Major Risk Factors

The global economy is slowing down due to the ongoing monetary tightening by major central banks in the U.S. and Europe against global inflation, including high energy prices and surging raw material prices accompanying the unstable international situation. The progress in the shift to e-commerce is also changing the competitive environment surrounding the Yamato Group, not only intensifying competition with logistics providers, but also making it more important to have strategic relationships with EC platforms that are converting to in-house logistics, as well as the need to be aware of start-ups that have the potential to change business practices through digital means. In such an environment, failure to respond to the changing and diversifying needs of consumers and the logistics needs of corporate customers who are restructuring their existing distribution structures could result in a decline in operating revenues and missed growth opportunities, which could affect the Yamato Group’s business results. In addition, if we do not work on corporate activities for the development of a sustainable society, we may face a decline in customer support, deterioration in relationships with the regional society, difficulty in securing talented human resources, and higher financing costs. This may affect the business results of the Yamato Group in the mid- to long-term.
In light of these risks, the Yamato Group is working to achieve sustainable growth by expanding the value it provides to the “end to end” supply chain to address the diversifying needs of customers and society.
In the expansion of corporate business area, we are working to provide value to the entire supply chain of our customers, such as by helping optimize logistics costs through balancing adjustment of inventories and reduction of lead time for delivery and transportation, in response to the growing demand for e-commerce and changes in the supply chains of corporate customers.
Furthermore, in the structural reform of network operations, we are establishing an e-commerce logistics network mainly in the urban areas in response to growing e-commerce demand. At the same time, we are working on the improvement in productivity of the entire logistics network as well as the optimization of operating costs by consolidating and increasing the size of TA-Q-BIN offices, which had been small and multi-store operations, redefining terminal functions, and promoting improvement in work operation efficiency using IT systems, among others.
In addition, while promoting our digital strategy, HR strategy and environmental strategy that support these business transformations, we strive to strengthen sustainable management, which serves as the foundation for initiatives to sustainably enhance corporate value, and to reinforce corporate governance.

Many of the businesses operated by the Yamato Group are labor-intensive, and it is essential for us to secure high-quality human resources as our workforce and to assign them to their positions appropriately. If the supply-and-demand for labor becomes even tighter due to a decline in Japan’s working population and it is not possible to secure sufficient human resources including transportation and delivery partners, or if costs significantly increase due to more intense competition over human resources, the Yamato Group’s business results may be affected.
In light of these risks, the Yamato Group is building an environment in which employees are motivated to work and can advance through an attractive personnel and evaluation system that contributes to the acquisition and retention of human resources, and promoting the re-hiring of employees who have reached retirement age and possess knowledge and expertise. It is also developing a workplace environment in which human rights and diversity are respected and employees can work with greater peace of mind, and working to strengthen cooperation with our transportation and delivery partners, including in terms of safety and quality.
Furthermore, we are working to optimize the allocation of management resources based on data analysis, optimize and standardize transportation processes including trunk lines, reduce inter-base transportation by consolidating and increasing the size of bases, and improve overall network productivity through operational reform, automation, and digitalization of work, while promoting business process reform (BPR) to standardize, computerize, and consolidate administrative and indirect operations.

The logistics industry in which the Yamato Group operates is undergoing various changes due to the evolution of technology, such as resource optimization through the utilization of AI, IoT, big data, and more, the automation of warehouse operations through the utilization of robotics, and reformation of trunk route transportation and last-mile delivery through the utilization of drones and automated driving. If the Yamato Group is unable to respond appropriately to the emergence of new business models expected in the short to mid-term, or if there is a misunderstanding of technological trends or inadequacies in the implementation method of cutting-edge technologies, the investment effect may not be achieved as expected, which may affect the Yamato Group’s business results.
In light of these risks, the Yamato Group is bringing together internal and external digital specialist personnel to promote the implementation of cutting-edge technologies. We are also striving to quickly detect technologies and business models that could become a threat to the Yamato Group through direct investment and CVC funds in the digital field, as well as to create new growth models through open innovation.

In addition to confidential business information, the Yamato Group also holds a great deal of personal and customer information through its logistics operations and commissioned information processing. If information were to be leaked externally or data were to be lost due to causes such as cyber-attacks or inadequate management, the business results of the Yamato Group may be affected due to damaged public trust, claims for damage compensation, and doubts about the digital strategy we are promoting. In addition, if the TA-Q-BIN system were to go down due to a cyber-attack, etc., and TA-Q-BIN deliveries were to be suspended nationwide, the Yamato Group’s business results could be affected by lost revenue opportunities, etc.
In light of these risks, the Yamato Group is engaged in organizational and personnel-based measures as well as multi-layered technical measures assuming more advanced and more sophisticated cyber-attacks. Security measures include 24 hours a day and 365 days a year monitoring against unauthorized access to the network and unauthorized entry into the facility. In addition, as a countermeasure against system outages due to broad-based disasters, we have decentralized data centers for critical systems and operate mutual backups. As a countermeasure against system breakdowns, we have maintenance contracts with manufacturers to deal with hardware degradation over time and potential bugs in their products, and we are constantly coordinating information on problems or defects.

