Nomura Research Institute : Governance

Initiatives for Improving the Atmosphere and Effectiveness of the Board of Directors

Fukami: At NRI, we are working to improve how the Board of Directors operates based on effectiveness evaluations. In 2022, we began holding Roundtable Discussions for Members of the Board and Audit & Supervisory Board Members for directors and auditors to exchange opinions outside the Board of Directors. Today I would like to focus our discussion on efforts to improve the atmosphere and effectiveness of the Board of Directors itself.

Omiya: It seems to me that time is managed very smoothly in NRI Board of Directors meetings. While there are some things that still need to be ironed out, the materials and presentation methods are concise, which also speeds

up our understanding. Authority is also being delegated, and the Board meetings seem to be running very well.

• I also serve as an outside director at another company, but they seem to have a more outspoken atmosphere there. People there often say unpredictable things. Sometimes
  it happens where a conversation starts between outside directors, and someone from inside that company then cuts

into their conversation. Compared to that, it seems like NRI's Board of Directors is a little more serious. At the other company, there are also opportunities to exchange opinions in places outside the Board of Directors. That helps to better understand each person's character, the points that matter most to them, and their level of understanding. Although it also somewhat depends on the character of each company, I think we could express our opinions more candidly in our Board if NRI also offered such opportunities. In that sense, I think this new Roundtable Discussion initiative is very mean­ ingful since it allows us to hold discussions in a different atmosphere than in the Board of Directors. It has brought out different opinions than before. I would even advise that we could be a bit bolder in the way we go about this.

Fukami: Presenters are trained beforehand in the Senior Management Committee to speak concisely at Board of Directors meetings. I also do this myself, with an under­ standing of the difference in purposes between the Board of Directors and the Senior Management Committee. For the materials and documents as well, we are diligently making improvements such as presenting more of the background, to facilitate decision-making in the Board of Directors.

• The Roundtable Discussion is an initiative that began only recently, but I think it has become an excellent forum for discussions. I hope to see it continue into the future.

Omiya: At the same time, to someone from a manufactur­ ing background, the workings of business in the IT industry seem complicated. For example, in our business with finance, the way we work at financial institutions is struc­ tured and the parts THE STAR handles are complicated, as are the relationships with the numerous and many different types of competitor companies. When we get the order for such a project, if we can get disclosures of information such as how broadly it will extend organization-wise and that

it will enable us to expand our scope both upstream and downstream, I think we can realize certain things from that. Members of the Board are interested from the vantage point of what lies beyond the project. NRI's business is B2B,

so although we understand that the circumstances and requirements differ from one client to the next, it would be good to discuss how much we want to invest after receiving disclosures about our past, present, and future relations with the clients in relation to the project, and about their situations. As a Member of the Board, I want to suggest strategies and tactics with the potential upstream, down­ stream, and organization-wide breadth of the project in mind. Since I cannot give advice beyond the scope of my own knowledge and experience, if the strategic role of the project is presented I will probably be able to give advice that can increase effectiveness.

• NRI's business gives the impression of being highly refined. Personally, I am also handling this role with a sense of vigilance as I try to gain deeper insight into NRI's business.

Fukami: There are hardly ever any explanations about indi­ vidual clients in Board of Directors meetings, but we have account plans for each client which we continuously pass down. I also think it would be great if there could be a little more explanation about that point as well.

Omiya: I occasionally give requests and comments for making the Board of Directors more effective, which are handled very quickly. This makes me feel like we are steadily heading in the right direction. NRI has the mechanisms and passion for self-directed improvement, and that mentality is also ingrained, so I am not particularly worried about the future.

Considerations for the Next Long-term Management Vision: Group Vision 2030

Fukami: Since around the summer of 2021, we have been advancing our considerations for the next long-term man­ agement vision, Group Vision 2030 ("V2030"). In order to proceed with these considerations more openly and freely, we established an opportunity for everyone to express their opinions in the Roundtable Discussion even as the vision is still in the considerations phase.

Omiya: For strategies, particularly for something like a long­ -term management vision, more opinions come out in discussions when the incubation stage is still not fully com­ plete. As a result, I think everyone gains a deeper under­ standing about which direction everything should proceed, which makes the plan itself more convincing. It really does seem to have been very effective that we were able to hold discussions about the next long-term management vision this time in the stages before its completion. In addition to long-term management visions, I think it will also increase effectiveness if we can discuss various other business chal­ lenges early-on in this manner.

• It also seems beneficial for long-term management vision considerations such as these to be done as a team. Those who participated in the considerations are the people who will take over in the future, so establishing camaraderie between them early on will increase team unity and help to shape an even stronger management team.

Global Business

Omiya: For our global strategy, there are some Members of the Board who say that we should lower the ambitious targets set out in the Medium-Term Management Plan. However, executives including President Konomoto felt that these are necessary for NRI and had strong determination to pursue them no matter what. As a result, that determina­ tion is now blossoming. We are finding companies that are growing, acquiring them, and producing solid results, aren't we? The cases that are currently progressing smoothly are highly commendable.

• In 2021, we acquired Core BTS as a springboard for entering North America. Competition in North America is fierce, but just like in Australia we are expecting growth there as well.

Fukami: Until two years ago, our performance had also been sluggish in Australia, and we dealt with various strug­ gles. The circumstances there eventually changed and business got off the ground, which is comforting in this case. It seems like we made the right moves at the right time. If things had gone poorly in Australia, we probably would not be talking about North America.

Omiya: In my opinion, NRI's strengths are its outstanding human resources, organizational environment, and culture. I had heard that NRI has a culture of going beyond organi­ zational boundaries to learn from others, such as to share case studies of projects throughout the Company. It really surprised me to see the attitudes here of proactively sharing lessons each person has learned without compensation or reward, and at the same time learning and absorbing from others. The fact that working as a systems integrator involves sharing many things beyond segment boundaries is probably also a factor, but I think these activities are highly conducive to accumulating knowledge as an organization.

Fukami: NRI has an organization that pushes productivity improvements and provides development methodologies and expertise, but on the other hand, the practice of taking the initiative does seem to be functioning effectively. When projects are bustling, people can be seen asking for help from others all over the Company. The culture and atmo­ sphere of the organization can also drastically change when people from different backgrounds in the Company get involved in projects. It could naturally energize the organiza­ tion, and even create opportunities to acquire new knowl­ edge or foster a culture of doing so. You could even say that the culture of helping each other is functioning brilliantly.

NRI's Strengths and Challenges

Fukami: From your perspective as an outside director, what are NRI's strengths and challenges?

We will continue evolving,

to make the Board of Directors

more effective.

Omiya: Another characteristic of NRI seems to be that the projects last for around one to two years rather than long- term, resulting in frequent opportunities for learning. There is also an adaptive attitude in which people are open to incor­ porating new ideas that they deem effective from among those that they hear via the various interactions and social­ izing inside the Company. As a result, proficiency levels seem to increase both as individuals and as an organization as projects proceed.

• With projects bustling the way they are now, that is all the more reason to be concerned about issues like personnel shortages and employee work conditions. That would likely be one of the challenges NRI is facing now. To secure human resources, we are actively hiring both new graduates and mid-career, but we probably need to think of other methods as well.

Fukami: As measures to bolster our development resources, I feel that we need to diversify and raise ability levels from various standpoints. People would seem to be both a strength and a challenge.