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

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. 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 will work to mitigate foreign exchange risk by utilizing the production base in Thailand and raising the overseas procurement ratio.

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 suppliers and production facilities in certain regions

Principle manufacturing facilities and the core management system of the Company are concentrated at the Miyakoda Factory in Hamamatsu City. The factory has adopted an earthquake-resistant structure and other measures against massive earthquakes. In addition, we are diversifying our bases for production and component procurement by utilizing the production base in Thailand to develop a business continuity structure in preparation for earthquakes and other disasters. However, at present, the majority of materials suppliers of the Company’s products are located in the area surrounding Hamamatsu City, and the Company’s headquarters is also located in Hamamatsu City. Therefore, disasters in this area, including a massive earthquake, may adversely affect not only the manufacturing of the Company’s products, but also its corporate activities.

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.
In addition, on January 30, 2007, Gerber Scientific International, Inc., headquartered in the Unites States, has filed a lawsuit against Roland DGA Corporation, a consolidated subsidiary of the Company, for the alleged infringement of its United States patent and to seek remedies including damage compensation (no precise amount specified) and injunction against the manufacture, sale, and sales promotion of products utilizing the patented technology in question, as well as a recall order of these products.
On April 9, 2010, in addition to Roland DGA Corporation, the Company has also been named as a co-defendant in the above lawsuit, which is still pending.