A Dialogue between Outside Directors

Left: Hiroshi Watanabe, Nominating Committee Member and Audit Committee Member
Joined the Ministry of Finance (currently the Ministry of Finance, Japan) in 1972. After serving as Director-General of the International Bureau and Vice Minister of Finance for International Affairs, retired in 2007.
Subsequently held positions including Professor, Graduate School of Commerce and Management at Hitotsubashi University (currently Graduate School of Business Administration at Hitotsubashi University); Governor, Japan Bank for International Cooperation; and President, Institute for International Monetary Affairs. Appointed Director of ORIX Corporation in June 2020.

Right: Miwa Seki, Nominating Committee Member and Audit Committee Member
Joined DENTSU INC. in 1988. After serving at Smith Barney and Morgan Stanley, appointed as General Manager, Tokyo Branch, Clay Finlay Limited in 2001. Subsequently held positions including General Partner at MPower Partners Fund L.P., in addition to serving as Member of the Board of Directors (Outside Director), Daiwa House Industry Co., Ltd. Appointed Director of ORIX Corporation in June 2025.

Valuing a balanced decision-making process

Watanabe: In January this year, President Hidetake Takahashi assumed the position of CEO, marking the full-scale launch of ORIX’s new management framework. In the past, ORIX gave the impression of having the organization driven by the strong, unifying leadership of its top executive. However, I feel that the new CEO, Mr. Takahashi, is inclined towards making decisions by bringing together diverse opinions within the company. The Board of Directors has also set a clear direction to further strengthen its role as a forum for discussion, with more active debate focused on the Group’s overall management strategy and direction it aims to pursue.

Seki: I have been serving as an outside director since June of last year, and, as you said, I also feel that CEO Takahashi is a leader who values team decision-making. Meanwhile, over the past year, ORIX has swiftly rolled out a series of bold strategies and measures, including the sale of ORIX Bank and the shift to an asset management business model, the reorganization of business segments, and the introduction of a CxO system. Watching the way CEO Takahashi first establishes the overall direction and then develops concrete plans while listening to the views of each business unit, I feel he maintains an excellent balance between autonomy, speed, and discipline.

Management’s Intention to Evolve Made Clear through Business Portfolio Reform

Watanabe: I believe what Mr. Takahashi has been pursuing over the past year is the work of organizing and optimizing ORIX’s business domains, which had steadily expanded with the changing times, with the aim of realizing sustainable growth. Bringing in Mr. Yamada, who has an investment banking background, as CFO is also likely based on his decision that a dedicated person to oversee financial strategy with a company-wide, cross-functional perspective was needed to fully pursue a business requiring dynamic capital allocation going forward. The business portfolio has been reorganized by consolidating the business segments, which had expanded to 10 areas and assigning a COO to each of the Group’s three core segments: JAPAN & APAC, Infrastructure, and USA & Europe. These reforms clearly show the intention of ORIX’s top management to change the status quo.

Seki: As a company, ORIX operates very diverse businesses, which has at times made it difficult for general investors and other stakeholders to fully understand the company. I believe that ORIX has now become easier to understand externally because of the reorganization, in that the businesses are now organized based on their underlying characteristics rather than on form, and closely related businesses are grouped together. Having said that, I also feel that the major business segments that have been consolidated back together are linked to a single COO, that is, a specific person who primarily oversees them. I sense there is also a potential risk around what happens when that person changes.

Watanabe: Certainly, the current system assumes the existence of an outstanding COO to lead each segment. To ensure sustainable growth in each field, it is also vital to develop the next generation of young leaders. For the past few years, I have been repeatedly saying that ORIX needs to develop its next generation of management, including the position of CEO, with an eye on five or ten years in the future. Speaking based on global standards, ORIX must start selecting and developing its next generation of leaders from around the age of 35. I think this would also further increase the motivation of younger employees.

Leveraging the Strength of “Frontline Capabilities” in New Growth Models

Seki: I believe it is critically important to understand how the strengths we have cultivated over the years will drive our growth going forward.

Watanabe: ORIX’s sense of direction is expressed well by Alternative Investment & Operations and Business Solutions, the two business models which it announced aimed at realizing Long-Term Vision 2035. To ensure sustainable growth, it is important to skillfully link both the things ORIX wants to do and can do with the actions that are required by society. Meeting the needs of markets and customers is, of course, important. At the same time, a vision of what ORIX wants to become is also essential for creating new value. If ORIX believes there is something it should pursue, then I think it is fine to push forward with conviction while still gauging the response of the market and customers.

