Major risks that are related to what is stated primarily in the Business Overview and Financial Status chapters of the Securities Report, which management thinks could significantly affect the financial position, operating results and cash flows of the consolidated companies are as follows. Moreover, from the standpoint of disclosing information to investors, the Group proactively discloses information also about matters that do not necessarily fall under the category of business risks but may be regarded as important or useful for investors in making investment decisions or understanding the Group’s business activities.
The Group recognizes the possibility that these risk factors may materialize and has the policy to undertake measures to avert the occurrence of such risks and promptly take the necessary counter-measures if it should occur. It also considers that decisions to invest in shares of the Company’s stock should be made after careful deliberation of the contents of this section and what is described in its securities reports other than the contents of this section. Please also be aware that the risks listed below do not include all the risks related to shares of the Company’s stock.
Forward-looking statements contained in this report reflect the Company’s judgment as of December 20, 2021.
1. Business environment
- (1) Risks related to technological innovation
The Group provides various services using information technology (IT) to customers and end users, including local governments, hospitals, dispensing pharmacies and private companies. With the rapid progress in technological innovations creating great changes in the business environment, the management of the Group could be affected, if earnings cannot be secured due to a smaller-than anticipated number of users of the Group’s services because of obsolete services associated with a delay in the adoption of advanced technologies and difficulties in providing innovative services that meet user needs or adding new functions to existing services, if efficient development frameworks cannot be maintained due to higher-than-anticipated development costs for adopting new technologies in the Group’s services or if uncertain factors that are more severe than anticipated arise. - (2) Risks related to severe competition with competitors
The management of the Group could be affected if earnings from each line of services cannot be secured as anticipated because it fails to differentiate itself from competitors in the content, quality, price and other aspects of the services it offers or if fails to maintain its relationships with users of the Group’s services and suppliers due to the migration of its users to services offered by other companies and its failure to maintain cost competitiveness in an environment of fierce competition with competitors for clients or price competition, including free service. - (3) Risks in information networks
The Group engages in business using telecommunication lines, information systems, etc. Accordingly, the Group may be forced to suspend its business, and its business, business performance or social reputation could be seriously affected, if telecommunication lines, information systems, etc. become unavailable for a long period due to line disconnection caused by natural disasters, accidents, etc., or systems failure caused by a rapid and unexpectedly large increase in accesses, computer viruses or unauthorized access to computers, etc.
Moreover, the Group mainly uses Amazon Web Services (AWS) and Microsoft Azure as data centers for its cloud services. The business, business performance and financial situation or social reputation of the Group could be seriously affected, if its services are interrupted for many hours due to communication failure or other trouble and failure to build alternative means or if a malfunction that may affect the quality of the Group’s services occurs.
To respond to these risks specific to information networks, the Group enhances measures for information security, including backing up data regarding services and building measures against system trouble and unauthorized access.
- (4) Risks related to ensuring safety and soundness of the sites
As part of the services provided by the Group, a large number of unspecified users communicate with each other using messaging functions in the service. Accordingly, the management of the Group could be affected, if large-scale trouble occurs due to violation of terms of use, etc. and the Group is held liable for the trouble or suffers a deterioration in its reputation or image. - (5) Risks related to content business
The proportion of profits generated from the content business is extremely high in the Group. The business is based on a distribution license from content holders and is highly dependent on cellphone carriers because cellphone shops around the nation constitute the Group’s major sales channels. Accordingly, the business performance and financial situation of the Group could be affected, if maintaining its agreements with these parties becomes difficult due to changes in their business strategies, etc. - (6) Risks related to healthcare business
The Group is pursuing the healthcare business into the medium to long term, as it is expected to be an expanding, high-growth market in the future. The business performance and financial condition of the Group could be affected, if the business plan is not achieved due to unexpected changes, considering the fact that it is difficult to predict the impact of such changes on the business, if investments do not produce results as initially expected or if revenues that match upfront investments cannot be recorded in the future.
The main clients in the healthcare business are diversified in scope and include local governments, hospitals, dispensing pharmacies and health screening establishments. Although the Group uses special caution about various regulations imposed on these clients, the management of the Group could be affected, if there is a revision, abolition or enactment of laws and regulations or restrictions by the government or by trade organizations, etc.