Japan, which is the Yamato Group’s main market, is experiencing a decline in the total population as well as a variety of issues in regional lifestyles and regional economies. In depopulated and aging regions, declining delivery efficiency and a shortage of human resources for pickup and delivery have become apparent. In the future, the business results of the Yamato Group may be affected if problems such as the decline of the regional social infrastructure due to a shrinkage of the local economy become more serious, or if it becomes more difficult to maintain a logistics network that covers the entire country in fine detail from a mid- to long-term perspective due to the decreasing profitability in such regions.
In light of these risks, the Yamato Group is working to reinforce the existing network, such as by consolidating and increasing the size of its bases mainly in urban areas, reforming the working style of employees through subdividing and specializing job definitions, and appropriately allocating personnel in tandem with the reform, in order to improve productivity across its entire logistics network. Additionally, the offices in charge of regional management will take the lead in promoting initiatives to contribute to the sustainability of local communities by rebuilding supply chains as local infrastructure in cooperation with local stakeholders, including local governments.

The Yamato Group uses a large number of vehicles to carry out its business. If global environmental issues, including climate change, become more serious, and if greenhouse gas (GHG) emission regulations or reduction obligations are tightened, or if carbon taxes are raised, the Yamato Group’s business results may be affected due to increased costs for the introduction of low-carbon vehicles and facility renovations, etc. Also, with consumers becoming increasingly conscious of environmentally friendly consumption and with corporate customers’ demands to reduce GHG emissions throughout their supply chains, if we are unable to meet the expected low-carbon transportation, operating revenues may decrease due to a decline in customer support, which may affect the Yamato Group’s operating results among others. In addition, if the transition to a low-carbon society does not progress, the long-term effects could include frequent suspension of business activities due to damage to employees and facilities, road cutoffs, or power and fuel supply outages caused by more severe or more frequent natural disasters, which could affect the Yamato Group’s operating results.
In light of these risks, the Yamato Group has set a medium-term target of reducing GHG emissions by 48% by 2030 compared to the fiscal year ended March 31, 2021, and is promoting initiatives such as “introduction of 20,000 EVs,” “introduction of 810 solar power generation units,” and “increase in the use of electricity derived from renewable energy sources,” in order to achieve the long-term target of effectively zero GHG emissions (in-house emissions) by 2050. In addition, the entire Group is working to improve its resilience by strengthening its crisis management system in anticipation of various emergency situations caused by natural disasters. Specifically, we are conducting drills based on the business continuity plan (BCP), assessing the risk of flood damage to facilities, reallocating bases, and continuously reviewing manuals related to post-disaster response, suspension of pickup and delivery, maintenance work, etc. in preparation for unexpected disasters.

The Yamato Group has been implementing capital and business alliances and the like with overseas logistics companies in order to respond to the expansion of cross-border logistics with the goal of sustainable growth. However, if we are unable to achieve the expected results due to changes in the business environment or competition, or if unforeseen business problems occur, our business results may be affected.
In light of these risks, the Yamato Group makes decisions on investment projects after thoroughly examining the business model we should aim for based on the results of feasibility studies and other factors, and in light of the business feasibility determination rules, continues to conduct periodic monitoring after investment.

The Yamato Group promotes management that places the utmost priority on compliance. However, it may not be possible to completely avoid compliance risks in products and services, work and safety, and the entire supply chain, and if a situation that infringes on a law or regulation were to occur, the Yamato Group’s social trust and brand image could be damaged, and additional costs could be incurred in response to that occurrence. This may affect the business results of the Yamato Group.
In light of these risks, in order to improve the soundness of our Group management, the Yamato Group is striving to enhance our Group governance by appropriately operating our product management process based on our product management regulations, implementing philosophy training for employees, and working to quickly discover and appropriately respond to inappropriate cases through our whistle blower system and questionnaires for cooperating companies and partners.

The Yamato Group’s main business is the transportation of parcels by vehicle, and we operate our business assuming the safety and health of our employees, the maintenance of our vehicles and facilities, and the stable supply of fuel and electricity. In the event of an unexpected large-scale natural disaster, the Yamato Group’s business results could be affected by a shortage of human resources due to employees becoming victims, business stoppages due to damage or submersion of vehicles, information equipment, or facilities, power or water outages or shortages of fuel or supplies, incurring repair or replacement costs for vehicles or facilities, or a decrease in shipment volume due to customers becoming victims, from immediately after the disaster and over the medium to long term.
In light of these risks, the Yamato Group, as a corporate group responsible for social infrastructure, has formulated a business continuity plan (BCP) to ensure that we can continue to provide stable services even in unexpected situations. In addition, in light of our experience of the Great East Japan Earthquake that occurred in 2011 and other such disasters, we are working to strengthen the crisis management system throughout the Group to respond to a variety of hypothetical emergency situations. We then conduct BCP drills, assess the risk of flood damage to our facilities, and reallocate our bases, as well as continuously review manuals related to post-disaster response, suspension of pickup and delivery, maintenance work, etc., in preparation for unexpected disasters. In the event of an emergency, based on our basic BCP policy, which is centered on “placing the highest priority on human life,” “aiming for early restoration of the business of each Group company,” and “meeting the expectations of the local community as a social infrastructure,” we will establish an internal task force in accordance with our standards, respond in cooperation with the Group companies, and work to provide value to the affected areas and customers in response to their issues.

