Nomura established the Board Risk Committee to further enhance its risk management and carry out rigorous controls and business oversight. The committee will provide an independent perspective with the aim to strengthen oversight and develop more sophisticated, in-depth risk management. Under the supervision of the committee, which has already started operating, the management of Nomura is committed to implementing advanced risk management measures and building a solid platform for business operations.

The Board Risk Committee

What is the background to the establishment of the Board Risk Committee as part of the enhancement of risk management? Was it triggered by the U.S. incident?

Board-level risk committees are in place at many financial institutions lately, especially in the United States per the requirements of the Dodd-Frank Act (This regulatory requirement is not applicable to Nomura). As the global market complexity increases, we thought that such a risk-focused committee would benefit Nomura as it conducts its business globally. Therefore, the Board of Directors had started discussing whether and how to establish a board risk committee, including the committee member composition and scope of risks to be covered. Following the occurrence of losses arising from transactions with a U.S. client ("U.S. incident") in 2021, we decided to establish the Board Risk Committee ("BRC"). Although Nomura had started such discussions much before, I do think that the learnings from the U.S. incident really sharpened our need for more sophisticated risk management and thinking as we embarked upon our global expansion. I think Nomura has really begun to invest in all of the underpinnings of what we need to be a truly powerful force going as any global financial firm going forward.

What is the role of the BRC?

The BRC approves the Risk Appetite Statement and risk management framework. The BRC also tries to probe and anticipate strategic risks. For example, we have conversations about emerging risks associated with external factors. My view is that it helps management think about external factors affecting Nomura and its strategy by pressure testing the risk management view. We also conduct deep dives for area of business opportunities as capital market movements are unfolding and things are moving quite dramatically every day. We have begun to provide opportunities for new management to come to the BRC meeting and have an open line dialogue to the BRC. This transparency would help sharpen the accountability of the risk executives and underscore that we are paying very close attention on all of the risk issues.

What kind of members make up the BRC?

I think Patricia and Chris have a deeper knowledge of the economy and the actual modeling and market related risk considerations, Victor has hands-on experience in the investment business which is relevant to Nomura and Shimazaki-san is obviously a financial expert who also serves a critical role in having the Audit Committee perspective of the risks. This is a good mix of talent for diversity of thinking on risk. In addition, Chris, Patricia and I serve on the board of Nomura's U.S. subsidiaries. I think that would help increase cross-organization transparency and communication as well.

The composition of the BRC

BRC member's careers

BRC member's skills (PDF 27,031KB)

What is the philosophy of the committee in terms of challenging management?

The challenge maybe begins in having the conversation. We provide a high-level overlay over some very granular thinking. That overlay is a combination of a kind of background perspective and external events. Sometimes such dialogues are ongoing, but it is critical to at least begin the conversation. I think management also wants to have some input from board members. BRC does not necessarily supplant the full board conversations, but we look more deeply into issues the board is thinking and cares about, wants to probe, or we vet the issues and then bring them up to the full board.

Risk Culture

How do you think Risk Culture affects Nomura Group's competitiveness?

The U.S. incident might expose less than perfect things about the firms on Wall Street. For us, it provided the trigger to look more deeply into our risk management and risk culture and change and evolve it to the current best practices. I think our journey to be known as a firm that is expert and laser-focused on risk will give us a competitive advantage in attracting clients and new business. Clients are going to need very sophisticated advice and products to invest in the market and to manage risks. To satisfy those client needs, we are going to have to provide our best thinking and client service. We happen to be very good at bespoke advice in difficult markets and it will continue to become a competitive advantage in a very complicated marketplace.

What is the key for embedding Risk Culture?
Also, please tell us your view of the goal Nomura should aim for.

There is a need to look at Risk Culture at the firm level and at the people level. At the firm level, it means a way of thinking about opportunity and strategy going forward, as risk is embedded in everything we do. At the people level, it is how you look at your responsibility in terms of what you do for the firm individually, but then collectively how you work with others in creating success. We're one firm. We should be working together on our future success. It can be a very nuanced business, where you need to share your expertise among your colleagues and for the greater good of the firm. Preventing the repeat of events like the U.S. incident is one of the goals of enhancing Risk Culture. At the same time, our objective is to create a stronger risk oriented corporate culture. We must work together, escalate concerns without retribution, and ensure voices are heard and respected.

Conclusion

You have been an outside director of Nomura Holdings since 2018. What kind of strategy or action do you think is necessary for Nomura to raise corporate value or to raise share price?

We have had some solid performance, but we have also had some negative surprises. I think having a continuous pattern of performance without any surprises will greatly help our share price, and I know we are working diligently to resolve past issues that could result in a surprise. In addition, if we can show our solid progress towards our strategic objectives and perhaps provide more granularity to the marketplace about the metrics that will show our progress, I believe that will help develop investor confidence in our future success and improve our share price.

Finally, what message would you like to convey to stakeholders?

Nomura cares deeply about its clients and its stakeholders, and it is moving purposefully towards becoming the new Nomura; reflecting the paradigm shift in capital markets. This entails continuing to build on its risk management culture, and focus on the firm's strategic objectives. I do think we have made incredible strides in our governance and becoming a single global firm as opposed to a Tokyo based firm with offices in other places. That transformation is very apparent to me. It has made the board stronger and more effective and more focused. Having more engagement with our shareholders and stakeholders and having deeper conversations about strategy and of course being focused on risk with the BRC, will continue to make us crisper and more focused on executing strategy. I think our future should be as a truly global firm with world recognition of our talent and client service.