2. Statutory regulations
- (1) Restrictions, laws, regulations, etc. related to the business
The business performance and financial condition of the Group could be affected, if the cost increases, in response to the revision, abolition or enactment of laws restrictions, regulations, etc. that are relevant to the Group’s business, and the Group is forced to change the service contents or increase expenses for managing and maintaining its services, or if the Group is restricted in its business development or is required to suspend its business. The restrictions, laws and regulations that may be relevant to the Group’s business include the Medical Care Act, the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices, the Payment Services Act, the Act on the Protection of Personal Information, the Consumer Contract Act, the Act on Specified Commercial Transactions, the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade, the Act against Unjustifiable Premiums and Misleading Representations, the Act against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors, the Unfair Competition Prevention Act and the Act on Regulation on Soliciting Children by Using Opposite Sex Introducing Service on Internet. - (2) Leakage of personal information
The Group takes thorough measures to protect personal information by building strict management frameworks for personal information it handles, securing information security, developing and improving rules, etc. regarding the handling of information and working to provide education, training and enlightenment to employees, trade partners and others. The business performance and financial condition of the Group could be affected, if a problem occurs due to leakage of personal information. - (3) Infringement of intellectual property rights
The Group’s business activities could be affected, if intellectual property rights held by the Group are illegally violated. Moreover, although the Group engages in its business by constantly taking care not to infringe the intellectual property rights of third parties, there is a possibility that the Group may inadvertently infringe the intellectual property rights of a third party. The business performance and financial condition of the Group could be affected, if the Group is subject to damages payment, etc. because a third party claims a damage or files a lawsuit to seek an injunction, etc.
3. Internal systems/structures
- (1) Dependence on specific persons
Toshihiro Maeta, President and Chief Executive Officer of the Company, plays the central role in creating new business models for the Company and important roles in promoting the business lines of the Company and the Group. Although the Group aims to build a management structure to avoid a heavy dependence on Mr. Maeta and works to foster and strengthen human resources, the business performance and financial condition of the Group could be affected, if Mr. Maeta cannot execute business operations for some reason. - (2) Retainment, fostering and securing of human resources
As described in “2. Business situation, 1. Management policies and environment, issues to be addressed, etc., (4) Issues to be addressed by the Company” in the Narrative Information of the Group in accordance with the Principles Regarding the Disclosure of Narrative Information proposed by the Disclosure Working Group of the Financial System Council , the Group aims to achieve a further expansion of its business and sustained growth by continuously working on initiatives to (i) improve development frameworks and enhance information security, (ii) enhance marketing capabilities, (iii) enhance designing capabilities and (iv) promote work style reform. The Group recognizes the importance, in the implementation of these initiatives, of retaining, fostering and securing talented human resources for the purpose of ensuring the predominance of the Group, the business performance and financial condition of the Group could be affected, if human resources cannot be sufficiently secured amidst the circumstances of shortage of labor and IT personnel in and outside Japan. - (3) Internal management system
The Group periodically reviews and improves internal systems with the aim of further enhancing corporate governance. Moreover, to secure the appropriateness of business operations and reliability of financial reports, it develops and manages systems to ensure the efficient function of internal control systems with respect to the above. However, the business performance and financial situation of the Group could be affected if, in its efforts to expand the business while responding to changes in the business environment, an event in which the Group lags behind the actual situation in improving internal systems arises and the Group cannot maintain appropriate business operation systems.
4. Other matters that could affect business management
- (1) Risks regarding new businesses, business affiliation, business acquisition, etc.
The Group recognizes that new business development, business affiliation with other companies, business acquisitions, etc. are important factors for sustained growth as these could generate various synergies. Accordingly, the Group makes a range of investments during the course of these initiatives and holds software, goodwill and other intangible assets, and financial assets and other assets, including shares of stock of other companies acquired as a result of business affiliation or the establishment of a company or a joint venture. Although the Group appropriately implements tests for any impairment loss regarding these assets, the business performance and financial situation of the Group could be affected, if the initially planned results cannot be achieved in time due to changes in the business environment, etc., if it determines that sufficient future economic benefits for recovering initial investments are not expected, or if there occurs an impairment loss, a loss on the sale of business associated with business restructuring, etc. and associated costs. Moreover, such judgment is greatly affected by the Group’s estimation and it is impossible to accurately predict the time of occurrence and the amount of impairment loss. - (2) Risks related to natural disasters or similar events
The business, business performance, financial condition and social reputation of the Group could be seriously affected, if there is a problem in the Company’s internal systems and service systems caused by unexpected system failures, unauthorized access or other factors, including earthquakes, typhoons, heavy rains or other natural disaster, fire, electricity failure, electricity shortage, terrorism, computer viruses and unauthorized access in computers from the outside, and the Group cannot safely and securely provide services to end users and others.