1. Across the Pacific Ocean
- Building an Enterprise-wide Strategic Platform -
November 5, 2008
Union Bank of California
The Bank of Tokyo-Mitsubishi UFJ
Takehiko Nagumo

2. Agenda
Company Profile
Brief History of BSC at BTMU / UBOC
Evolution of Strategic Platform:
1) Enterprise-wide Risk Management – COSO
2) Customer-Centric Strategy Execution – Six Sigma
3) Management Philosophy – CSR
Conclusion – BSC as Learning Dynamics
2

3. MUFG Profile
Mitsubishi UFJ Financial Group
Bank of Tokyo-Mitsubishi UFJ Mitsubishi UFJ Trust Bank Mitsubishi UFJ Securities
Mitsubishi UFJ
Mitsubishi UFJ NICOS
Lease & Finance
MUFG is a fully-fledged comprehensive financial group owning the
commercial bank, the trust bank, the securities company, top-class credit
card, consumer finance, asset management, leasing, and other companies,
as well as a U.S. bank (UBOC).
To Be a Premier, Comprehensive, Global Financial Group
3

4. BTMU & UBOC Profile
<Total Assets JPY192.9 Trillion>
Mitsubishi UFJ Financial Group
100%（inc. shares held by MUTB) 100% 100%
Bank of Tokyo-Mitsubishi UFJ Mitsubishi UFJ Trust Bank Mitsubishi UFJ Securities
Total Assets: No. 1 in Japan Trust Assets: No. 1 in Japan Customer Assets: No. 4 in Japan
UnionBanCal Corporation
Union Bank of California
(as of March 31, 2008)
4

5. MUFG Global Network
Domestic Branch Network Overseas Branch Network
East
Japan EMEA
Retail: 453
Corporate:180
35
West Japan
633 336
Retail: 252 Americas
Corporate: 117 55
Union Bank 30
244 of California Asia and Oceania
(UBOC)
369
Central Japan
Retail:165
Corporate:79
Domestic Total: 1,246 Overseas Total: 456
(as of March 31, 2008)
5

6. Brief History of BSC at BTMU / UBOC
BTMU Americas (NY) BTMU Global (Tokyo) UBOC (SF)
2001 July - 2004 July- 2008 July -
Organization: Organization: Organization:
Mgmt Foundation: Japan Mgmt Foundation: Japan Mgmt Foundation: US
Best Practice: US Best Practice: Japan Best Practice: US
Headcount: Approx. 2,000 Headcount: Approx. 54,000 Headcount: Approx. 10,000
Motivation: Motivation: Motivation:
Linkage b/w org and individuals Alignment of mgmt processes
Regional Governance
Balance (risk/return, HQ/Br, etc) Cross-org. Collaboration
(Strategy & Risk Mgmt)
Clear Roles & Responsibilities Execution Capability
Key Results:
Key Results: Key Results:
Integration / alignment b/w
strategy and risk management Successful merger integration
High marks in US regulatory Net profit increase by 117.5%
examination Credit rating improvement
Enhanced communication No. 1 rating in Brand Survey
b/w expats and local etc.
employees
6

7. Across the Pacific Ocean
HQA (NY) to BTMU
Americas 2001 -
Union Bank of
California 2008 -
BTMU Tokyo to the Global
Operations 2004 -
7

8. Cross Cultural Context - Culture Matters
Japanese Companies American Companies
Vague Mission and Vision Defined
Incremental Strategy Formulation Process Grand Design
Operational Efficiency Competitive Edge Differentiation / Uniqueness
Bottom Up
Decision Making Top Down
(or Middle-Up-Down)
Implicit / Nonverbal / Closed Communication Style Explicit / Verbal / Open
Process Orientation Performance Evaluation Outcome Orientation
Diversified Culture /
Single Culture / Cooperative Work culture
Competitive
Adapted from “Essence of Failure,” by I. Nonaka 8

9. Strategy Execution Platform at Glance
【Customer Value Proposition】 【Corporate Social Responsibilities】
External CS Management Brand Image Voice of
Score Sat. Score Score Stakeholders
Initiative Business Line
Evaluation Sat. Score 【Compliance & Risk Management】
ISO9001/14001 Branch Office Regulatory Internal &
Audit & Exam. Sat. Score Exam. Results External Audit
CSA SOX 404
【Employee Engagement】 Score Test Results
Employee Opinion Poll Compliance Info. Security
Sat. Score Results Check List Test Results
Strategy Formulation Strategy Execution Strategy Review
（P） （D） （CA）
SWOT Analysis, 5 Forces Analysis, etc.
9