The Yamato Group conducts its business activities using vehicles on public roads, and if a serious traffic accident were to arise, the Yamato Group could suffer a drop in social trust, discontinuation of the use of its vehicles due to administrative punishment, discontinuation of business operations at its offices due to the violation point system, revocation of its business license, and other measures. This could result in business being disrupted or suspended. In addition, causing a serious occupational accident that impairs the occupational safety of employees and others could affect the business results of the Yamato Group.
In light of these risks, the Yamato Group places the utmost priority on respect for human life, and is working to promote transportation safety management, to formulate and comply with rules to ensure safety, to maintain facilities and systems, to provide safety education and raise awareness among employees, to implement periodic checks by the Audit Division on the status of compliance with laws and regulations in operations and maintenance management, and to ensure occupational safety.

Many of the businesses operated by the Yamato Group are labor-intensive, and it is essential for us to secure high-quality human resources as our workforce and to assign them to their positions appropriately. In the event of revisions to laws, regulations, systems related to labor, social insurance, or the like, the Yamato Group’s business results may be affected due to a significant increase in costs to comply with such revisions. In addition, the application of overtime caps to vehicle driving operations will begin in April 2024, which will reduce capacity for long-distance transportation in the transportation industry and increase the cost of outsourcing to transportation partners, which may affect the Yamato Group’s business results.
In light of these risks, the Yamato Group is working to promote the development of a working environment and HR system that appropriately complies with laws and regulations, as well as strengthen relationships with transportation and delivery partners and improve productivity by promoting digital transformation. In addition, we will expand the use of trailers, including the Super Full Trailer SF25, which contributes to more efficient long-distance transportation, promote modal shifts, and improve transportation efficiency based on data analysis, and toward building a sustainable logistics network, in addition to trucks, railroad, ferries, and cargo space under passenger aircraft floors, which have been responsible for long-distance transportation until now, we will begin operating dedicated cargo aircraft (freighters) as a new mode of transportation from April 2024.

If the regions in which the Yamato Group conducts its business activities or the regions in which its major clients conduct their business activities are affected by terrorism, war, or other international conflicts or trade disputes, the business results of the Yamato Group may be affected by stagnating logistics caused by disruptions in the supply chain or the like, as well as employee evacuations or other similar reasons. In addition, as the Yamato Group's main business is the transportation of parcels by vehicle, a constant, stable, and appropriate supply of fuel such as diesel oil is essential in order to carry out the business. If supply were to be restricted or fuel prices were to skyrocket due to international situations or the like, the business results of the Yamato Group may be affected.
In light of these risks, the Yamato Group has established an account management structure that faces corporate customers as “One Yamato,” including those overseas, and is promoting initiatives to expand the value it provides by combining a variety of transportation methods by land, sea, and air for the globally extending supply chains of its customers. In addition, we are promoting measures to reduce fuel use, such as improving efficiency of transportation and delivery based on data analysis, modal shifts, the introduction of more fuel-efficient vehicles, and the promotion of cart pickup and delivery, as well as optimizing pricing to customers in light of soaring fuel prices etc.

Many of the businesses operated by the Yamato Group are labor-intensive, and we operate our businesses assuming the safety and health of our employees. In the event of an unforeseen outbreak of an infectious disease, the business results of the Yamato Group may be affected due to a lack of human resources because of employee illness, costs involved in providing hygienic supplies, and increased difficulty in continuing business.
In light of these risks, in the event of an unforeseen large outbreak of an infectious disease, the Yamato Group will set up a liaison office for countermeasures, and will plan and promote countermeasures based on the infection situation within the Company and government measures. Then, to ensure that our customers can use TA-Q-BIN with peace of mind, we will pay utmost attention to employee hygiene management, as well as supporting parcel deliveries without face-to-face contact and taking measures to prevent infection when taking care of customers in person, and disseminating information through our website and other means, thereby ensuring the continuation of TA-Q-BIN and other logistics services with customer and employee safety as our top priority.

The Yamato Group acquires the necessary funding by utilizing Group funds as well as borrowing from financial institutions and issuing bonds while referring to our investment plans for business continuity and growth. The future economic situations of Japan and abroad may make it difficult to procure funding if the financial markets become dysfunctional or if financial institutions are selective in their lending, and interest expenses may increase due to rising interest rates.
In light of these risks, we will maintain and strengthen our financial soundness in terms of cash generation, cash and deposits held, equity ratio levels, and the like, as well as strive to appropriately diversify our funding sources and timing.