The Yamato Group believes that the following matters relating to implementation of Group business operations may have a significant impact on the decisions of investors. It should be noted that forward-looking statements in this document are based on information available as of November 14, 2018.
(1) Risk of High Dependency on Delivery Business for Operating Revenues
The Delivery Business represents approximately 80 percent of consolidated operating revenues of the Yamato Group in the fiscal year under review, and business performance in the Delivery Business has a greater impact than other businesses on the Yamato Groupís business performance. The Group will take measures for structural reform of the Delivery Business; however, if such measures fail to produce results, there could be an impact on the business performance of the Yamato Group.
(2) Risk of Difficulty in Securing Labor
Many of the businesses operated by the Yamato Group are labor-intensive businesses in which securing competent staff and allocating personnel to appropriate positions are essential. The Yamato Group will make group-wide efforts regarding work-style reforms and take steps to improve work environments and enhance employee retention. However, if labor supply and demand conditions tighten further, causing the Group to be unable to secure adequate human resources, this could affect the business performance of the Yamato Group. In addition, if there is a significant increase in employee-related costs due to changes in laws or regulations and systems or fluctuations in prices, etc., this could affect the business performance of the Yamato Group.
(3) Risk of Outflows of Business Know-How Resulting from Personnel Leaving the Group
The Yamato Group has accumulated various kinds of know-how, such as methods of developing new products and building networks, to differentiate its services from other companiesĀEservices. However, it is difficult to provide legal protection for most such accumulated know-how, and the Groupís know-how could flow outside the Group when personnel leave employment with the Group, and it may not be possible to effectively prevent a third party from providing similar services. In such an event, the business performance of the Yamato Group could be affected.
(4) Risk of Loss of Trust Due to Failure to Ensure Service Quality Control
The Yamato Group has built high social trust with customers through the provision of high quality services, which allowed the Group to secure competitive advantage. However, if a problem occurs such as deterioration of service quality, damage to or loss of packages entrusted to TA-Q-BIN, and so on caused by failure to ensure compliance with company rules, this could lead to a loss of social trust. The occurrence of such an incident could affect the business performance of the Yamato Group.
(5) Risk of Loss of Trust As a Result of a Major Traffic Accident
The Yamato Group uses vehicles on public roads in its business activities, mainly in the Delivery Business, and conducts a range of safety measures with utmost priority on protecting human life. However, if a major traffic accident involving the Group occurs, it could lead to the loss of social trust and affect the business performance of the Yamato Group. A business operator that caused a serious traffic accident will be ordered to cease the use of vehicles as a government sanction. In addition, if the Groupís offices are ordered to cease business or have business licenses revoked as penalties under the traffic violation points system leading to interruption or cessation of business, this could affect the business performance of the Yamato Group.
(6) Risk of Cyber-Attacks, etc.
The Yamato Group takes organizational and personnel measures as well as technological security measures to ensure multi-layered defense in anticipation of the increasing sophistication of cyber-attacks. However, if the Group is forced to partially shut down computer systems and cease business due to unforeseen cyber-attacks, such as a zero-day attack, this could affect the business performance of the Yamato Group.
(7) Risk of Breach of Customer Information
The Yamato Group handles large quantities of customer information. Vouchers for TA-Q-BIN, moving, and other services contain personal information of users. In addition, there are cases where sales are recognized based on delivery information from customers, such as sales processed through EDI (Electronic Data Interchange). In e-Business, the Group undertakes contract processing of various types of customer information and manages customer information. The Group also handles a wide variety of customer information in each business. Given this, the Yamato Group is required to and is working to maintain the confidentiality of customer information. However, in the event of a breach of customer information caused by a failure to thoroughly ensure information management, this will lead not only to a loss of social trust in the Yamato Group but also to demands for compensatory damages and the like. The occurrence of such an incident could affect the business performance of the Yamato Group.
(8) Risk of Legal Regulation
The Yamato Group operates a wide range of businesses, centered on the TA-Q-BIN Business, and is subject to restrictions by various laws and regulations in each business field. Although the Yamato Group is making efforts to ensure compliance management as a top-priority issue, the business performance of the Yamato Group could be affected if the Groupís business activities are restricted due to changes in laws and ordinances, etc., causing the Group to incur a decrease in operating revenues or an increase in costs to respond to restrictions and so on, and this could affect the business performance of the Yamato Group.
(9) Risk of Official Regulation Due to Environmental Issues
The Yamato Group uses a large number of vehicles in its business operations and voluntarily undertakes environmental measures, such as introducing low-emission vehicles and promoting eco-driving, in the face of growing environmental awareness in recent years. However, if unexpectedly strict environmental regulations are enacted, this could affect the business performance of the Yamato Group.
(10) Risk of Natural Disaster, Power Outages, etc.
The Yamato Groupís mainstay business is to transport packages using vehicles, and its business activities are conducted using equipment that requires a supply of electricity such as automatic package sorting equipment and computers for information management at base terminals where packages are sorted. All equipment undergoes accident prevention inspections and equipment inspections on a regular basis. However, if stagnation of the flow of packages or the like occurs due to unexpected major natural disaster or power outage, this could affect the business performance of the Yamato Group.
(11) Risk of International Factors
If the geographical regions where the Yamato Group or its main business partners operate are affected by international conflicts such as acts of terrorism and wars or infectious disease such as a new strain of influenza resulting in stagnation of the flow of packages and requiring evacuation of employees and others, this could affect the business performance of the Yamato Group. In addition, the Yamato Groupís mainstay business is to transport packages using vehicles, such as the Delivery Business, and therefore the continuous, stable, and adequate supply of diesel and other fuel is essential for its business operations. To this end, the Group is taking steps to reduce fuel use such as implementing modal shifts, introducing low-emission vehicles, and promoting pickup and delivery using hand-pushed trolleys. However, if the supply of fuel is restricted due to the influence of international events or other factors or if fuel prices increase, this could affect the business performance of the Yamato Group.
(12) Risk of Credit Exposure Management and Interest Rate Fluctuations
The Yamato Group engages in the shopping credit business in the Financial Business. There are concerns about increasing cost of credit exposure management if personal bankruptcies remain at high levels due to economic trends and other factors. The Group takes necessary measures to stabilize funding where necessary, but greater-than-anticipated, sharp increases in interest rates could affect the business performance of the Yamato Group.
(13) Risk of the Impact of Inappropriate Billing
Based on the factual investigation and causal analysis and recommendations regarding preventive measures by the internal investigation committee made up of external independent experts established in the Company following the occurrence of inappropriate billing for moving-related services for corporate clients by Yamato Home Convenience Co., Ltd. (YHC), a Group consolidated subsidiary, the Group will take drastic preventive steps, led by the Group Governance Project established in the Company and YHC organizations implementing business structural reforms. The Group will recheck compliance with the terms and conditions of all moving-related services provided by YHC, including services that YHC provides for individual customers, and temporarily suspend new orders for services for which such compliance is not confirmed until we complete the redesign of service products for which compliance of the terms and conditions can be assured.
Depending on the future progress regarding this incident, there will be an impact on sales activities such as order taking due to a loss of trust, which could affect the business performance of the Yamato Group.