10. COSO Six Sigma CSR
Integrating Risk Management with BSC
Public’s Trust & Confidence Corporate Value
Credit Strategy
Risk Risk
Governance Framework
Legal & Regulatory Operational
Risk Market Risk Risk
People Risk
IT Risk Crisis Money
Management Laundering
Country Risk Risk
Settlement
Risk Information /
Data Security
Liquidity Risk Risk
Systemic Risk
Reputational Compliance Risk
Risk
10

11. COSO Six Sigma CSR
COSO ERM-Inspired BSC Evolution
COSO ERM Framework Committee of Sponsoring Organizations of the
Treadway Commission (COSO) is a U.S. private-
sector initiative for enhancing risk management
and internal control, sponsored and funded by:
American Institute of CPAs
Association of American Accountants
Financial Executives International
The Institute of Internal Auditors
The Institute of Management Accountants
COSO ERM framework is the global de facto
standard or “common language” of enterprise-wide
risk management, adopted in various regulatory
frameworks and activities such as:
BASEL II
SOX
Regulatory examinations
11

12. COSO Six Sigma CSR
COSO ERM-Inspired BSC Evolution
Strategy-Risk Management Double Loop Once strategy is articulated for all
levels of the organization from the
top-down, it became easier to
Proactive Risk
Proactive Risk identify and assess risks associated
Management and
Management and
Compliance
Compliance
with implementing strategy.
Corporate level
COSO-based control self-
assessment (CSA) was introduced
Cascading Aggregating on to proactively manage risks
Strategy
BU level
Risk derived from the strategy execution
(Top-down) (Bottom-up) process. This process was adopted
as a bank-wide common objective
called “Proactive Risk Management
Division 1 and Compliance” in BSC.
CSA was conducted at the lowest
Division 2
organization level and CSA results
were aggregated from the bottom.
Division 3
The BSC-CSA linkage created a
Strategy-Risk management double
loop for BTMU.
12

13. COSO Six Sigma CSR
COSO ERM-Inspired BSC Evolution
(1) BSC: Objective Setting (2) Process Map : Business Process Analysis
Process Process Process Process Process
(Step 1) (Step 2) (Step 3) (Step 4) (Step 5)
Risk？ Risk？ Risk？ Risk？ Risk？
(3) Risk Scenario : Hypothesis of “cause-event-effect “chain (4) Risk Assessment & Control
Cause A
Risk Event A
Cause B Effect (Loss) A
Risk Event B
Cause C Effect (Loss) B
Risk Event C
Cause D
13

14. COSO Six Sigma CSR
COSO ERM-Inspired BSC Evolution
Performance Driver Performance Outcome
(Leading Indicator) (Lagging Indicator)
Proactive Risk
Proactive Risk
Management and
Management and Brand Image
Corporate level
Compliance
Compliance
RAROC*
Corporate level
Score
Cascading
Cascading Aggregating
Aggregating
Strategy
Strategy Risk
Risk
(Top-down)
(Top-down)
BU level
BU level
(Bottom-up)
(Bottom-up)
# of Operational # of Compliance
Incidents Violations
Division 11
Division
# of Information # of Fin / Non-fin
Division 22
Division Leakages Reporting Errors
Division 33
Division
Audit / Exam
# of Misconducts
Results
% of issues proactively identified Result vis-à-vis past 3-term Ave:
by business line before anyone else “Improved” = +2 points
(auditors / regulators) “Unchanged” = 0 point
“Degraded” = -1 – -5 points
% of issues closed by the
deadline Major Incident Damaging Corporate
Reputation: -5 points (trigger item)
*RAROC = Risk-Adjusted Return on Capital 14

15. COSO Six Sigma CSR
COSO ERM-Inspired BSC Evolution
Board
Internal
Audit
Management
Total Risk Aggregation
(Vertical)
Corporate Risk
Management Lines
Reputational Risk
Business Risk
Risk Aggregation
Market Risk
by Risk Category
Credit Risk (Horizontal)
=
Operational Risk Corporate Risk KPIs
Operation Risk
IT Risk
Compliance
Info. Security
Acc. & Tax Risk
Operation & IT People Risk, etc.
15

