Our Group is engaged in a wide range of businesses, and we strive to control group-wide risks by formulating risk management plans for each one to avoid risks, and by holding and adjusting our assets and funds. However, due to the nature of our business and management policies, risks that we believe could significantly affect our financial position and operating results include those listed below.
Forward-looking statements are based on the judgment of our Group based on information available as of the date of submission of the Annual Securities Report (June 29, 2023), and actual results may differ from these forecasts.
In addition, the forecasts do not describe degree and timing of the possibility that such risks may materialize, as they are difficult to reasonably foresee.
Natural disasters such as earthquakes or heavy rains that damage station facilities, rolling stock, commercial buildings, and other facilities necessary for business activities or make it difficult to procure electricity, fuel, construction materials, merchandise, and other items, could seriously affect the Group's business results. This is because they could cause a decrease in revenue due to the suspension of business activities, force expenditure of large amounts of money to restore operations, and trigger a rise in procurement costs for motive power, materials, and other items.
In the event of an outbreak or epidemic of a new viral infection or other disease in the Group's business area, the Group's sales may fall due to a decline in revenues as individual consumers refrain from leaving their homes, a reduction in sales activities due to difficulty in securing workers, and a slump in existing businesses arising from changes in consumer orientation and spending behavior after the outbreak of the infectious disease is controlled. This could have a serious impact on business performance.
(Measures to address risk)
Our Group is striving to ensure the business continuity of the entire group by developing diversified businesses and expanding operations beyond Fukuoka. In each of our businesses, we place the highest priority on ensuring safety, and by continuously improving our crisis management system and business continuity plan, we aim to realize our social mission and minimize the impact on our business performance.
In addition, to ensure stable and continuous procurement, we strive to maintain and develop good business relationships with suppliers, and minimize the impact of procurement by diversifying suppliers, placing orders systematically, and negotiating reasonable prices on a daily basis.
If overseas business activities are curtailed or suspended due to significant changes in political and economic conditions overseas, outbreaks of terrorism or conflicts, or changes in legal regulations in various countries, our business performance may be seriously affected by a decrease in operating revenues in related business segments.
(Measures to address risk)
The Group monitors the status of its businesses as appropriate through the Management Committee, Executive Committee, and other meeting bodies, and reviews strategies and other matters in light of risks arising from changes in social conditions, etc. The Group also responds appropriately to legal regulations, etc., through collaboration among businesses and the use of specialists.
In addition, we have established limits on overseas investments to reflect the magnitude of the risks involved, and make our investments within these limits to ensure that they do not have a significant impact on the entire Group’s business performance.
If the number of visitors to Japan declines due to deterioration of diplomatic relations or other changes in the international situation, our business performance may be severely affected by a fall in operating revenue in each business segment.
In addition, if procurement of electricity, fuel, or construction materials becomes difficult or procurement prices soar due to deterioration in diplomatic relations or other international situation, our business performance may be affected by a reduction in the scale of our operations or an increase in expenses.
(Measures to address risk)
The Group monitors the status of its businesses as appropriate through the Management Committee, Executive Committee, and other meeting bodies, and reviews strategies and other matters in light of risks arising from changes in social conditions, etc.
In addition, to ensure stable and continuous procurement of fuel and construction materials, we strive to maintain and develop good business relationships with suppliers, and minimize the impact of procurement by diversifying suppliers, placing orders systematically, and negotiating reasonable prices.
In the event of a large-scale accident or fire, the Group's business performance could be seriously affected not only by compensation for deceased or injured users, but also by a loss of user confidence in the safety of the business and the social reputation of the Group as a whole, which could hinder business activities.
In the event of various compliance violations (employment issues, harassment, human rights violations, etc.), violations of the Antimonopoly Law and other laws and regulations, leakage of personal information, and other misconduct, our business performance may be affected by the payment of penalties, claims for damages, and a decrease in sales due to loss of trust.
(Measures to address risk)
Our Group places the highest priority on ensuring safety, and has established a cross-divisional organization overseen by an executive officer who is also a representative director for particularly important items, and is taking measures across the Group, etc., to implement initiatives to eliminate accidents in each business, and to develop and manage security facilities and disaster prevention equipment.
In addition, we have established the “Nishitetsu Group Compliance Policy” as a code of conduct for employees to follow in terms of compliance with laws, regulations, and ethics, and our executive officers are leading the way in complying with the policy. We are striving to improve our compliance system, including by establishing and distributing a compliance manual that provides specific guidelines for behavior.
Although we have purchased various types of property insurance to reduce the impact on our business performance, it is not possible to cover all damage and compensation expenses.
In principle, any change in the number of services or fares in the railroad and bus businesses requires approval from or prior notification to the Minister of Land, Infrastructure, Transport and Tourism. If there is a sudden change in the Group's business environment due to changes in social conditions, it may not be possible to immediately correct the discrepancy in demand, which could have a significant impact on our business performance, such as a decline in profit margins in these businesses.
In addition, if legal regulations are strengthened or newly established, or if various national or local government policies are changed, our business performance could be affected through an increase in expenses to cope with such changes, or by fluctuations in income and expenses due to a review of our business strategy.
(Measures to address risk)
In light of changes in social conditions, the Group works with the national and local governments to formulate business strategies and carry out business operations while striving to appropriately comply with legal regulations under the guidance of supervisory authorities.
In addition, we endeavor to provide attractive products and services by accurately identifying shifts in customer demand resulting from changes in economic conditions and regulations.
