Changes in Economic Conditions
Risks
Since our group is mainly engaged in the restaurant business in Japan, our group's business, performance, and financial position may be affected by fluctuations in the Japanese economy and the effects of government economic policies. In particular, a slump in personal consumption due to a lack of wage increases accompanying the recent sharp rise in prices, as well as increases in raw material prices, labor costs, and utility costs, could affect the Group's business, performance, and financial position.
Response to Risks
In response to these risks, the Group constantly monitors changes in economic policies, market conditions, and consumption trends, and reflects them in various sales policies, investment policies, and productivity improvement measures in order to maintain a stable profit structure that can respond to changes in the environment.
Changes in the Domestic Market Environment and Competition with Other Companies
Risks
In the restaurant market, the Group competes with companies operating restaurant and izakaya (Japanese style pub) chains and fast food chains, as well as individual and family-run restaurants. In addition, we may also compete with companies operating convenience stores and supermarkets that sell prepared foods and boxed lunches in the home meal and lunch box markets. These competitors may compete with us in terms of food prices, taste and quality, menu variety, store location, facility attractiveness, atmosphere and comfort, delivery and takeout services, staff skills, social reputation of the restaurant brand, benefits such as point cards, and tax treatment such as the application of reduced tax rates. If we are unable to gain an advantage over these competitors, our group's business, performance, and financial position may be affected.
In addition, the number of restaurant outlets of companies operating restaurant chains in Japan currently accounts for a relatively low percentage of the total number of restaurant outlets in the country compared to the number of outlets of companies operating fast food and coffee shop chains as a percentage of the total number of outlets, and there is no guarantee that restaurant chains, including our group, while we recognize that there is room for further growth of restaurant chains, there is no guarantee that restaurant chains will continue to grow in Japan.
Following the outbreak of the COVID-19, consumers' motivations for selecting eating out opportunities have changed, and the competitive environment has changed, with demand for delivery and takeout services becoming more regular. The Group is implementing and expanding measures such as the expansion of delivery and take-out services in response to this environment, but if the delivery market in Japan expands and delivery services become more widespread in the future, restaurants that were not previously competitors will increasingly enter the delivery market and competition in the delivery market may intensify, and that the Group's dependence on delivery services provided by third parties will increase, making it more susceptible to the conditions and quality of such services.
Response to Risks
In response to these risks, the Group is continuously working to develop and improve affordable and tasty menu items by utilizing its vertically integrated platform and mass merchandising system. In addition, the Group is optimizing its brand/store portfolio and store network by introducing a new management method called “composite business,” in which a single store offers products from multiple brands. The Group has also launched e-commerce operations through online channels and retail sales businesses in supermarkets and other outlets.
Furthermore, in the area of delivery services, the Group is implementing a system that leverages both its in-house delivery network and third-party delivery services to consistently maintain competitive service quality and pricing.
Changing Consumer Preferences
Risks
Sales in the Group's restaurant business are strongly influenced by consumer preferences and social trends related to food and beverage.
In particular, the experience of the COVID-19 epidemic has reduced consumers' opportunities and willingness to eat out, and while eating out has become a more special occasion than in the past, consumers' preferences have changed as they seek more satisfying dining opportunities and demand for specialty restaurants and popularity of high quality, high unit price menus has increased. In this environment, consumers' preferences are changing as they seek more satisfying dining opportunities.
If the Group is unable to accurately grasp or predict consumer preferences, or if measures such as brand conversions and surveys of planned store opening areas are not successful, the Group's business, performance, and financial position may be affected.
In particular, Gusto, the main brand in our group's restaurant business, has the largest number of restaurants in our group and accounts for a large percentage of our group's sales and profits, If the concept of Gusto's menu, price range, and service is not supported by customers, the Group's business, performance, and financial position may be affected.