16. COSO Six Sigma CSR
Strategy Execution Platform at Glance
【Customer Value Proposition】 【Corporate Social Responsibilities】
External CS Management Brand Image Voice of
Score Sat. Score Score Stakeholders
Initiative Business Line
Evaluation Sat. Score 【Compliance & Risk Management】
ISO9001/14001 Branch Office Regulatory Internal &
Audit & Exam. Sat. Score Exam. Results External Audit
CSA SOX 404
【Employee Engagement】 Score Test Results
Employee Opinion Poll Compliance Info. Security
Sat. Score Results Check List Test Results
Strategy Formulation Strategy Execution Strategy Review
（P） （D） （CA）
SWOT Analysis, 5 Forces Analysis, etc.
16

17. COSO Six Sigma CSR
Performance = Mindset x Execution Skill
High Performance
Financial targets
continuously rising high
Execution / Problem Solving Skill
Increasingly complex
customer needs and
business requirements
Strategic Mindset
Building Customer-Centric Strategic Mindset
Lack of Execution /
Problem Solving Skill Low
Performance 17

18. COSO Six Sigma CSR
BSC-Six Sigma Integration Benchmarking
Management Philosophy
JQA
(Leadership & Management Maturity)
Strategy Execution Management
BSC
(Objective Setting & Performance Evaluation)
Initiative Execution Management Six Sigma
(Strategy Execution & Problem Solving)
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JQA = Japan Quality Award

19. COSO Six Sigma CSR
BSC-Six Sigma Integration Benchmarking
JQA BSC Six Sigma
Useful for management Useful for strategic Useful customer-centric
quality assessment objective setting / strategic execution and
prioritization & cascading problem solving
Standardized technique.
management quality Useful for performance
assessment methodology measurement, evaluation Promote management
and linkage to reward by fact (data-driven)
programs
Not useful for Not a management Not suitable for
prioritizing objectives / quality assessment tool prioritization of strategic
initiatives objectives / initiatives
Not a strategy
Not useful for execution or problem Not a performance
performance solving technique itself evaluation and
measurement and compensation tool
evaluation
19

20. COSO Six Sigma CSR
BSC-Six Sigma Integration Concept
Market Segmentation / Customer-Base Selection
Business Strategy
Customer Value Proposition Selection
Survey (Benchmarking
Customer Focus
& Prioritization) Analyze
“Voices of customers”
Voices customers
Customer ( VOC)
KPI Setting
Translate to
Behavioral Change
concrete action
Target Setting &
Action Planning
Performance Evaluation
Leading to
& Compensation
financial results
Business Performance Revenue growth
20

21. COSO Six Sigma CSR
Deepen Customer Understanding
Customer Satisfaction Level
Customer Satisfaction Factor
Customer Delight Factor
• Important service quality to
• Key differentiator often associated provide but competitors can also
with innovative ideas. Essential to provide similar type / level of
foster customer loyalty and service.
advocacy
• Consequently, competition on
• Must exceed customer this basis will soon face a zero-
expectations sum game situation, particularly
in a saturated market.
• Generally used for growth
strategies.
Service Level
Customer Dissatisfaction Factor
• Used to be a differentiator but
turned out to be a minimum
requirement today.
• Customers will feel “being
satisfied” but will easily leave
if this basic requirement is not
properly met. 21

22. COSO Six Sigma CSR
Translate VoCs to Metrics and Actions
KPIs Benchmarking Strategic Priority
# of security-related customer complaints
Singificance to Customers (1, 3, 5, 7, 9)
Customer Significance x Upgrade Ratio
Time spent to write an application
# of teller counter per customer
Average transaction cycle time
Normalized Weight
# of branch offices
Upgrade Ratio
Target Quality
Competitor C
Competitor D
Competitor A
Competitor B
Competitor E
BTMU
Y = f(x)
Customer Requirements (VOC)
"I want convenient location." 9 9 3 9 7 1 5 1 5 167% 15.0 31%
"I do not want to wait in line." 5 9 1 9 7 5 3 9 1 1 7 100% 5.0 10%
"I want a simplier application form." 3 9 7 9 1 1 5 3 9 129% 3.9 8%
"I want quick transaction processing." 7 3 3 3 9 5 9 7 1 3 1 9 180% 12.6 26%
"I want high security." 7 9 3 9 7 5 1 1 5 167% 11.7 24%
KPI Prioritization 102 66 53 108 63
Normalized weight of significance to customers 100% 26% 17% 14% 28% 16%
Legend Survey-Based Score Conversion
9 = "Strongly related" 1st place = 9
3 = "Related" 2nd place = 7
1 = "Weakly related" 3rd place = 5
0 = "Not related" 4th place = 3
5th place or below = 1
22