Business Risks and Other Risks
The main risks concerning Skylark Group's business operations, operating results and financial position, etc., which could have a significant impact on investment decisions made by investors are as follows. The forward-looking statements below in this document are judgments made by the Group as of the end of the fiscal year under review. The following are specific examples of risks that the Group anticipates in order to continue its business, but do not constitute an exhaustive list.
Investor Relations (IR) Business Risks
Emerging Risks
Emerging risks are defined as significant long-term (3-5 years or longer) new risks that could significantly affect the business of Skylark Group in the future due to changes in the external environment, as described below. The Group Sustainability Committee monitors these risks on a regular basis, and deliberates on and reviews, as appropriate, the establishment of a system that enables prompt implementation of appropriate countermeasures and the implementation of such countermeasures.
| Water risks |
Water shortages due to population growth and climate change are serious issues to the Group's business continuity. In particular, higher costs for procurement of key raw materials, a tarnished brand image, and restrictions on investment due to stricter regulations are direct consequences for the Group. Declining raw material yields drive up costs and weaken competitiveness. In addition, loss of brand image due to environmental issues at suppliers can lead to consumer disengagement and investor uncertainty. In addition, we recognize that tighter water use restrictions and wastewater regulations could limit production activities, increase costs, and deprive us of opportunities for new investment, which is one of the emerging risks that could affect the sustainability of our group's business.
To address these risks, we have set a 10% reduction in water withdrawal by 2030 and a 20% reduction by 2050 (compared to 2018 levels), and are raising employee awareness by installing water-saving fixtures in our stores, conducting water conservation activities with all employees working together, and publishing articles on water conservation in our company newsletter. For our suppliers, we are working to provide guidance based on CSR surveys based on our CSR guidelines.
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| Forest-related risks |
Internationally, illegal logging of forests is recognized as an important issue, and related laws and regulations are being strengthened. In this context, we recognize that one of the emerging risks that may affect the sustainability of the Group's business is the difficulty in procuring foodstuffs and the increased costs associated with forest protection, as well as the potential damage to our brand image if we mistakenly handle illegally harvested timber. To avoid or reduce the occurrence of risks, we have set the ratio of FSC/PEFC certified products as a materiality KPI to promote wood procurement from sustainable forests, and are promoting initiatives such as switching to FSC/PEFC certified products. |
| Air and soil contamination risks |
Stricter laws and regulations due to air and soil pollution are a serious risk to the sustainability of our restaurant business. For example, if contamination issues in the areas where key ingredients are produced make it difficult to procure certain ingredients, we will be forced to change our menu structure, leading to lower customer satisfaction and loss of brand image. Higher costs for procurement of alternative ingredients would lead to lower profit margins, and the loss of confidence in the supply chain as a whole could make it difficult to develop new business partners. Furthermore, if a plant of a major client were to shut down, the stable supply of food ingredients would be disrupted, which would not only lead directly to a decline in sales, but could also develop into a situation that shakes the stability of management, and we recognize this as one of the emerging risks affecting the sustainability of our group's business.
As a countermeasure against these risks, we are working to prevent pollution through appropriate drainage and management of hazardous substances in accordance with laws and regulations, and we are also providing guidance to our trading partners based on CSR surveys conducted in accordance with our CSR guidelines.
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Risk Management System
Basic Approach
Skylark Group has established Group Risk Management Regulations and laid out a process for responding to risks, for the purpose of preserving its corporate value. In risk management, we begin with an overview of a diverse range of risks, identify risks to be tackled, and work to prevent them from manifesting. When a risk actually manifests itself, we minimize damage by responding swiftly and accurately, evaluate the results of our response, and confirm that measures have been taken to prevent re-occurrences before declaring completion.