Response to Risks
In response to these risks, the Group constantly strives to understand consumer needs and customer opinions of its menu, and reflects these in brand development, store opening policies, and menu development. We also strive to respond quickly to changes in lifestyles and preferences by analyzing big data such as customer POS data and mobile app coupon data.
Food Accidents
Risks
Ensuring food safety is of the utmost importance in our Group’s core businesses—namely, the restaurant business and the e-commerce and external sales businesses. Despite the implementation of measures to prevent food-related incidents, should a serious food safety issue such as a mass food poisoning event occur due to our Group’s operations, it could not only cause significant inconvenience to our customers, but could also lead to administrative penalties, a deterioration of our brand image and social credibility, a decline in sales, response-related costs, and potential civil litigation.
Particularly in the case of delivery and takeout services, there is an increased risk of food accidents compared to in-store dining, as food may be handled inappropriately under conditions beyond the Group’s control—such as delays in consumption or delivery after the food has been provided by the Group to consumers or third-party delivery services.
In addition, with the expansion of our e-commerce and external sales business, there is a possibility of food-related incidents occurring in connection with products sold by our Group. This may include product recalls due to actual or potential violations of the Food Sanitation Act or the Food Labeling Act.
Moreover, even if a food safety incident were to occur at a competitor, our Group’s business performance could be adversely affected. This could result from a general decline in the reputation and credibility of the restaurant industry, reduced consumer willingness to dine out, disposal of stock containing the problematic ingredient, or a temporary surge in the market price of such ingredients due to industry-wide disposal and restocking efforts.
Response to Risks
To prevent food accidents, we have obtained ISO 22000 certification for our purchasing, menu development, internal audit, and quality control departments, as well as all of our central kitchens. Based on assessments of foreseeable food safety risks, we have established and operate under strict hygiene management rules to ensure the safety and peace of mind of our customers.
For example, for products manufactured at our central kitchens, we verify the appropriateness of processing conditions, monitor critical control points during production, and only ship products that fully meet our established standards with no deviations.
In terms of ingredient procurement, we have set rigorous supplier standards. In accordance with our procurement management regulations, we inspect local factories and production processes and source ingredients only from suppliers that meet our criteria.
At the store level, we apply hygiene management methods based on the HACCP concept to maintain consistent product quality. As part of our hygiene compliance monitoring system—including general practices such as handwashing and employee health management—our dedicated Quality Control Group conducts unannounced inspections from the production site to the store. Any risks identified are addressed in collaboration with relevant departments.
As a general rule, outsourced products not manufactured in-house are consolidated at our own central kitchens, which also function as logistics hubs. These kitchens conduct regular spot checks not only during production or procurement but also during distribution, to ensure that only products meeting our standards enter circulation.
Bacterial tests, as well as inspections for pesticide residues, allergens, and other potential hazards, are conducted in our in-house laboratories. This system allows us to make swift decisions and take appropriate action. Approximately 100,000 samples are tested annually.
Difficulty in Procuring Food Materials and Indirect Materials and Price Hikes
Risks
The Group's business performance may be affected by an increase in the cost of sales ratio in the event of instability in the procurement of raw materials and other materials or price hikes due to the following factors: inflation at home or abroad, outbreaks of epidemics (hog cholera, avian influenza, etc.), unseasonable weather, extreme weather conditions, natural disasters, outbreaks of infectious diseases, energy shortages, logistical obstacles, the imposition of restrictive import measures by governments, international fishing restrictions, supply disruptions due to bankruptcy of suppliers or accidents and disasters, restrictions on shipments and reputational damage due to food hygiene problems or radioactive contamination, fluctuations in foreign exchange and crude oil prices, tax hikes, and geopolitical risks and political turmoil such as terrorism and riots.
In particular, since our Group sources food ingredients from various regions around the world, although currently only a portion of these transactions are conducted in foreign currencies, the costs and prices of such ingredients are directly or indirectly affected by fluctuations in foreign exchange rates. At present, our Group does not engage in hedging to mitigate foreign exchange risks. Therefore, fluctuations in foreign exchange rates may adversely affect our Group’s business operations, financial results, and financial condition.
