Risk Control System

Keeping risk that affects our management within a permissible range helps us achieve our business goals. Based on this approach, we appropriately identify, analyze, and evaluate the risks stablished in the “Rules of integrated risk control” and have devised appropriate control systems for the different risks that confront the Monex Group and the group companies.

 

As per the flow chart below, the CEO appoints a risk control manager, and this manager is responsible for ascertaining the development and operational status related to the risk control system and regularly reporting that status to the Board of Directors.

Risk Management System

Risk Definitions and Main Measures

The Monex Group categorizes and regularly assesses the following types of risks noted in the table below. In addition, the main measures to address those risks are also shown.(As of end-June 2025)

 

Risk Category1 Risk Category2* Risk Definition Main Measure
Business risks Strategic risks Risks of losing invested capital and a decrease (or loss) in future revenue and profits due to such factors as a decline in the competitiveness of existing businesses, failure of new investments, or delays in realizing synergies within the group. Securities Business: Development and provision of sophisticated tools for active traders by TradeStation, API integration with third parties. Promotion of asset management models by Monex Securities, and alliances with NTT Docomo, AEON Bank, etc.
Crypto Asset Business: M&As by Coincheck Group, expansion of customer base and B2B business by Coincheck.
Asset Management and Wealth Management Business: Investments in growth areas, optimization of asset management business portfolios, and creation of synergies within and outside the segment.
Management oversight risks Risks of failing to accurately and promptly grasp the management status of group companies, leading to an inability to build an optimal business portfolio. Monthly reporting of segment-specific performance and KPIs to the Board of Directors, etc.
Financial risks Market-related risks Risks of losses due to fluctuations in market risk factors affecting held assets (including off-balance sheet assets). Foreign exchange positions are appropriately controlled based on regulations related to cover transactions for FX trading (self-positions are generally not held for crypto asset exchange transactions). Risk amounts are calculated with a focus on VaR (Value at Risk).
Credit risks Credit risks related to counterparties and customers (including credit risks of counterparties exposed to climate change risks). Risks, such as position concentration, are identified through daily monitoring of transaction status. Risk amounts are calculated with a focus on VaR.
Liquidity risks Risks of difficulties in securing funds due to deficiencies in cash flow management.
Operational risks Information security risks Risks of losses due to breaches or damage to information assets, compromising confidentiality, integrity, etc. Implementation of an Information Security Committee, regular monitoring, and continuous security education for employees.
Cybersecurity risks Risks of losses due to cyberattacks, such as leakage of critical information, unauthorized use of systems, or service outages. Establishment of a global framework to promote measures in organizational operations, system responses, human responses, and external collaboration.
Strengthening of internal security education programs. Risk amounts related to wallet balances in crypto asset transactions are calculated with a focus on VaR.
System development risks Risks of losses to customers and the company due to system downtime, malfunctions, or unauthorized use. Regular vulnerability assessments by third parties and immediate responses to detected vulnerabilities.
Operational risks Risks related to human errors by employees or reliance on third parties, such as clearinghouses and system vendors. Formalization of key operational risks through reviews during the introduction of new projects or products/services.
Internal fraud risks Risks of losses due to fraud by officers or employees. While managed as a subtype of other risks, these are separately managed primarily from the perspective of preventing internal fraud. Promotion of transparent business operations through education for officers and employees and thorough dissemination of internal whistleblowing systems.
Money laundering and terrorist financing risks Risks of being exploited for money laundering or terrorist financing. Identification and response to money laundering-related issues through thorough measures at each group company and the establishment of a global reporting system.
Legal risks Risks of losses due to violations of laws and regulations, legal uncertainties in transactions, differences in interpretation, or incomplete recognition of facts during business execution. Regular and thorough dissemination of compliance items by compliance officers and systematization of confirmation processes for contract execution.
Reputational risks Risks of losses due to deterioration in the company’s reputation caused by media reports, rumors, etc. (including risks of losses due to delayed responses to environmental issues, such as climate change, leading to reputational damage and reduced customer transactions). Efforts to minimize the risk of reputational damage through strengthened collaboration with media personnel and PR support companies. Active disclosure of initiatives related to climate change.
Disaster risks Risks to business continuity due to major disasters or pandemics (including risks of asset damage caused by business stagnation of counterparties due to natural disasters). Development of business continuity plans and pre-consideration of emergency response measures at major group locations for disasters, terrorist attacks, etc.
Human risks Risks of being restricted from achieving business objectives due to labor shortages stemming from such factors as imbalances in the talent portfolio, unfair or discriminatory personnel evaluations, low morale, labor accidents, or mental health issues. Ensuring diversity in talent and fair evaluation systems (including compensation structures), conducting various training programs on such topics as harassment, and promoting one-on-one communication and coaching. Implementation of HR systems enabling flexible work styles and organizational engagement surveys. Thorough dissemination of internal whistleblowing systems.
Disclosure risks Risks of damaging corporate reputation and losing investor trust due to errors, deficiencies, or delays in disclosed information. In addition to building and operating appropriate internal controls, establishment of systems to prevent fraudulent accounting practices through collaboration between external directors with CPA qualifications and accounting auditors. Prior checks of timely disclosures and press releases by the Disclosure Committee.
Other risks Other Country risks, political risks. Sharing of global management environment information through meetings attended by executives from global offices.