Key Risks and Responses Relating to Execution of Business Operations
Occurrence of Food-related Accidents
Our basic policy is to establish and thoroughly manage quality, hygiene management and legal compliance standards with regard to various predicted risks in all processes from procurement of ingredients to processing, distribution, preparation and serving in order to prevent not only cases of food poisoning due to bacteria and viruses but also food-related accidents due to contamination by foreign objects and food allergies, and incorrect labeling.
Response Measure 1: Ensuring thorough washing of hands and health management by employees at central kitchens
We have established—and are thoroughly enforcing—the most effective hand washing procedures as verified in-house to prevent viruses and bacteria on employees' hands from being carried into our facilities.
Hand washing is monitored 24 hours a day, and guidance is given to ensure thorough implementation of established procedures.
Response Measure 2: Hygiene guidance and regular in-house bacterial testing by the Quality Management Group
We design our production processes based on ISO 22000 management methods to enable provision of safe products, and check the operational status of each process.
Our central kitchens have eight hygiene inspection rooms that perform unannounced monitoring and provide guidance on matters ranging from raw ingredients to central kitchen processing, and the state of store management.
Response Measure 3: Thorough measures to prevent and control the spread of norovirus
Because toilets and kitchens are used by many people, we disinfect them on a regular basis every day.
If an employee is unwell, a norovirus test is conducted at the expense of the company, and the employee is only allowed to come in to work if a negative result is confirmed by this high-sensitivity test.
Labor Management Risks
With the diverse range of employment types that exist today, the environment surrounding employees is changing drastically, and continuous optimization of working conditions is essential for continuing to employ excellent human resources in the long term. Skylark is driving work style reforms such as enhancing labor management systems and improving working environments to enable all employees to work energetically and in good health.
Response Measure 1: Initiatives to enhance the labor management system
As a measure to enhance Skylark's labor management system, top-level management figures attend each labor management meeting in order to gain an understanding of the current situation and work to thoroughly improve upon it.
We are also creating mechanisms to reflect the content of regular reviews and improvement proposals from the workers' union.
We are also improving employee retention rates and working environments by continuously conducting level-specific training to enable employees to improve their skills and level of satisfaction.
Response Measure 2: Initiatives to enhance work-life balance by encouraging employees to take leave
We have increased our number of annual holidays from 108 to 117 days, with the aim of improving work-life balance. At the same time, we have increased the number of successive days of leave per six-month period by two days, from five days to seven days, and are implementing this along with the planned taking of annual paid leave. Additionally, as one aspect of our work style reforms, we abolished 24-hour operation at all stores in January 2020, and shortened late-night operating hours in July 2020 to make closing time 23:30 as the general rule. We aim to create a workplace in which employees can work stably in the long term.
Risk Management System
Under the supervision of the Board of Directors, we have established the Group Risk Compliance Committee, which is chaired by the President and Representative Director and includes the Chairman and Representative Director and all executive officers, as an organization that oversees risk management for the entire Group. The committee has identified 31 types of risks that should be addressed (as of March 2024). In addition, for each risk to be addressed,
the Committee also designates a department to be in charge of taking appropriate preventive and responsive actions. We evaluate these risks once a year, since the degree of risk impact constantly fluctuates in response to changes
in the business environment.
In 2023, the Group Risk and Compliance Committee met a total of six times (ten separate times in writing) to review states of emergency that had occurred within the Group.
Efforts are also being made to ensure the transparency of the risk management system, such as by sharing information on the content of deliberations by the Committee with outside officers.
Outside corporate auditors also serve as advisors to the Committee, and we have established a system to receive pointers and advice from outside perspectives. The appropriateness of the risk management process is checked by the Internal Audit Office.
Skylark has defined Emergency Guidelines under its Group Emergency Response Regulations with regard to particularly serious risks such as natural disasters, infectious diseases and food-related accidents, as issues that should be tackled with the combined power of the company.
Additionally, in order to ensure prompt sharing of the contents of emergency reports with senior management and other related departments in the company, we have established emergency contact routes and rules for reporting to management, and comprehensive efforts are being made to ensure that specific reporting standards and procedures are known within the company.