Response to Risks
Group is taking countermeasures against these risks through procurement strategies such as diversification of the origin and production area of each food ingredient and indirect material, utilization of long-term contracts with suppliers, strengthening of relationships, and development and diversification of new suppliers.
Labor Management Risks
Risks
The Group's full-time employees, contract employees, and many part-time and part-time employees are engaged in operations in stores, factories, distribution facilities, and delivery services. The maximum overtime work restrictions introduced sequentially from April 2019 onward by large companies in relation to the reform of work styles, the mandatory use of annual paid leave and the revision of special clauses in 36 agreements that came into effect in April 2019, and the legal provisions on equal and balanced treatment to realize equal pay for equal work that were introduced in April 2020. In addition, the national weighted average of minimum wages by region after the revision in FY2023 will exceed 1,000 yen for the first time in history, and there are significant changes in laws, regulations, and the labor environment surrounding both fixed-term and permanent employees. These changes in labor-related laws and regulations and the labor environment may make it extremely difficult for our group to maintain the employment of talented employees, or may cause our group's labor costs to rise. In addition, in the event of a violation of labor-related laws and regulations by our group, our group's business, performance, financial condition, brand image, and social credibility may be affected due to orders from regulatory authorities to improve our group's operations or claims from employees.
Response to Risks
To address these risks, the Group provides labor data to management on a weekly basis and takes measures to prevent violations of labor-related laws and regulations. In addition, we maintain a system in which the current situation is checked and countermeasures are discussed and immediately implemented at monthly labor improvement meetings attended by directors, the executive officer in charge of human resources, and the general manager of the sales division. In addition, we are striving to maintain employment by implementing specific measures such as curbing long working hours by shortening business hours and systematically taking paid leave.
Securing Human Resources
Risks
Group employs a large number of part-time and part-time employees to work in its stores, merchandising centers and delivery services. Although there were reports that some restaurants were unable to operate due to staff shortages after the lifting of the state of emergency declaration in September 2021, we had not experienced any such cases. However, if the recruitment environment deteriorates in the future due to higher wages, increased recruiting costs, or difficulty in securing employees due to increased domestic labor demand, the Group may not be able to secure the number of employees it needs at an appropriate cost, which may result in an increase in labor costs to secure the required number of employees, revision of store opening plans, or temporary closure of some stores. This could affect the Group's business, performance, and financial position.
Response to Risks
In response to these risks, Group positions "human resources" as its most important management resource, and is actively working to improve business efficiency and productivity through DX promotion, in addition to various measures to improve employee satisfaction, such as reducing late-night business hours, shortening business hours during the year-end and New Year holidays, curbing long working hours, ensuring the use of paid vacations, promoting health management, and providing a comfortable workplace.
Lease of Real Estate
Risks
Most of the Group's stores lease land and buildings from third parties, and deposits and guarantees are paid to the lessor. Although we conduct credit checks and credit management for lessors, in the event of unexpected bankruptcy, etc. of a lessor, the relevant security deposits and guarantee money may become irrecoverable, which may affect our group's business performance.
In addition, the Group's business, performance, and financial position could be affected by the possibility of store closures or an increase in costs associated with real estate leases in the event that negotiations are unsuccessful at the time of renewal of leases for existing stores.
Response to Risks
To mitigate these risks, our group’s dedicated in-house department proactively begins negotiations for lease renewals well in advance of the usual timeline (six months prior to contract expiration) for lease agreements that may potentially lead to store closures, such as fixed-term leases and leases with demolition clauses. By securing longer lease terms and conducting thorough negotiations, we work to prevent store closures.
Additionally, to address the risk of increased rental costs, we negotiate rent reductions for stores where the rent is above the market rate, and for stores with below-market rent, we aim to extend the lease term as much as possible, thereby mitigating the associated risks.