*Risk calculation for any remaining risks that correspond to category2 risks above
(Level of impact across group × Rate occurrence/Control measures)

Risk Control in Crypto Asset Business Segment

Differences in risk control between a financial instruments business and cryptocurrency exchange business

The risk control as a cryptocurrency exchange service provider is similar to the risk control in FX trading in some aspects. For example, a cover transaction (hedging on a position held by a virtual currency exchange service provider to reduce risk with another service provider) for a position that is issued by trading a cryptocurrency with a customer is the same as a cover transaction for a foreign currency pair in FX trading.

 

However, the cryptocurrency exchange service provider has a higher liquidity risk for the cover transaction than in FX trading. For leverage, the risk (absolute amount of loss) to the trading volume is lower because Coincheck, for example, has a leverage ratio of 5x, which is smaller than the 25x upper limit in FX trading.

 

On the other hand, there is a noteworthy difference in managing cryptocurrency trading and FX trading, which is handling the currency in a wallet form and using blockchain to complete the transaction. When compared to a brokerage firm that primarily engages in equities trading, the stock as the primary element in that trading is managed by Japan Securities Depository Center, Inc. using electronic data. In simpler terms, the data is stored at a separate location from the brokerage firm. Whereas with a cryptocurrency exchange service provider, the cryptocurrencies are most often stored by the company itself, requiring the company to control that high risk.

Management required in the cryptocurrency exchange business

In a cryptocurrency exchange business, other  aspects need to be managed apart from the  aforementioned risk control. Even with regard  to money laundering prevention, there are more points that must be monitored in a cryptocurrency  exchange business. In a brokerage firm, the  deposit and withdrawal from a securities account  can only be completed via a bank account.
These deposits and withdrawals are not possible  if the names on the accounts do not match. Yet in the cryptocurrency exchange business, more  advanced measures to prevent money laundering  are needed because a cryptocurrency can be  remitted to a cryptocurrency address.　

 

In terms of system security measures, we are  making our security system stronger to conduct  appropriate monitoring, assuming there will be  multiple threats, such as hackers attempting to  attack our servers.

Differences between cryptocurrency exchange business and financial instruments business

Service content Cover
transaction		 Liquidity risk Verification of person
depositing or withdrawing		 Outflow risk
of assets in
custody		 Comprehensive
risk control
Cryptocurrency
exchange service
provider		 Trade location and
exchange location		 ○ High Bank account/
address		 High High
Financial instruments
business		 Equities trading - - Bank account Low Low
FX trading ○ Low Bank account Low Medium