Business Risk Factors
Of matters related to the business overview and financial information, etc., described on the securities report, we have identified the following items that could have a material impact on investment decisions.
Also, forward-looking statements herein are based on the Group’s judgment as of the end of the fiscal year under review.
In addition, we recognize no risk of significant issues, etc.
- Competitive environment
- New business development
- Potential impact of currency fluctuation on business performance
- Concentration of management resources
- Risks associated with overseas business development
- Risks associated with legal restraints and litigation
- Risks associated with the occurrence of disasters
- Risks related to information management
- Risks Associated with COVID-19
The digital device field in which the Group primarily operates is facing a decline of product prices due to the emergence of major companies and manufacturers from emerging nations as well as shortened product life cycles, despite the market size expanding along with the development of digital technologies and networks. Although the Group aims to create customer value through solutions, its business performance could be adversely affected by the fierce competitive environment, by factors such as a decline in sales and deterioration in earnings due to increased R&D expenses and promotion expenses.
New business development
Aiming for sustainable growth by flexibly changing its business structure responsive to social change, the Group has been continuously engaged in market research, R&D activities, and investment to develop new businesses. In our medium-term business plan for the three-year period starting in FY2021, we will work on creating new businesses with the aim of transforming our business portfolio. However, due to many uncertain factors in new businesses, there are possibilities of changes in market environments beyond our expectations, misreading of market needs, delays in research and development, emergence of leading alternative technologies, or failure in generating synergies expected from collaborations with partner companies in each new business. Launch of a new business may be impaired due to such various factors, and recovery of amounts invested may be delayed or impossible.
Potential impact of currency fluctuation on business performance
Overseas sales account for approximately 90% of consolidated net sales and as such, the business performance of the Group is affected by foreign currency exchange rate fluctuations.
We plan to transfer our mass production function from the Miyakoda Plant in Japan to the Thai plant by the end of FY2021, as a shift away from the existing two-site production system comprising our plants in Japan and Thailand. In conjunction, we will raise our overseas procurement ratio in order to further mitigate foreign exchange risk.
Concentration of management resources
Dependence on certain suppliers
Of materials, etc., procured to manufacture the Company’s products, there is a high dependency on certain suppliers. Difficulty in procuring materials, etc. from these suppliers for various reasons may adversely affect production of the Company’s products.
Concentration of production facilities
We will shift away from the existing two-site production system comprising the Miyakoda Plant in Hamamatsu city, Japan, and the Thai plant, by transferring the mass production function to the Thai plant by the end of FY2021. Meanwhile, prototyping, minimal volume production, pilot production prior to product launch, and some other functions will stay at the Miyakoda Plant so that we will remain prepared to continue production in case of an emergency where the Thai plant stops operation due to a disaster or political unrest. On the procurement front, we will work to diversify risk by using our Thai plant as a base for overseas procurement, in addition to sourcing in Japan.
Risks associated with overseas business development
The Group is engaged in overseas business mainly in the United States and Europe. For this reason, changes in legal restraints, etc., or invocation of unexpected regulations, may limit the business activities of the Company. In addition, occurrence of social or economic turmoil or natural disasters, etc., may adversely affect the business performance and financial standing of the Group. On the tax front, concerning transfer pricing taxation, etc., the business performance of the Group may be adversely affected depending on discrepancies in the interpretation of laws and regulations.
Risks associated with legal restraints and litigation
In the conduct of its business in Japan and overseas, the Group has established an internal control system and risk management system and works to comply with various laws and regulations. However, regardless of reason, the business activities of the Group may be judged to be in violation of laws and regulations, or there is a possibility that a lawsuit may be filed against the Group over issues related to product liability or intellectual property rights, etc. Depending on the development and result of the foregoing, the brand image, business performance and financial standing of the Group may be adversely affected.
Roland DG Brasil Ltd. ("DBR"), a consolidated subsidiary of the Company, has been investigated by the Brazilian tax authorities in connection with the import and sale of the Company's inkjet printer products, and has received a notice of additional tax due, including customs duties, for the said products. DBR objects to the findings of the authorities and has filed complaints against the decision in September 2018 and in November 2018, to assert its legitimacy.
Risks associated with the occurrence of disasters
The Group is engaged in production and sales activities in Japan and overseas. Should disasters such as earthquakes, floods, typhoons, fires, wars, and infectious diseases occur in these regions and cause damage to the Group or its business partners, this could interfere with the Group's business activities and affect its business performance and financial standing.
Risks related to information management
The Group has established Information Systems Management Regulations/Global Information Security Management Regulations, and is working to prevent information leakage and address system intrusion from the outside. However, should information system stoppages, information leakages or other issues occur due to unforeseen circumstances, this could affect the Group's business performance and financial standing.
Risks Associated with COVID-19
The rapid spread of COVID-19 worldwide is significantly affecting the business activities of the Group that is operating on a global scale. If a country or region in which the Group operates implements a lockdown or any other policy measures that limit economic activities to prevent the further spread of COVID-19, it could interfere with the Group's business activities and adversely affect its business performance and financial standing.
The Group has set up a COVID-19 Task Force in February 2020 and has since been practicing thorough safety and sanitation management in order to prevent the spread of infection, giving prime consideration to the health and safety of our customers and employees. In the meantime, we will step up efforts that would lead to new approaches of doing business in the world with and after COVID-19 with a view to ensuring business continuity, such as introducing remote working, staggered working hours, flextime, and other flexible work arrangements, proactively hosting online events, and increasing contact points with our customers using websites and social media.