Climate Change
Risks
With the increasing trend on a global scale to rationalize energy use and to curb climate change such as laws and regulations to combat global warming, we recognize that climate change is one of the key risks affecting the sustainability of our Group's business. Transition risks related to climate change (e.g., the risk that procurement and energy costs will increase due to the introduction of carbon taxes, higher electricity prices, and other environmental regulations to combat global warming; the risk that the Group's brand image and social credibility will be damaged because the Company is perceived as not environmentally conscious) and physical risks (i.e., acute risks such as plant and logistics outages and store closures due to typhoons, floods, and storm surges, and chronic risks such as a decline in food quality and price hikes due to increases in average temperatures and changes in weather patterns) may affect the Group's business performance.
Response to Risks
In response to the impact of the introduction of the carbon tax, the Group is reducing energy use, promoting the use of renewable energy, and developing environmentally friendly stores. In addition, as a response to the impact of changes in electricity prices, the Group is working to curb electricity consumption in a manner appropriate to each location (stores, central kitchens, and headquarters). In addition, to cope with the impact of natural disasters such as floods and storm surges, we have established and are operating an emergency communication system by utilizing an all-employee safety confirmation system, an emergency situation e-mail sharing system, and a disaster portal site. In addition, some merchandising centers and offices are equipped with mobile power generators and other countermeasures.
The Group deliberates and reviews these risks and countermeasures as appropriate, based on a promotion system led by the Group Sustainability Committee. The contents of such discussions and reviews are reported to the Board of Directors as necessary.
Infectious Diseases
Risks
Demand in the restaurant market may fluctuate as consumers' opportunities to eat out and their willingness to eat out decrease due to outbreaks of infectious diseases such as the COVID-19. In addition, outbreaks of infectious diseases may result in restrictions on restaurant operations due to requests from government agencies.
A decrease in the number of customers visiting our stores due to this, or a prolonged period of such a decrease, could affect our Group's business, performance, and financial condition . In addition, negative rumors about the possibility of infection at our group's stores may damage our group's brand image and social credibility, which may affect our group's business, performance, and financial position.
Response to Risks
In response to these risks, the Group recognizes that its restaurants are "part of the lifeline for the local community," and has established a system and business continuity plan to ensure that it will contribute to the maintenance of social functions by continuing operations while avoiding confusion caused by disorderly responses to infectious diseases and taking thorough measures to prevent infection and the spread thereof, placing the safety of customers and employees as our top priority.
In response to the COVID-19, we established a group-wide task force and, in accordance with government and industry guidelines, took thorough measures to prevent contact infection and droplet infection, placing the safety of customers and employees first. In addition, we implemented swift and flexible measures to provide products and services in response to the changing lifestyles of the Corona disaster, expand delivery and takeout services, realize a store portfolio that leverages the strengths of our multi-brands, and improve productivity by promoting DX.
Reliance on IT (Information Systems)
Risks
The Group relies on its information systems for restaurant operations and business, including food procurement, delivery, food processing, store operations, and orders received from inside and outside the restaurants. In the event of various failures in the Group's information systems due to program malfunctions, computer viruses, and external cyber attacks, the efficient operation of the restaurants and timely provision of food products to consumers could be disrupted, important data could be lost, or response costs could be incurred. This could affect the Group's business, performance, financial position, brand image, and public trust.
Response to Risks
In response to these risks, the Group has implemented security measures as well as redundancy in its systems to ensure the stable operation of various systems. In addition, we have established a specialized department within the company to prevent external attacks and respond promptly to various failures in order to reduce risks.
Internal Control over Financial Reporting
Risks
The Group considers the establishment and operation of internal control over the reliability of financial reporting as one of our important management issues. Although the entire Group is continuously working to inspect and improve the management system, we cannot deny the possibility that significant deficiencies may be discovered in the Group's financial reporting. In addition, there is no guarantee that we will always be able to establish and operate effective internal controls in the future. Furthermore, due to the inherent limitations inherent in internal control, if the Group's internal control over financial reporting does not function effectively in the future, or if material deficiencies are found in internal control over financial reporting, the reliability of the Group's financial reporting may be affected.
