A Dialogue between Outside Directors

――How do you view management’s long-term vision and the “ORIX Group Growth Strategy 2035”?

Watanabe: First, the formulation of the ORIX Group Purpose & Culture, which preceded this growth strategy, was not so much about creating something new as it was a process of reaffirming what makes ORIX unique by incorporating the opinions of a wide range of employees, including younger ones. The long-term vision and growth strategy were then formulated based on this reaffirmed corporate purpose. In that sense, I believe it is a strategy that is truly ORIX-like, backed by a sense of realism and execution. In formulating the strategy, we outside directors also actively contributed our opinions at Board meetings and engaged in extensive discussions. Amidst the maturation of the leasing business, which was once a pillar of ORIX’s revenue, and the significant changes in its business structure, we carefully examined areas with growth potential for the future.
Hodo: ORIX started in finance and expanded into investment and business operations. Based on the “real-world perspective” that comes from running various businesses itself (instead of just investing), ORIX has practiced a “project-based” management style, carefully evaluating and selecting individual projects. In this context, clearly articulating a long-term vision based on corporate purpose and outlining a “philosophy-driven” growth strategy is a groundbreaking step for ORIX. Going forward, we believe it is crucial to strike a balance between the “project-driven” and “philosophy-driven” approaches.
Watanabe: Even if we identify growth areas, it is meaningless if they are not properly communicated within the company. The big challenge is how to share the direction of the company's overall strategy while improving communication between departments and avoiding a silo mentality. Each department at ORIX has a perspective that spans the three areas of finance, business, and investment, creating a foundation for frank and open-minded discussions that take a bird's-eye view of the entire organization. I feel that discussions from this perspective have already begun among the management team led by COO Takahashi.

――In the long-term vision, a high target of 15% ROE has been set. What are your thoughts on this?

Watanabe: While it may seem like a high target at first glance, we do not consider it an unrealistic figure. In fact, in the new three-year plan, we have set a target of 11% as a first step, and we believe that a step-by-step approach will ultimately lead us to the goal of 15%. We believe that the best approach to improving ROE is to enhance our ability to generate profits. At the same time, while financial businesses such as banking and insurance tend to have structurally low ROE, they have a track record of supporting the overall business during periods of market instability. It is important to take this into consideration as well.
Hodo: That's right. Even if ROE is temporarily low, if a business generates stable profits over the long term, it can be said to contribute to corporate value. It is important to look at both time frame and capital efficiency. In that sense, it is essential to improve the monitoring skills of the Investment and Credit Committee and Audit Department and build a system that can select projects that will generate sustained value.

――Alongside economic growth, how to add value through addressing societal issues is also a crucial theme. Could you share your thoughts on the role ORIX aims to play moving forward?

Watanabe: I believe that ORIX is a company that can break through existing frameworks and take on new challenges at a time when Japanese companies and society are feeling stagnant. I think that attitude is ORIX's strength and what inspires society. ORIX is neither a zaibatsu^*-affiliated company nor a newcomer specializing in a specific field, but rather a unique entity dynamically operating a wide range of businesses, showing the world that “this is another way a company can exist” and “this is another way we can contribute to society”.
Hodo: ORIX’s Purpose states that “We combine innovative thinking and diverse expertise to find pathways to impact in a world of change.” This deeply resonates with me. At ORIX, each employee is committed to meeting specific client needs and challenges, and our talent pool is diverse and each possess unique strengths. While these individuals may not consciously recognize their contributions to societal issues, many of them, including those who have already left ORIX, are making significant impacts across various fields.

――Finally, please share a message for investors.

Hodo: ORIX has grown by finding frontiers and taking risks to enter them. Although the management system has been strengthened, we would like investors to continue to give us their candid opinions and criticisms. ORIX is committed to listening and responding to such voices head-on, and is the kind of company whose growth will be enabled through such challenging and rigorous dialogue.
Watanabe: Indeed, the awareness to meet investors' expectations is very strong. On that basis, once decisions are made through thorough discussions, there is a culture of ensuring they are implemented across the entire organization. As outside directors, we aim to increase opportunities for direct dialogue between us and investors and thereby incorporate diverse opinions into Board discussions. We look forward to your continued candid feedback.

* Zaibatsu were large, family-controlled Japanese industrial and financial conglomerates that dominated the Japanese economy from the Meiji period until the end of World War II.