Business Risks

The following are some of the major risks that management recognizes as having the potential to significantly affect the Kosaido Group’s consolidated financial position, operating results, and cash flows, among other matters related to the business and accounting conditions described in the Annual Securities Report.Any forward-looking statements in the text are based on judgments of the Group as of the end of the current consolidated fiscal year.

1. Price competition

Among the Group’s competitors, there are companies with substantial manufacturing and sales resources. This may affect our business performance due to intensified price competition caused by a sharp economic slowdown and resulting contraction in demand.

2. Market changes

Although the Group’s printing business maintains a certain level of demand, a major change in printing demand owing to the move toward a paperless society and other developments, as well as rapid changes in employment conditions and customer demand in the human resource service business, could affect the Group’s business performance.

3. Fluctuations in raw material costs

The Kosaido Group makes every effort to maintain prices and secure stable raw materials. However, some of these prices fluctuate depending on the market. If prices of those raw materials soar and cannot be covered by cost reductions elsewhere, or cannot be added to the sales price, the Group’s business performance may be affected.

4. Product quality

Although the Kosaido Group manufactures its products under rigorous quality controls, product defects caused by inadequacies in the manufacturing process may result in compensation for damages or loss of credibility, which may, in turn, affect the Group’s business performance.

5. Legal regulations

In the Kosaido Group’s funeral services business, since we operate crematoriums, we have a legal requirement to abide by the Law Regarding Graveyards, Burials and Others . If new legal regulations are established in the future, it may affect the Group’s business performance.

6. Information security

The Kosaido Group manages its own confidential information under a strict information security management system and takes all possible measures to manage confidential and personal information entrusted by its customers and other parties. However, in the event of leakage or misuse of information, the Group may fall into discredit which may, in turn, affect our business performance.

7. Impairment accounting

The Kosaido Group’s real estate, including land, and other inventory assets and tangible fixed assets, as well as intangible fixed assets such as goodwill, and other assets such as investment securities, may also have an impact on the Group’s business performance if impairment losses are required due to changes in the market or business environment.

8. Financial strength

The Kosaido Group raises a portion of its investments and capital expenditures primarily through loans from financial institutions and the issuance of corporate bonds, resulting in a high level of dependence on interest-bearing debt. As such, any future changes in the current level of interest rates may affect the Group’s business performance and financial position.

9. Impact from disasters

Although the Group implements fire prevention and earthquake-proofing measures for manufacturing facilities and other facilities, natural disasters such as earthquakes and typhoons, accidental disasters such as fires, and epidemics could affect the Group’s business performance, etc. The current outbreak of COVID-19 could have a significant impact on our financial situation and operating results.