Response to Risks
In response to these risks, our group will maintain an awareness of accounting compliance and communicate more deeply with internal and external parties, including audit firms, in order to enhance the development and operation of appropriate internal controls.
Large Borrowings and Violation of Financial Covenants
Risks
The Group borrows heavily from financial institutions. The Group's existing borrowings may limit new borrowings and investments, make it vulnerable to downturns in the economy, and make it less competitive than competitors with higher capital ratios than the Group.
Among the Group's borrowings, those under syndicated loan agreements and commitment line agreements in the same form are subject to financial covenants. If the Group violates these covenants, it will lose the benefit of time under the agreements if the lender demands it, and it will be necessary to immediately secure funds to repay the debt, which may affect the financial position and cash flow of the Group. If the Group is unable to secure such funds, it is anticipated that it will also lose the benefit of time on its other borrowings, which may have a negative impact on the survival of the Group.
Response to Risks
In response to these risks, the Group seeks to stabilize its finances by discussing with financial institutions the possibility of violating financial covenants and obtaining waver agreements (agreements whereby financial institutions waive contractual rights that would become exercisable if the Group violates a financial covenant) in advance. The Company is working to stabilize its finances by obtaining a prior waiver agreement (an agreement by which a financial institution waives its contractual rights, etc., exercisable due to a breach of the Group's financial covenants). In FY2020, the Group was in breach of financial covenants at the end of each quarter from the second quarter onward due to the impact of the new coronavirus infection, but responded by obtaining a waiver agreement from each financial institution to the effect that it would not make a claim for forfeiture of the benefit of time. The Company also discussed the financial covenants with each financial institution based on the income and expenditure plan considering the impact of the new coronavirus infection on the business, and revised the covenants on February 12, 2021 and February 13, 2023.
Application of Impairment Accounting
Risks
The Group currently conducts valuations of its store assets based on assumptions of performance recovery that are considered reasonable at this time. However, if events occur that significantly impact the recovery period, inflation outlook, or other assumptions, impairment losses on store assets may arise, which could affect the Group's performance.
As of December 31, 2024, the Group had ¥157,636 million of goodwill recorded in the consolidated statement of financial position. The breakdown of key brands is as follows: Gusto (¥72,954 million), Sukesan (¥16,518 million), Bamiyan (¥16,186 million), and Jonathan's (¥12,822 million). Similar to store assets, if events occur that significantly affect the assumptions, impairment losses on goodwill may arise, which could impact the Group’s financial results.
Goodwill is amortized over a 20-year period in the individual financial statements, with the balance as of December 31, 2024, amounting to ¥51,706 million. Additionally, as of December 31, 2024, the Group had ¥10,358 million of trademark rights recorded in the statement of financial position, of which ¥10,240 million relates to the acquisition of Sukesan. Similar to store assets and goodwill, if significant events occur that impact assumptions, impairment losses may arise, potentially affecting the Group’s performance.
Response to Risks
In response to these risks, the Company has strengthened its earnings management for its businesses and stores, formulated a medium-term plan, and is working to strengthen monitoring not only of the progress of single-year plans, but also of the progress of medium-term plans.
Natural Disasters
Risks
Since the Group has stores and merchandising centers located throughout Japan, in the event of a major earthquake, windstorm, flood, tsunami, heavy snowfall, or pandemic of an infectious disease, the Group's head office, stores, merchandising centers, and other buildings, machinery, and equipment could be damaged, or store operations, operation of merchandising centers, logistics of raw materials or attendance of employees could be disrupted.
