Roundtable Discussion among Outside Directors

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Formulating a New Medium-term Management Plan that is both persuasive and easy to understand

For the New Medium-term Management Plan, we placed particular emphasis on the theme of “growth beyond what we have previously achieved.” In Japan, “making structural reforms to the Payment Business,” “enhancing cross-selling of the main unit and subsidiary companies,” and “growing our business in overseas markets, particularly in India,” have become the three pillars of those efforts. With these pillars, it was important for us to aim for growth of a different dimension and to disclose information in a way that was more transparent and easier to understand. As an outside director, I think this is very meaningful for earning shareholders’ trust and getting them to have positive expectations of the Company.
　We had many discussions at management meetings and Board meetings before arriving at this “statement of unprecedented growth.” Notably, I reviewed the commitments, risks, and resources required by each department in detail, and offered my own input based on my experience in the financial industry. Ultimately, I believe that the strong wills of the CEO and COO were essential to the development of the New Medium-term Plan.
At the Board of Directors, we have had discussions about IR activities and the appeal of our business strategy to investors. We also spent an ample amount of time studying the New Medium-term Plan at Board meetings and management meetings, and the process was very much a Company-wide effort. In particular, we sought to make this plan persuasive and easy to understand, and I think it has been well-received by the market.
　Drawing on my expertise as a lawyer and CPA, I have always been aware of the relevance of facts, logic, and process ethics, which are prerequisites for making decisions. As a result, we were able to produce a Medium-term Plan that is both specific and clear, and successfully disclosed information in an easily understood way. I feel that this result was brought about by discussions by the Board of Directors and the leadership of the COO.
Although this is my first year as an outside director, I took particular care to keep “understanding the business” and “asking questions about factors I felt uncomfortable with” in mind. One thing that particularly struck me was the current state of our company’s stock price, which has been left undervalued. When formulating the Medium-term Plan, we spent a great deal of time establishing our ROE target and the time axis for achieving it.
　All directors shared the need to take steps to improve the stock price, and this easily understood disclosure is the result. I think that we need to continue to work to make our disclosure even better. I am also grateful to the COO, Mr. Mizuno, for his careful coordination with each department to create a meticulous Medium-term Plan.

From logical discussions with each backbone as context

In the New Medium-term Plan, we are aiming to achieve business profit of ¥100.0 billion and an ROE of 9.5% in three years. This is an extremely challenging goal: to simultaneously grow in scale while improving profitability and capital efficiency. Our discussions centered on how to strike a balance between growth and efficiency, and how to communicate our strategy, as a vague strategy could cause confusion both internally and externally.
　In this Medium-term Plan, we clearly lay out which areas will emphasize growth and which areas will emphasize efficiency. As an example, for the Payment Business, our strategy is to increase profitability for the premium segment and small and medium-sized businesses, while growing in scale with services such as revolving payments. For the Finance Business, we plan to aim for growth through collaboration with Suruga Bank Ltd. while boosting capital efficiency for the credit guarantee business. These specific paths have been properly laid out, and the Board of Directors discussed these points extensively.
I was particularly conscious of “discipline.” It was important to find a way to deliver a balanced message to our stakeholders: our customers, shareholders, and employees. We placed a particular emphasis on increasing corporate value and employee productivity, and although we cannot directly control our stock price, we constantly questioned the rationality of setting goals for enhancing corporate value and the plans of each business unit that supported these goals. On reflection, I feel that I still do not have a sufficient understanding of our business and that I did not say enough from the standpoint of our customers. However, I think that overall we have achieved a well-balanced plan.
The keys to achieving the New Medium-term Plan are “making structural reforms to the Payment Business” and “growing the Global Business.” In the Payment Business, in particular, DX promotion is indispensable. The fact that externally hired digitally savvy personnel have chosen to stay with the Company and are committed to DX promotion leads me to believe that structural reforms are progressing appropriately.
　For the Global Business, I provided opinions on many issues, such as legal and regulatory risks in each country and liquidity risks in fund procurement, and shared my awareness with the Global Business Division. Cooperation between local branches and the Head Office is also key, and we will continue to have discussions and monitor progress.

