Management System
Japan Real Estate Investment Corporation (JRE) entered into an entrustment contract for asset investments with Japan Real Estate Asset Management Co., Ltd. (hereinafter “JRE-AM”). JRE has also entered into business consignment contracts with various trust banks for custodial business related to assets and general business outsourcing. Under the management structure below, JRE-AM conducts asset investments such as acquisition and transfer of properties and leasing spaces to tenants.
For details, please refer to the securities report (Part 2. Details of JRE, Section 4. Status of affiliates, 1. Outline of JRE-AM, (2) Operation system (available only in Japanese).
Risk Management
In order to gain an understanding of risk inherent in operations and manage them in appropriate fashion, JRE-AM has formulated a Basic Risk Management Policy, Risk Management Regulations, and Risk Management Rules, and has established the Risk Management Department, which handles risk management for JRE and reports the status of risk management for JRE to the Board of Directors.
1 Basic Risk Management Policy
This policy defines JRE’s basic policy regarding risk management. This policy stipulates: 1) the classification and definition of risks and management in line with the characteristics of each risk; 2) risk identification, assessment, and analysis; 3) activities to mitigate risks based on assessment and the means to monitor these activities; and 4) implementation of measures when risks become apparent. This policy also lays out provisions for an organizational structure regarding risk management and for reporting to the Board of Directors.
2 Risk Management Regulations
Under the Basic Risk Management Policy, the Risk Management Regulations clarify the types of risks related to JRE’s business operations and where they may occur, and determines management methods and systems to mitigate these risks.
Types of Risk
(1) Asset management risks
- Real estate investment risks (risks related to volatility in the real estate market, real estate credit risks, etc.)
- Other asset management risks (market risks, credit risks, operational risks, etc.)
(2) Other risks
- Companywide risks (risks caused by inadequate organizational structure, corporate governance, and internal control systems)
- Disclosure risks (risks caused by failure to disclose information in a timely and appropriate manner)
- Reputation risks (risks caused by the spread of negative information or perception)
- Event risks (risks caused by unpredictable external factors such as earthquakes and other natural disasters)
Risk Management System
The Board of Directors determines the Basic Risk Management Policy and supervises the development of an appropriate risk management system. In addition, the Risk Management Department has been established as the department responsible for handling risk management, and risk management managers have been assigned to each department to promote appropriate risk management. Furthermore, the status of risk management is reported to the Board of Directors.
3 Risk Management Rules
In accordance with the Risk Management Regulations, the Risk Management Rules stipulate that each department is to clarify the risks to be managed, that each department is to recognize and address these risks, and that the Risk Management Department will monitor these efforts. As a general rule, once every fiscal year, each department uses a "Risk Assessment Table" to revise their list of risks, reassess their approach, and review countermeasures. The Risk Management Department monitors these actions and reports their findings to the Board of Directors.
Basic Risk
Management Policy
Determine the Company’s basic policy related to risk management.
Risk Management
Regulations
Clarify the types of risks, where they may occur, and determine management methods and systems to mitigate these risks.
Risk Management Rules
Establish risk management procedures such as risk recognition and responses for each department, monitoring by the Risk Management Department, and reporting results of monitoring to the Board of Directors.
4 Efforts Related to Risk Management
Based on the Risk Management Rules, the "Risk Assessment Table" created by each department is reviewed every year in principle according to the following process in order to properly manage various types of risks and confirm the status of risk management.
Risk Assessment Process
Compliance Risk Management through Three Lines Model
Each department of JRE-AM is proactively and autonomously working on compliance risk management. The following is a summary based on the “Three Lines Model” concept.
1 1st Line—Self-Control by Front Divisions
- A compliance manager has been appointed in each department to promote compliance, which includes daily compliance checks and assessments, formulation and implementation of compliance programs*, and formulation and practice of rules and manuals under jurisdiction of each department.
- A risk management manager is appointed in each department to promote efforts such as reviewing the “Risk Assessment Table,” gaining an understanding of the types of risks inherent to work under the jurisdiction of each department in order to ensure that these risks are managed appropriately.
2 2nd Line—Control by Risk Management and Compliance Divisions
- The Compliance Department drafts general compliance plans, practices compliance, and inspects, checks, and works to improve the level of compliance in each department.
- In addition to planning and promoting the Basic Risk Management Policy, the Risk Management Department monitors the status of risk management in each department and provides direction based on the “Risk Assessment Table.”
- A variety of compliance training is conducted to ensure an understanding of the laws and regulations to be complied with, and to ensure that officers and employees can engage in activities while maintaining thorough compliance.
3 3rd Line—Review by Audit Divisions
- Internal audits are conducted every year to inspect and verify the appropriateness and effectiveness of our system in terms of legal compliance, internal management, risk management, crisis management, and other matters from the perspective of ensuring investor protection and fair market formation as an asset management company.
A concrete implementation plan for achieving proper compliance