We have established rules regarding the sharing of information with outside officers, and are working to improve the provision of information on key risks and emergency cases, and the state of our response to them.
We have also formulated the Group Business Continuity Planning (BCP) Regulations in order to clarify details of the Group's system for responding to emergencies, details of initial responses, and priority of operations.
The Five Key Policies of the Group Business Continuity Planning (BCP) Regulations
- Act with human life as the top priority
- Prevent secondary disasters
- Ensure that the departments responsible for sales, products/merchandise, production, purchasing and business infrastructure cooperate closely to form an integrated unit, and act in coordination with local communities and government agencies
- Transfer authority depending on the nature of the emergency
- 5. Summarize responses and work to prevent re-occurrences once the state of emergency has been lifted
In the past, too, in the event of a natural disaster or infectious disease outbreak, we have established response headquarters based on our Group Business Continuity Planning (BCP) Regulations, and consolidated all information at the headquarters to enable it to make timely and appropriate policy decisions. By disseminating this information to all restaurants and stores, we respond promptly and appropriately to emergencies.
Internal Reporting System
For the purpose of early detection, correction, and prevention of recurrence of violations of laws and regulations and misconduct that may disadvantage stakeholders such as customers, investors and wider society, the Group has established the Skylark Group Internal Reporting Desk, with a specialized outside company as the contact point, accepting whistleblowing reports from all domestic Group executives, employees and business partners.
Reports received from whistleblowers are shared directly with independent outside directors and full-time corporate auditors who are qualified as lawyers, and are handled in accordance with internal regulations, such as regularly reporting on the status of operation to directors and corporate auditors.
Dedicated Reporting and Consultation Desk for Business Partners
As one initiative to promote compliance, Skylark Group has established a reporting and consultation desk to enable transparent and fair transactions with business partners.
We receive reports regarding organizational and personal violations of laws and regulations with the Group, as well as questions and opinions from our business partners, and work to improve upon any problems.
Content of Report and Consultation
Persons Eligible for Reporting and Consultation
Officers, employees, part-time workers, temporary employees or former employees of Group business partners
Promise of Confidentiality
The contact desk is set up at Dial Service Co., Ltd., a third-party organization. We strictly observe the privacy of whistleblowers and persons engaging in consultations, and will not disclose or leak information to third parties.
Method of Reporting and Consultation
Reports and consultations from business partners are accepted by telephone.
| Reception hours |
Weekdays: noon - 21:00
Saturday, Sunday and national holidays: 09:00–17:00 *Excluding December 29 through January 4 |
| Dedicated phone number for business partners |
TEL：0120-330-280
- *This is dedicated telephone number for the Group's business partners.
For customer inquiries, please contact the Customer Consultation Office: 0120-125-807 (09:00–18:00)
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Prohibition on Disadvantageous Treatment
Whistleblowers and persons engaging in consultations will not be treated unfavorably by affiliated companies for using the whistleblowing and consultation desk.
Measures Against COVID-19
We established a response headquarters chaired by the Chairman, President & CEO and, based on our policy of doing everything possible to ensure the safety of our customers and employees, we have implemented infection prevention measures for COVID-19 which exceed the standards set by national and local government, and continued to operate our restaurants and stores as an essential part of food infrastructure.
We are cooperating fully with local government requests and making Group-wide efforts to bring the COVID-19 pandemic under control. Since the pandemic began, we have held more than 30 meetings of our response headquarters and its subcommittees in order to enable swift and detailed decision-making with regard to issues such as preventing infections among customers and employees, responses in the event of actual infections, health management and labor management issues.
In view of the constantly changing situation and various information that is being transmitted, we have clarified our information gathering routes so that information can be gathered and consolidated by the response headquarters. The information gathered is shared constantly with senior management, including the Chairman, President & CEO, as well as with outside officers.
Measures to Tackle COVID-19