japan’s securities market, we take risks with a keen awarenesspolicy, and serves as the operational foundation of the RAF.

of maintaining financial soundness and ensuring that concurrent

In addition, risk governance is further strengthened throughbusinesses such as securities finance do not affect the stable

the cyclical effect of continuously raising awareness of risk

operation of our licensed loans for margin transactions business.

culture through the operation of the RAF, which further fosters

In addition, through regular training and interviews we strive

and instills this culture.
governance, which constitutes part of our corporate

conduct risk.

governance, and aim to achieve sustainable growth andthroughout the Company through adherence to the Code of52

We will continue to increase the sophistication of our risk

awareness and the work environment, and take care to reduce
The risk culture fostered by JSF’s identity is firmly instilled

Japan Securities Finance Co., Ltd. Integrated Report 2022

Management ofshareholders’ equity ratio

Analysis/Reporting

securities market.

to stay apprised of the status of employees’ compliance

Monitoring

increase our corporate value over the medium to long term.

Management Committee
Executive Officer in chargeof Risk Management
Department

Executive Officer in chargeof Treasury Department

Meetings

ALM Committee

Executive Officer in chargeof Information System
Planning Department

Executive officers
in charge of eachdepartment

Executive Officer
in charge of Audit
Department

Risk Management
Committee

Supervising
Department

Risk Management
Department

Risks

Liquidity risk

Market risk

Credit risk

System risk

Processing risk

Managing
Departments

Treasury Department

Risk Management
Department

Risk Management
Department

Information
Systems Planning
Department

Each Department

Internal Audit Department

In the operation of the RAF, the Board of Directors establishes

Risk management policy

Auditing Department

1. Risks to be taken: Risks associated with revenue-generating activities
2. Risks to be avoided: Unacceptable risks such as conduct risk

Business characteristics (licensed business,
concurrent businesses), risk characteristics

Social/public role

RAF overview

Japan Securities Finance Co., Ltd. Integrated Report 2022

53

Management Foundation Supporting Corporate Value

Risk Management
Liquidity Risk Management

Basic Concept
We broadly classify assumed risks for management as credit risk, market risk, liquidity risk, processing risk and system risk. For
credit risk and market risk, we strive to secure profits while quantitatively identifying risks and using integrated risk management
to keep them within levels that match our financial strength. For liquidity risk, processing risk and system risk, we strive to prevent
their manifestation by implementing appropriate management according to risk characteristics.

Integrated Risk Management
We use integrated risk management to quantify various risks

the Management Committee following deliberation by thewith unified methodology and to keep the total amount of

Risk Management Committee at its regular annual meeting.

risk within the bounds of management strength.

Each risk operation department keeps the risks within the

Liquidity risk is the risk of loss caused by failure to raiselarge amounts of funds. There is also a system for reportingnecessary funds or by procurement of funds with unusually

the status of daily cash flow to Company management.

high interest rates, or the risk of loss caused by a halt of

Furthermore, to be prepared for unforeseeable circumstances,transactions due to market disruptions or by forced

measures are taken to supplement liquidity, such as holding atransactions at unusually unfavorable prices.

certain amount of highly liquid government bonds.

The Treasury Department has jurisdiction over the

In addition, at its quarterly meetings the ALM Committee

management of liquidity risks. As such, it strives to diversify

develops cash flow projections based on forecasts of loans

procurement methods and secure stable suppliers. To

outstanding, deliberates policies for asset liability

manage cash flow, it formulates cash flow projections to grasp

management, such as revenue management for assets andthe amount that can be procured and the liquidity of assets

liabilities of the Company as a whole, and reports on thesewhile paying attention to concentrated settlement dates formatters to the Management Committee.