In addition, if such natural disasters cause restrictions or stoppages in the supply of lifelines (water, electricity, and gas), interruptions in distribution networks, stoppages in delivery services due to difficulties in procuring gasoline and other supplies, damage to client plants and warehouses, shortages of energy and supplies, large-scale employee shortages, or disruptions in public transportation, the Group's operations, business performance, and financial position could be affected.
In particular, since the Group's stores and merchandising centers are concentrated in the Tokyo metropolitan area, a large-scale disaster in the Tokyo metropolitan area could have a negative impact on the Group's business, performance, and financial position.
In addition, even if it does not lead to a natural disaster, if unseasonable weather occurs, demand in the restaurant market, including our Group's, may be affected by a decrease in consumers' opportunities and willingness to eat out.
Response to Risks
In response to these risks, the Group has established a Disaster Response Headquarters in accordance with the Group Emergency Response Regulations, and has put in place a system to respond promptly based on the Business Continuity Plan (BCP), centered on the Disaster Response Headquarters.
Intellectual Property Rights
Risks
The Group believes that the logos of Gusto, Bamiyan, Syabu-Yo, Jonathan's, and other restaurants operated by the Group, as well as trademark rights related to menus such as "Gusto Cheese in Hamburger Steak" are very important for brand image and marketing purposes. The Group considers these trademarks to be very important in terms of brand image and marketing. In order to protect such trademarks, the Group makes every effort to obtain trademark rights in appropriate countries and regions, but there is a possibility that sufficient trademark rights have not been obtained in some countries and regions.
In addition, in order to protect its intellectual property rights, our group may have to file a lawsuit against a third party who is misusing our group's trademarks. However, there is a possibility that we may not be able to detect a third party who is misusing our group's trademarks in a timely manner, or that our claims may not be fully recognized in a lawsuit filed by us, in which case our business, brand image, and public trust may be affected.
Response to Risks
In response to these risks, the Group has a dedicated internal department that appropriately manages and operates its trademarks and other trademarks. In addition to these risk management measures, the Group also takes appropriate measures to protect its proprietary business information, including recipe information for its menu items, information on menu prices, and store operation know-how, as well as technical information, including technology and data, in accordance with the characteristics of such information, including management that satisfies the requirements for protection of know-how and data under the Unfair Competition Prevention Law. We protect such information appropriately according to its characteristics.
Damage to Public Trust due to Harmful Rumors
Risks
In the event of negative publicity or evaluation of our Group's brand image and social credibility, such as inappropriate postings or publication of images related to our Group or its related persons on the Internet, etc., our Group's brand image and social credibility may be damaged, regardless of the truth or falsity of the content, this may affect our group's business, performance, and financial position.
In addition, even a negative reputation or evaluation regarding our group's competitors, if it were to cause a decline in the social reputation or reputation of the restaurant market as a whole, our group's business, performance, brand image, and social credibility could be affected.
Response to Risks
In response to these risks, the Group works with outside professional consulting firms to detect signs of danger at an early stage, while at the same time taking prompt and appropriate action when inappropriate postings are confirmed on the Internet.
Leakage of Personal Information
Risks
The Group retains the personal information of many customers in the operation of its mobile apps, delivery business, takeout business, and payment settlement. The Group pays utmost attention to the protection of users' privacy and personal information, and strives to comply with relevant laws and regulations, and manages information appropriately. However, it is difficult to completely eliminate the possibility of leakage or misuse of information outside the Group due to unauthorized access, or unintentional violation of laws and regulations. In the event of leakage of such personal information outside the Group or violation of laws and regulations, the Group's brand image and social credibility may be affected, and the Group's business, performance, and financial position may be affected due to response costs, disciplinary actions by the authorities, or lawsuits filed by customers.
Response to Risks
To counter these risks, the Group has implemented security measures to prepare for external system attacks, including the establishment of a state-of-the-art security monitoring center (SOC) that operates and monitors the system 24 hours a day, 365 days a year, the installation of firewalls, IDS/IPS, and WAFs, and the installation of anti-virus software. In addition to reducing risks through preventive measures taken by specialized in-house departments, the Group has established a management system for information security, led by the Information Security Committee. In addition, various information security-related regulations detail the various responses to be taken in the event of a security incident, and measures are taken to limit the impact of an incident.
