Risk Management Framework
At the Simplex Group, we have established a risk management framework based on our Risk Management Regulations to appropriately manage and respond to a broad range of risks associated with business operations, including those related to business activities, finance, disasters, information, labor, contracts, and legal compliance. Matters and response policies on promoting risk management are discussed at the Executive Committee under the supervision of the Board of Directors.
In parallel with the process for identifying materiality topics, we also identify relevant risks and opportunities and formulate corresponding response policies. Each department is primarily responsible for addressing specific risks. Depending on the importance and level of expertise required for the case, the status of risk responses is monitored by the Board of Directors, the Executive Committee, the Information Risk Management Committee, and the Project Review Committee. These bodies may also directly issue instructions to ensure effective risk management. Additionally, departments conduct bottom-up risk assessments based on likelihood and business impact, and implement specific countermeasures for cases identified as highly important.
Major Risks and Countermeasures
01
Dependence on specific industries
Risks
- A large proportion of revenue is from financial institutions such as securities firms and banks
Countermeasures
- Develop Strategy/DX Consulting business driven by Xspear
- Diversify the business portfolio through expansion of Non-financial Solutions domain
02
Competition with other companies
Risks
- Decline in the Group's competitive advantage resulting from the provision of superior solutions by competitors
- Price competition greater than expected due to the spread of packaged products, etc.
Countermeasures
- Continuously verify the Group’s competitive advantage by analyzing competitors’ solutions, packaged product developments, market share, etc.
03
Talent strategy
Risks
- Decline in the Group’s competitive advantage due to an inability to recruit the top 10% of talent in the market
- Decline in labor productivity and increase in employee turnover due to deteriorating labor environment
Countermeasures
- Maintain one of the highest compensation packages in the industry
- Provide an environment and growth opportunities for a diverse range of professionals to demonstrate their sharpest talents
- Establish various systems that help improve employee engagement, such as a fair and transparent evaluation system
04
Occurrence of problems related to system development and solutions
Risks
- Loss of confidence resulting from the inability to provide solutions that meet the functional requirements and service levels specified in contracts or to meet delivery deadlines.
- Service suspension due to product defects or changes in licensing terms and conditions provided by third parties
Countermeasures
- Thoroughly review development progress by the Executive Committee, Competency Team, Quality Improvement Division, etc.
- Collect information on third-party product defects, changes in regulations, etc., and timely and appropriately share such information to relevant departments
- Have clients agree to certain disclaimers and take out compensation liability insurance
05
Information security
Risks
- System failures or service outages due to computer viruses or cyber- attacks, or leakage of confidential information such as personal data
Countermeasures
- Put in place the internal information security system by acquiring ISO/IEC 27001 Information Security Management System (ISMS) certification, etc.
- Select secure software and hardware
06
Natural disasters or other unexpected events
Risks
- Inability to use data centers, cloud servers, and other infrastructure due to natural disasters such as major earthquakes, volcanic eruptions, windstorms, and floods
Countermeasures
- Conduct periodic drills to prepare for natural disasters
- Ensure regular data backup, redundancy, etc.
Related Links
Risks that may have a material impact on investor decision-making are disclosed on the IR website.