Response to Risk Management

In its approach to risk management, JPX recognizes the importance of maintaining sound and stable business operations to fulfill its public role as a market operator and continue raising corporate value.

Risk Management Systems

JPX faces numerous risks in the course of its operations, including risks associated with system glitches, legal matters, compensation in the event of clearing participant defaults, and administrative errors. JPX has established a Risk Policy Committee, chaired by an outside director, and a Risk Management Committee, chaired by the Group CEO, to address risk. In line with JPX's Risk Management Policy, these committees are responsible for identifying risks as well as developing and implementing measures to prevent such risks. JPX also has a system in place to ensure a swift and appropriate response when risks do or are likely to materialize.
The Risk Policy Committee consists of at least five members, the majority of whom are outside directors. As a rule, the committee is chaired by an outside director.
The Risk Management Committee is composed of core members and project members who oversee the risks of specific projects. The Group CEO (who serves as chairperson), the executive officer overseeing the General Administration Department, and the director of the department make up the core members, while the chairperson of the committee assigns project members to specific cases as they arise.
The Risk Management Policy serves to prevent risks by indicating and classifying the risks JPX faces.
Departments or sections are assigned to handle the classified risks, and information on the assessments of operations and issues to be addressed are periodically brought before the Risk Policy Committee and Risk Management Committee.
Each fiscal year, the Risk Policy Committee identifies the significant risks requiring priority action in JPX.
The results of this process are submitted to the Board of Directors as recommendations in the form of a Comprehensive Risk Management Statement. JPX works to reduce the possibility of realization of the risks based on the Comprehensive Risk Management Statement and responds flexibly to risks that materialize. When a major issue occurs, the Risk Management Committee gains an overall grasp of the situation and orchestrates a concerted response by giving directions for dealing with the issues as quickly as possible. The system calls for all necessary information to be reported to management promptly and without fail.

Risk Classification

Types of Risk Examples
Buisiness environment and business strategy risk Economic fluctuations, legal and regulatory matters, demographic changes, technological innovation, investor trends, public opinion, and failed business choices
Accidents and disaster risk Major earthquakes, typhoons, tsunami, epidemics, terrorism, failure/stoppage of social infrastructure, fires, and accidents
System risk Inadequate hardware capacity and application errors
Legal risk Violations of laws and regulations in the course of business, business partner's failure to perform on contracts, and the possibilities of having a relationship with anti‑social forces
Financial risk Undermined reliability of financial reporting, lack of funds, and loss or damage to assets, including deposits
Human risk Personnel shortage, industrial accidents, and occupational hazards
Information security risk Information leakage, unauthorized access, and computer viruses
Operational risk Mistakes in operational procedures and misjudgments
Risk of associated companies Emergence of risk in group companies
Reputational risk Decline in public reputation due to acts and statements by employees and/or third parties
Credit risk and liquidity risk arising from obligation assumption business Emergence of losses due to default, etc. by clearing participants
Other risks Risks other than those mentioned above

Significant Risks

Each fiscal year, we identify the significant risks that could affect JPX. We control the possibility of the materialization of these risks by implementing necessary preventive measures. We also implement measures to ensure that we are able to respond flexibly in the event that risks materialize.

JPX approaches risk management on two levels.First, all group companies work to identify risks in the internal environment. Second, there is wide‑ranging discussion involving the management team about potential risk factors in the external environment, including geopolitical risk. Based on the results of these discussions, we then examine significant risks. Many risks are detected at the discussion stage. We examine these in detail to identify the risks that require the greatest attention in each fiscal year, on the basis of the potential impact on JPX if the risk materializes and the frequency with which such risks are likely to arise. We then take preventive measures targeting specific significant risks.

Significant Risks

Risk Phenomena Risk Scenarios
Risks that could impact JPX business continuity and business operations
  • Risk to business continuity resulting from damage to social infrastructure, including power grid failure, such as in the event of a wide‑area disaster
  • Risk that could affect market operations, etc. due to cyberattacks on JPX's systems
  • Risk to trading continuity due to pressure on system capacity caused by abnormal market fluctuations in response to sudden short‑term exchange rate movements caused by economic or political events in Japan or overseas
  • Risk of an impact on market operations, etc. as a result of workers being infected or being unable to commute to work due to the spread of a novel virus
  • Risk of difficulties in market operations, etc. due to events such as a failure of our system software
  • Risk of reduced confidence and support for our market infrastructure due to an inadequate response to the promotion of sustainability which includes ESG issues
Risks that could effect JPX business performance and financial position
  • Risk of a decline in trading due to medium‑ to long‑term market stagnation resulting from changes in political and economic conditions in the U.S., the EU, or other major economies
  • Risk that the financial position of JPX will be impacted by a clearing participant default