Discussing various unpredictable situations centered on the Global Business

I felt that it was difficult for me to understand the Global Business, in part because this is my first year as an outside director. The challenge is how to think about the returns and risks of the markets in the Global South, especially India. While the field has great growth potential, I feel we still have much to learn in terms of risk management. We are in the process of learning as we get market information through our network of friends.
　Our core Payment Business is also facing a tough competitive environment, and it will be key for us to find ways to improve capital and labor efficiency. The New Mediumterm Plan asks how we should effectively allocate limited capital to domestic and overseas operations. I believe that flexibility in this area is key to achieving our growth strategy.
Our growth target for the Global Business in the New Medium-term Plan drew particular attention. Amid the lively discussions we had about setting the target, I was able to agree with the growth target by directly hearing the opinions of the CEOs of local corporations and the COO, who is in charge of risk management. As many examples of failure in overseas businesses can be attributed to a lack of communication with local management and inconsistencies in strategy, I believe it was very significant for us to confirm the commitment of local management.
　However, there are always unpredictable situations overseas, such as the risk of sudden changes to laws and regulations or problems with fund liquidity. We need to improve our readiness for dealing with these risks and continue to have more in-depth discussions and make recommendations on how to respond to sudden changes.
Our discussions centered on the fact that the business environment is undergoing dramatic changes. The challenge is how to respond to these changes, especially in the post-COVID era, amid the changing interest rate environment and the TSE’s emphasis on the importance of capital efficiency. The Board of Directors discussed how to allocate and procure our limited management resources in order to improve growth, profitability, and efficiency.
　The ALM Committee held in-depth discussions on the allocation of risk capital, and the Board of Directors was always aware of how to allocate resources to support the growth strategy. We need to continue to promote our plans around this perspective.

Regular meetings with directors and each executive director, centered on COO Mizuno

In addition to discussions with the Indian management team, I have one-on-one meetings with executives from each division to discuss strategies and issues on a regular basis. I feel that this daily exchange of ideas has been very helpful in the formulation of the New Medium-term Plan. In particular, I had in-depth one-on-one discussions with the Corporate Planning and Finance departments about fundraising strategies and capital policy to support dramatic growth. These successive discussions played an important role in our recent decisions about share buybacks and our dividend policy.
The flow of the discussions themselves were not a notable turning point. Rather, they were an extension of “normal” discussions at our company. It has been four years since I became an outside director. The discussions at the Board of Directors meetings have become increasingly specific and logical, and the seriousness with which we aim to manage the Group as a whole is reflected in the current Medium-term Plan. Examples include cross-selling between the Payment Business and the Finance Business, and the development of our CSDX strategy. These are the results of the leadership of COO Mizuno and each of the executive directors, and I believe we were able to send a good message to investors.
When the business profit target of ¥100.0 billion for the Medium-term Plan was presented, I was honestly surprised that our ROE target was below 10%. In the capital allocation discussions that followed, because of my strong commitment to achieving a 10% ROE, I expressed many opinions on the scope of share buybacks and our strategy for handling them.

Enhancing our key governance structure for executing the Medium-term Management Plan

During my term as outside director over these past four years, the composition of the Board of Directors and the content of discussions have made major strides. Leaders from core areas—Payment, Finance, Global, and Digital—have assembled on the Board of Directors, and with the additions of Mr. Sakaguchi and Mr. Kato last year, discussions have become more in-depth with the addition of diverse perspectives. In addition, the effectiveness of the Board of Directors is being evaluated, and initiatives to resolve issues are being carefully promoted. In particular, I feel that we have made progress with greater transparency in the decision-making process, and we can now see how opinions were reflected in those decisions, which should be commended.
　In addition, with regard to organizational restructuring this fiscal year, we have enhanced the Risk Management Department and the Audit Department, and strengthened the reporting line to the Board of Directors. This contributes to enhanced governance and is a key element in the implementation of this Medium-term Plan. I will continue to focus on these efforts to enhance governance and fulfill my responsibilities as an outside director.
From my perspective as a manager, I raised many questions about employee productivity and risks in emerging markets. For example, how are we measuring the effectiveness of DX, and has awareness of the cost of capital spread to the level of our subsidiaries? I am grateful for the seriousness with which the Board of Directors and the management team responded to my candid questions.
　However, there were some areas where we did not have sufficient discussions and relied on consensus, saying “This board member is in charge, so things should be fine.” In the future, I believe that the Board of Directors should be able to devote more time to discussing services and strategies, pursuing what makes Credit Saison unique from a more long-term perspective. Notably, securing human resources and improving diversity will be challenges for us going forward.
Discussions at Board of Directors meetings, ALM Committee meetings, and expanded management meetings have become more active each year. As the Company moves beyond just the Payment Business on the path to becoming a new business structure—a GLOBAL NEO FINANCE COMPANY—our discussions are enlivened by the in-depth expertise we each bring to the table in our capacity as outside directors who are involved in the transformation process.
　With the expansion of the Finance Business and Global Business, we also urgently need to improve the governance structure. The internal audit system is being strengthened but needs to be further developed. I have initiated one-on-one meetings with the General Manager of the Internal Audit Department and plan to continue having more in-depth discussions outside of Board meetings. As an outside director, I will lead the Board of Directors’ deliberations on particularly pressing issues and continue to offer my opinions as necessary.