“Stress Scenario Study group” started in 2010 with the volunteers of the management, CFO, CRO or CIO of financial institution or companies as well as experts of relevant areas. It provides the fundamentals being discussed in the Japan Risk Forum. Please refer to the following “purpose of establishment” prepared upon its establishment in 2010:
1. In banks, insurance institutions and industrial corporations in Japan, ERM (Enterprise Risk Management) has been placed in the core of capital and risk Management policy as an important management theme.
In financial institutions under government regulations, ERM is specified in the inspection manuals in light of international development. On the other hand, in business corporations, ERM is positioned as the extension of internal audit to comply with Companies Act and Financial Instruments and Exchange Act. If ERM discussion is done solely in response to the requirement of such regulation and internal audit, methodological advancement may have been achieved generally on the technique side, on the other hand, however, its intended purpose may not be achieved as far as mere framework discussion and formal discussion (as what we call “Silo”). In the tail part of the risk model, how concretely may experts take the real phenomenon and rise-and fall of market into account? How do managements understand and critically review the discussion of such experts? They may not necessarily reach enough level in terms of professional and management insight.
However, ERM originally is an approach to create value used in corporate management, and a synonym of management.
The ability of ERM is the total sum of the ability of an organization and management individuals, and in particular, ability and leadership to manage ERM at the management level are extremely important. For example, the ability to go deeply to the concrete content of the stress scenario and can understand it in line with company’s business model. In fact, this is the very foundation whether a process of ERM can be really validated. For people engaged in management and risk, it is necessary to have opportunities to concretely understand, study and consistently update such stress scenario, but there had not been many in Japan until recently.
The ability to see such a stress scenario and up side is important for managements and people concerned with risk to improve their own ability and at the same time to see the limit of one’s ability and think about a countermeasure.
2. On the other hand, in the international financial circles, important detailed report to be concerned with an international finance system has been repeatedly submitted by IIF and “Group of Thirty” (http://www.group30.org/members.shtml) as well as Basel, G20, IMF, IBRD, EU.
In addition, in the European insurance industry, the place called “the CRO forum” is formed by CRO,CFO and the CEO of influential insurance company and develops the argument beyond the frame of the companies extremely seriously regularly. In Japan for example, The opinion formed at round-table conferences of risk experts has been used in the report to regulator, for example,, however, on the other hand, opinion reports by each trade groups can stay within the local requirement but in light of international framework. It is necessary as a country level to form strong ERM-like strategy, but unfortunately, the ability and experience of politician and bureaucratic to support it, and the ability of public sectors as far as seen in detailed report contents published, seem to be considerably weak in comparison with other countries.
3. We aim to contribute to elevate the level of capital and risk management of companies (and country) or ERM through efforts to deeply understand the scenario of economical, political or natural environments on which business model of companies (and country) and share the output of the study. This is not “European CRO forum” as it is, but we aim to contribute to corporate management and risk management of Japan to be equivalent to “European CRO forum” in the future .