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## Risk Management 

While the Daiwa Securities Group pursues profitability and growth, it also recognizes the importance of accurately identifying, evaluating, and effectively controlling the various risks associated with its business operations. Our objective is to steadily improve corporate value by maintaining a sound financial base and profit structure by properly balancing risks and returns and by implementing effective risk control and management. 

## Basic Risk Management Policy 

The Daiwa Securities Group Inc. has established “basic risk man- agement regulations” governing all activities by the Group compa- nies to manage risk in order to ensure that they conform to the following basic policies: 

1. Management shall demonstrate an active concern for risk management. 

2. A risk management system shall be established to address the specific characteristics of risk faced by the Group. 

3. Management shall, through the aforementioned comprehensive risk management structure, ascertain the aggregate risk faced by the Group and enhance capital adequacy accordingly. 

4. All risk management processes shall be clearly identified. Limits are set for each type of risk so as to control risk within an amount suitable for the management strength of the Group. 

The Daiwa Securities Group faces various risks in the course of its business activities. The Group therefore believes that it is important to properly identify, evaluate, and manage these risks in order to maintain healthy financial and earnings structures. Daiwa Securities Group Inc. engages in risk management to clearly identify risks 

## Risk Management System 

based on the respective Group company’s business characteristics and risk profile. The types of risks that have been deemed impor- tant to manage include market risk, credit risk, liquidity risk, opera- tional risk, and reputation risk. 

## Risk Management System 

The Board of Directors of Daiwa Securities Group Inc. has approved “basic risk management regulations.” These regulations define basic policies related to risk management, the types of risk that are necessary to be managed, and the executive and depart- ment for each major risk. Each subsidiary conducts risk manage- ment suitable for the risk profile and size of each business in accordance with these basic policies related to risk management. Daiwa Securities Group Inc. monitors the system and situation of its subsidiaries’ risk management. Also, the Group Risk Manage- ment Committee, as a sub-committee of the Executive Manage- ment Committee of Daiwa Securities Group Inc., receives reports about risk exposures obtained via the aforementioned monitoring of subsidiaries and themes concerning their risk management system and discusses and resolves those issues. In addition, major Group companies regularly hold risk management committees in order to strengthen their risk management. 

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