Seki: I think that in the case of ORIX, these two business models can be pursued in parallel. ORIX’s major strength is its “Frontline Capabilities” for connecting deeply with customers. ORIX has branches nationwide and sales professionals with an in-depth understanding of where customers are located and the challenges they face. On top of that, ORIX has built up a track record of collaborating closely with customers to address a wide range of issues. This is a major competitive advantage that overseas private equity firms do not have. If ORIX can leverage this strength to create new business areas, I expect the two business models will produce synergies, which will translate into significant value creation. I also think the recent review of material issues for ORIX’s sustainability goals conducted in May 2026 was intended to clarify which material issues will contribute to growth in line with these two business models.

Watanabe: The previous material issues felt more like “social obligations.” Although they presented concrete targets in detail for each item such as GHG reduction targets, the updated material issues have been reorganized into six broad categories that express the direction ORIX aims to take. It is a positive change. I believe that the new material issues have also made it easier for employees to ask themselves what they can do to address the issues.

Focus on Challenge to Achieve ROE of 15% and Net Income of 1 Trillion Yen

Watanabe: ORIX has announced management KPIs of ROE of 15% and net income of 1 trillion yen in its Long-Term Vision, and these are both ambitious targets. Also, profit and ROE do not necessarily move in the same direction. I believe that clarifying the focus of ORIX’s efforts, including capital allocation for each project over the next one to two years, will also bring into view the positioning and concrete strategy for each segment. Although I am not overly optimistic, I believe it is better to set ambitious targets. I would like to give ORIX’s management team credit for boldly outlining its vision for the future.

Seki: I recently attended ORIX’s Global Management Conference. There was a comment that achieving ROE of 15% and net income of 1 trillion yen at the same time would be trying to increase muscle mass three- or four-fold while on a diet, and this is exactly the case. To increase capital efficiency, it is necessary to optimize the business portfolio and trim the balance sheet, but doing that alone is only “dieting.” To build “muscle,” ORIX will have to successfully create new, highly efficient businesses that go beyond the existing portfolio on a large scale. Of course, asset management is one of these businesses, but there are still many possibilities that can be developed, including, for example, investment in AI-related infrastructure, new energy sources, or the logistics sector.

Watanabe: Speaking from the viewpoint of social infrastructure, I believe that the Osaka Integrated Resort (IR) project currently underway is significant in the sense that it will contribute to society over the medium to long term while simultaneously enhancing ORIX’s presence in society. Including the financing plan, it is one of the largest projects in ORIX’s history, but it will be an incredibly significant achievement for its future development should it succeed.

Using Asset Management-Type Businesses as a Catalyst for Further Evolution

Watanabe: I believe that reforming the organizational culture of the entire Group is also an important key in ensuring that ORIX continues to evolve. Rather than just having lower-level staff act in accordance with plans created by senior management, I would like ORIX to foster a mindset in which all employees are working together to transform the company. This also includes incorporating the opinions of younger employees on the frontlines.

Seki: In that sense, I feel that the shift to an asset management-type business could be a major catalyst. Recruiting talented human resources from the outside is certainly necessary. However, it is also important to articulate and pass on the implicit knowledge which ORIX has cultivated as part of its DNA, such as its unique business know-how and processes for making decisions as a team. Doing this should also ensure the reproducibility of its business processes.

Watanabe: Speaking from the viewpoint of changing the organizational culture, it is also necessary to develop systems that bring out the potential of the next generation of leaders by equipping them with a company-wide, cross-functional perspective. This can be done by having them experience working in multiple core businesses within the first ten years of their joining the company, for example. In addition, looking toward future overseas expansion, securing and developing human resources with a global perspective is also a major issue. CEO Takahashi has considerable overseas business experience and a diverse network of personal connections, but there are also many people in each business unit who are in day-to-day contact with ORIX’s overseas operations. I hope these people will work with management to drive company-wide efforts to attract outstanding human resources, bearing in mind ORIX’s business counterparts and rival companies as potential sources of talent. Because, ultimately, it is the people on the frontlines who can decide who is the right person for the right job.

Seki: Asset management-type businesses are, in short, businesses that add value to entrusted assets, which is essentially no different from the strategic investment that ORIX has been engaged in all along. Each of ORIX’s business units have many experienced staff who have refined their abilities to assess asset strength through diverse strategic investment experiences. I expect that ORIX can create businesses that are unique to the firm by skillfully combining strengths based on the frontline perspective, which global private equity firms do not have, with the knowledge and skills of outside professionals.

Watanabe: The targets the firm has set are aspirational, but there is no doubt that ORIX has started moving toward major group-wide transformation with a firm sense of direction. As an outside director, I will continue providing backup for this bold challenge going forward.