Processing Risk Managementbounds of the risk capital allocated to them. The Risk

Processing risk is risk of loss in processing due to negligence,

procedures through regulations, manuals and training. In

each risk category within the bounds of our equity capital,

Management Department, which is independent of the risk

accidents or fraud by officers or employees.

addition, to prevent accidents and improve the businessthen quantify risks using the Value at Risk (VaR) method tooperation departments, quantifies the risks, monitors the

keep the calculated volume of each risk within the bounds ofstatus of risk operations, and reports its findings to theprocessing risks. To lessen processing risks, officers andthe risk capital allocated to it.

board members.

employees are familiarized with proper operational

For credit risk and market risk, we allocate risk capital to

To measure operational risk, which comprises processing

processing system, each department implements its own
voluntary inspections on a regular basis.

In the event that a risk may exceed the allocated amountrisk and system risk, we use basic methods and set theof risk capital, the Risk Management Committee holds annecessary risk capital amounts accordingly.

extraordinary meeting to deliberate how to respond and thenAmounts of risk capital to be allocated are determined by

Each department has jurisdiction over the management ofconsults with the Management Committee.

Credit Risk Management

System Risk Management
System risk is risk of loss due to system defects such as

and operation, clear operational procedures and a monitoring

failures or malfunction of computer systems, or tosystem have been put in place. In addition, to protect theunauthorized use of computer systems.

Company’s own information assets (its information and

The Systems Planning Department has jurisdiction over

information systems), necessary regulations have been

management of system risks. To ensure stable operation of

established and officers and employees have been

Credit risk is the risk of loss due to a decrease or loss in value

each client. Business operation departments keep said

our computer systems, the department takes measures tofamiliarized with the handling of such assets. Furthermore,of assets resulting from credit events such as deterioration inamounts within these limits. In addition, business operation

prevent system failures, such as duplicating networks andmeasures to minimize the effects of system failures include

the financial condition of a counterparty. We work to sustain

departments implement rigorous assessments of the assets

equipment. For the system’s safe and effective development

providing various manuals and drills.

and improve the soundness of assets by strictly managing

for which they hold jurisdiction.

overall credit risk.
More precisely, the Risk Management Department

Additionally, as a general rule we assure collateralequivalent to the amount of each loan transaction. By marking

assesses credit risk according to in-house ratings, quantifying

relevant collateral to the market on a daily basis, we limit theand managing this risk using these ratings. As a supplementary

possibility of impaired loans. In the event of borrower

measure, we also implement stress tests. For credit control,

bankruptcy, we take steps including selling securities held as

the Risk Management Department screens client companies

collateral to promptly collect receivables.

Initiatives for BCP

Basic Concept for BCP

and loan proposals and sets limits on transaction amounts forMarket Risk Management

partners and related external organizations. The Company

continue operations that serve as infrastructure for thehas positioned the loans for margin transactions, generalsecurities market, such as loans for margin transactions,credit financing and fund/securities settlement businesses

Market risk is the risk of loss caused by fluctuations in the

manages market risks, and supplements quantification by

for the handling of a possible disaster event such as a

as operations to be continued on a priority basis. We havevalue of assets held due to fluctuations in various market risk

implementing stress tests. Furthermore, to validate thelarge-scale earthquake JSF has established a businessestablished a policy assuming the respective cases offactors such as interest rates, prices of securities andreliability of the market risk quantification model we havecontinuity plan (BCP) system so that operations can be(i) injury (or threat of injury) to officers and employees,

exchange rates.

adopted, we also implement back testing to compare

continued or resumed as soon as possible in order toand damage to buildings etc., (ii) damage to thecalculated VaR with portfolio-fixed virtual profit and loss.

minimize the impact of the disaster on our businessCompany’s main centers, and (iii) insufficient personnel.

The Risk Management Department quantifies and54

As a securities finance company with a social mission to

Japan Securities Finance Co., Ltd. Integrated Report 2022

Japan Securities Finance Co., Ltd. Integrated Report 2022

55

Management Foundation Supporting Corporate Value

Compliance
Compliance System

Formulating Conduct Guidelines and Compliance Program

We believe that it is important to comply with all laws,

regarding honest and fair conduct based on high ethicalIn addition to formulating and disseminating the JSF Business

related to compliance promotion from the perspectives ofregulations and rules in conducting business as a company

standards, the Compliance Department works to thoroughly

Conduct Guidelines and the accompanying Complianceunderstanding compliance risks and the status of legal

and in one’s daily life (as a private citizen), and to carry out

implement and promote Company-wide compliance activities.