Laws and Regulations
Risks
The Group's business is restricted by various laws and regulations, including the Food Sanitation Law, Labor Standards Law, Food Labeling Law, and Act Against Unjustifiable Premiums and Misleading Representations. Future changes in social conditions and other factors may result in revisions of various laws and regulations, the enactment of new laws and regulations, changes in the interpretation of laws and regulations, and the expansion of the scope of regulations, which may restrict the business activities of our group. In addition, the Group may be subject to administrative penalties from regulatory authorities or lawsuits from third parties, should violations of laws and regulations or misconduct by the Group's officers and employees come to light. If these risks materialize, the Group's business, performance, financial position, brand image, and social credibility may be affected
Response to Risks
In response to these risks, the Group participates in various industry associations to obtain information, and has established a system to monitor and gather information on laws and regulations related to the Group's business through experts, business partners, and the websites of government ministries and agencies. Whenever laws or regulations are revised, the divisions in charge collaborate to ensure that all employees are informed of and comply with the revised laws and regulations.
In addition, the Group has established a Compliance Charter and Code of Conduct to ensure that all activities and actions are conducted in accordance with laws, regulations, and social ethics, and has set up contact points inside and outside the Group for consultation and reporting related to compliance, in an effort to detect violations of laws and regulations at an early stage. In addition, the Company strives to strengthen and thoroughly implement anti-fraud measures, including compliance education, and to constantly review and improve such measures, as well as to identify potential risks that could lead to dysfunctional business processes.
In addition, we have formulated an "Anti-Bribery Policy" regarding inappropriate treatment of foreign public officials, and have also developed a response to the Unfair Competition Prevention Law.
Human Rights Issues
Risks
If human rights violations are committed by the Group or its business partners, or if human rights violations in the Group's supply chain are discovered, the Group's performance and financial position could be affected due to a decline in trust in the Group among customers and business partners. This could have a negative impact on the Group's performance and financial position.
Response to Risks
As a response to these risks, in February 2023, the Group formulated the "Skylark Group Human Rights Policy," which states that the Group understands and supports the principles and standards to be observed in relation to human rights, including the UN Guiding Principles on Business and Human Rights, the International Bill of Human Rights (Universal Declaration of Human Rights and International Covenants on Human Rights) and Convention on the Rights of the Child, and the International Labor Organization Declaration on Fundamental Principles and Rights at Work.
In addition, the Group is committed to preventing human rights violations throughout its supply chain by implementing the Human Rights Due Diligence mechanism.
As part of its human rights due diligence, the Group has been listing human rights violation risks for all stakeholders, then evaluating them and identifying priority human rights violation risks to be addressed through the creation of risk maps, and has been taking concrete measures to address them since 2023.
In December 2023, we signed a statement of support for the United Nations Global Compact, a sustainability initiative advocated by the United Nations, and in compliance with the 10 principles in the four areas advocated by the organization ("protection of human rights," "elimination of unfair labor practices," "environmental responsibility," and "prevention of corruption"), we are promoting sustainability measures.
M＆A
Risks
The Group actively pursues M&A both domestically and internationally as part of its strategy for sustainable growth. However, despite thorough preliminary research and evaluation, there is a risk that the acquired business may not develop or operate as planned, or that the anticipated synergies may not materialize. In such cases, impairment losses on goodwill may occur, which could adversely affect the Group’s performance and financial position.
Response to Risks
In selecting M&A opportunities, the Group conducts detailed due diligence. We proceed with careful consideration of factors such as market trends, customer needs, the performance, financial condition, and market competitiveness of target companies, the alignment with the Group’s business portfolio, and the results of risk analyses associated with each M&A project.