In the event of significant fluctuations in foreign exchange rates, foreign exchange losses and other losses may affect our business performance.
In the event of a significant decline in the market value of investment securities because of major fluctuations in stock prices or other factors, our business performance may be affected due to the recording of valuation losses or other factors.
(Measures to address risk)
In developing overseas business, we have established investment decision criteria, and the Management Committee, Executive Committee, and other meeting bodies make decisions on whether to implement such investments, taking into account the risks associated with exchange rate fluctuations and other factors.
For investment securities, the appropriateness of holding such securities is comprehensively verified and confirmed each year by analyzing the impact of each individual issue on management, taking into account the purpose of holding, benefits and risks considering the cost of capital, and future prospects, in an effort to minimize write-downs.
If the population decline in the areas in which the Group operates is not halted, or if the Group is unable to offer new services to the elderly, such as providing means of transportation that contribute to their convenience, the Group's railroad and bus businesses may experience a continuous decline in sales due to a fall in the number of passengers carried. Alternatively, each business may be downsized or discontinued. This would have a serious impact on our business performance.
In addition, if the Group is unable to secure the necessary personnel structure it expects at the required time due to the declining population and aging society with fewer children, we may have to reduce the scale of various businesses, which could seriously impact business performance.
(Measures to address risk)
The Group is working to create and realize “urban development concepts” for each area along our railway lines and to strengthen and redevelop the transportation network to make these areas desirable places to live. Furthermore, we are expanding our housing and hotel businesses in Asia, the Tokyo metropolitan area, and other regions.
In addition, we are working to provide ICT-based products and services, including research on sustainable public transportation such as MaaS (Mobility as a Service) and demonstration tests of on-demand buses and automated driving, as well as strengthening profitability by capturing the seniors market. This includes expanding the Suncarna condominiums for seniors business and opening of the Carnas serviced housing for seniors.
With regard to the personnel structure, in addition to aggressive recruitment activities, we are working to secure the necessary personnel by establishing a training school for bus drivers to secure qualified people, and are also devising ways to maintain the scale of our business even amid the labor shortage, such as promoting experiments on automatic driving technology using AI.
If the Group's existing businesses cannot keep up with advances in ICT and digitalization, or are unable to provide new products and services that respond to these developments, operating revenues and other earnings in each business may decline, or profits may decrease due to a mismatch of human resources, which could seriously impact business performance.
In addition, a serious failure occurring in our information system or communication network could seriously affect our business performance, such as by disrupting our business operations and reducing operating revenues.
(Measures to address risk)
The Group has established the Nishitetsu Group DX/ICT Committee to promote DX and strengthen ICT control throughout the Group, and is working to provide products and services that utilize digital technology. This includes researching MaaS and promoting the introduction of cashless payment systems.
In addition, for information systems and the like, we take physical measures such as firewalls for communication network equipment, and strive to prevent system failures, etc., by establishing a system based on constantly manned monitoring of data centers and security rules and regulations.
Our Group's railroad business, bus business, and domestic logistics business use electricity and light oil for motive power, but these railroads and buses are characterized by lower CO2 emissions per unit of transportation volume (in terms of passenger kilometers) compared to private cars and other vehicles. By providing easy-to-use schedules and cooperating with other public transportation systems, we are helping to reduce CO2 emissions in society as a whole by improving convenience and encouraging people to switch from private cars. We are also working to reduce CO2 emissions by introducing environmentally friendly vehicles and embracing environmentally friendly driving methods. However, if these efforts fail to gain the understanding of consumers or if we are unable to provide services that are attractive to consumers, our business performance may be affected by a decrease in operating revenues due to a decline in the number of users of our railroad and bus businesses.
Failure to gain investors' understanding of our efforts to protect the global environment may make it difficult for us to raise funds from the investment market, and we may not be able to raise the necessary funds when we need them.
(Measures to address risk)
Recognizing that preservation of the global environment is an important issue, the Group aims to realize a decarbonized and recycling-oriented society through business activities in harmony with the environment, and strives to disclose these efforts in an appropriate manner.
Recognizing that the existence of diverse perspectives and values that reflect different experiences, skills, and attributes is a strength for ensuring the sustainable growth of the Group, we are endeavoring to develop and expand opportunities and environments where each and every employee can work with vigor and demonstrate their individuality and abilities. In addition, some of the countries and regions in which the Group operates have human rights issues arising from racial discrimination and political unrest, which require us to work together with our business partners to alleviate these.
However, if we are unable to appropriately address these issues within the scope of our Group, including our business locations, business partners, and customers, we may not be able to sustainably recruit a diverse range of people. This could result in the downsizing or discontinuation of each of our businesses, as well as seriously impact our business performance, such as a decline in brand value due to criticism from local residents, customers, consumers, shareholders, investors, and other stakeholders.
(Measures to address risk)
The Group recognizes that securing diverse human resources and strengthening them to support sustainable growth are important issues. Furthermore, in addition to promoting the success of female employees, the Group promotes the appointment of core human resources according to individual abilities, regardless of gender, nationality, new graduates or mid-career workers, etc. The Group also strives to create an environment that improves job satisfaction and promotes a healthy work-life balance.
In addition, we seek respect for the human rights of all people involved in our business activities based on the Nishitetsu Group Human Rights Policy established in March 2022, and strive to foster awareness of human rights through workplace training on human rights and social inclusion issues, harassment, people with disabilities, LGBTQ, and other issues.