Manual, the Company is working to instill compliancecompliance (such as the establishment of systems related tohonest and fair corporate activities in line with social norms.

Activities include holding meetings for compliance officers toawareness by having all officers and employees carry alaws and regulations and self-inspections using checklists),

We have therefore made compliance the basic premise of ourcommunicate and share information with those in charge in“compliance self-check card” at all times.

compliance awareness-raising activities (including training andmanagement and the foundation of all of our operations, andeach department, and compliance management meetings tohave established a compliance system to ensure complianceshare awareness with senior management.
In addition, the Company plays a central role in promoting

throughout the Company.
Specifically, we have established a Compliance Committee,

the establishment and strengthening of the overall compliancechaired by the executive officer in charge of the Compliancesystem for the JSF Group, in ways such as holding the Group

Department, to deliberate on important matters related tocompliance liaison meetings and Group compliance officercompliance, such as formulating a compliance program andliaison meetings to promote mutual understanding andconsidering measures to be taken when compliance-related

information sharing among Group companies.

issues arise. In addition to educating officers and employees

In addition, the Board of Directors formulates theactivities (activities aimed at sharing recognition and awarenesscompliance, and regularly reports on its implementation status.

among Group companies and among officers and employees).

The Compliance Program incorporates specific measures

Establishment of an External Reporting DeskIn addition to the Compliance Committee, the Compliance

Compliance Systemtests), and cooperation in and promotion of compliance

Compliance Program as a practical plan for promotingThis external consulting and reporting desk guarantees

Department and compliance officers, the Company has

the complete anonymity of any person consulting or reporting

established an external consulting and reporting desk staffedmatters regarding the Company, thereby reducing theby legal advisors to further strengthen the compliance system.

psychological burden on those persons and making consulting
and reporting easier.

Board of Directors

Initiatives to Block Relationships with Antisocial Forces

Management Committee
Compliance Committee(Chairperson: Executive officer in charge ofCompliance Department)

ReportCompliance personnel

External Reporting Desk
Consult/ Reportappropriate pre-screening and organized crime exclusion

unreasonable demands made by antisocial forces thatclauses in contracts and other documents.

threaten the order and safety of civil society. Our aim is toReportCompliance Department
ReportThe organization as a whole takes a resolute stance against

Consult/ Report

Consulting and reporting personnel (Managers and employees)

Consult/ Report

The Compliance Department ensures the effectiveness of

eliminate any relationships with antisocial forces by working

efforts to block relationships with antisocial forces in various

closely with external specialized agencies such as the police,

ways, including centrally managing and accumulating

anti-organized crime campaign centers, and attorneys.

information on such groups, building a database, conducting

We are also working to block such relationships throughtraining activities and preparing response manuals.

Initiatives to Protect Customers and Personal Information
Regarding opinions and complaints received from customers,

with laws and regulations and our conflict of interest

we clarify the relevant facts and responsibilities and work to

management policy to ensure that the interests of ourresolve the situation quickly, honestly, fairly and appropriately,

customers are not wrongfully harmed.

with respect for the customer’s position. In the event of a

We take appropriate measures to safely and properly

dispute or similar issue, we respond appropriately inmanage the personal information of our customers to prevent

accordance with the aims of the financial alternative disputeleakage, loss, damage or other issues, and educate andresolution (ADR) system.

properly supervise our employees to that same end. In

In addition, regarding transactions between Company oraddition, when entrusting the handling of personalGroup company businesses and their customers, or between

information and similar data that we have received, weCompany or Group company customers, we carry out ourappropriately supervise the entrusted party.

duties appropriately, taking necessary measures in accordance

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Japan Securities Finance Co., Ltd. Integrated Report 2022

Japan Securities Finance Co., Ltd. Integrated Report 2022

57