The Group ERM framework aims to maximize corporate value while balancing capital, risk, and return. To effect this, it has two main components: the “Risk Appetite Framework,” which supports conscious risk-taking in pursuit of strategic objectives, and the “Risk Control System,” which contributes to stabilizing the foundations of our business.
1. Risk Appetite Framework
The “Risk Appetite Framework” is a system for increasing the certainty of achieving the Group’s strategic goals - as set forth in the Management Philosophy, SOMPO’s Purpose, and the Group’s Management Plan - by taking risks based on the Sompo Group Risk Appetite Statement. This clearly states the risks the Group will take and the risks it will avoid.
We formulate a Group’s Management Plan and allocate capital to each business, after dialogue with the respective management teams, based on risk appetite indicators and the perspective of overall Group optimization.
2. Risk Control System
For effective risk control, Sompo Group uses a “Risk Control System” that identifies, analyzes, and evaluates the various risks and business opportunities surrounding the Group.
Material Risk Management
The Group defines risks that could have a significant impact on its business as “material risks”; we comprehensively identify and evaluate these risks based on risk assessments and expert opinions and insights. We evaluate the frequency of occurrence and the severity of impact across three risk dimensions (economic loss, business continuity, and reputational damage) in both qualitative and quantitative terms. We also confirm sufficiency of the countermeasures.
Additionally, the Group defines “emerging risks” as risks that have the potential to emerge or change, through changes in the environment or other factors, such that they would have a significant impact on the Group in the future. We manage emerging risks appropriately by monitoring any signs that they may develop into material risks.
Through Capital Adequacy Management, Stress Testing, Risk Limit Management, and Liquidity Risk Management, we strive to minimize unexpected losses and stabilize profits.
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Business and other risks
