Foresight in sight

Investor Relations

Risks in Business Operations

Risks related to the Group’s businesses and finances described in this report that have the possibility of having a material impact on the decisions of investors are as follows.
Please note that any remarks concerning the future indicated in the descriptions have been made based on the adjudications made by the Company Group as of the end of the fiscal year under review.

1 Risks from Economic Trends and the Market Environment

Due to economic trends, or changes in the information services market environment, we may experience situations where corporate customers refrain from making investments into their own information systems, price competitions are intensified further than expected, and we are kept from readily supporting technological innovations. Furthermore, our business environment may worsen partly due to changes in taxation/accounting laws, regulations and institutions, as well as in the social infrastructures of power and telecommunications. In such cases, performances and financial conditions of our company group are likely to be impacted.

2 Project Management Risks

The Group is engaged in many different system development projects.
However, intensified competition has meant that customers are continually demanding more sophisticated systems, resulting in projects becoming increasingly complex.
If a problem arises in a development project, there is a risk that the problem would require greater-than-expected costs and time to resolve, which could lead to a cost overrun.
To avoid such risks, the Group has made efforts to continuously operate a system where the Project Review Committee assesses any risks via multifaceted viewpoints at both the proposal phase and implementation phase.
Furthermore, the Group has been working to enhance the project management system, increase productivity by systematizing and standardizing the system development method, and continuously implement measures such as the Andon system (which detects problems in a project at the developmental stage). The Group also implements a cycle of improvement that includes the review of problems to ascertain their true causes and implement fundamental countermeasures. The Group has been making these efforts to detect problems early and prevent cost overruns.

3 System Failure Risks

The systems and services provided by the Group may have an impact on mission-critical systems for customers’ businesses and social infrastructures. In the event of serious failures caused by system faults and cyberattacks, the Group may suffer damages to their social credibility and brand image. Furthermore, it may see its performance results driven down due to damage compensation payments.
Thus, the Group has determined quality standards (such as the categorization of systems in use by their degree of social importance, problem occurrence rates, and the number of days needed to complete the response to a problem), and has established troubleshooting systems. In addition, in regard to the occurrence of problems, the Group has been working to provide information to related in-house departments through a problem reporting system in order to rapidly implement responses to problems.
The Group has been working to improve the quality of systems in use by evaluating and improving them through regular system inspection activities.

4 Risks Associated with Investment Decisions

The Group makes large investments with the aim of providing new products and services to strengthen its competitiveness and expand its businesses. However, these investments may impact the Group performance results, since there is no guarantee that sufficient returns on investment will always be achieved.
Thus, the Group entrusts with individual investment projects the R&D / Investment Committee and the Project Review Committee as well as their overseer, the Executive Council. The institutions carefully determine the appropriateness of business plans and other factors in order to minimize risks from investment decisions.

5 Information Control Risks

The Group has opportunities to access many customers’ confidential personal and corporate information, as well as that of the Group itself, through business activities related to the development and provision of information systems.
We therefore consider information control to be a top priority, and take all possible measures for appropriate management of information as a member of the ICT industry.
Furthermore, the Group has established a technical support team capable of responding to information security incidents of the Group (CSIRT:Computer Security Incident Response Team) in order to cope with cyberattacks.
To cope with the small possibility of an information leak in an emergency case that is beyond conventional imagination, the Group has insurance contracts to address the situation up to a certain extent. However, in the case that damage repair expenses are higher than the overall amount of contract coverage, or in the case that the leak has resulted in severe damage to the Group’s reputation, there is the possibility that the business results and financial conditions of the Group would be severely affected.

6 Risks Associated with Retention of Skilled Engineers

The Group needs to deal with fiercer competitions in the global market and a drastic decrease in skilled engineers in the Japanese society which experiences aging with a low fertility rate. Thus, it is critical to secure skilled engineers.
Furthermore, against the backdrop where industrial structures and business environments have been changing, it is indispensable to strengthen a workforce capable of continuously creating innovative technologies and coping with diversified customer needs in addition to technological capabilities. If we are unable to recruit high-caliber engineers to meet our needs, this could have an impact on the Group’s ability to secure technological advantages, competitiveness and continuous growth potential. The Company is working to address this issue by making efforts to create an environment in which Group personnel can acquire high-level skills.
To this end, we have instituted a wide range of personnel development measures, including career planning and other support systems as well as programs to enhance employee technical abilities. Furthermore, we have been earnestly promoting diversity management efforts to help female employees and other employees from various backgrounds play active roles.

7 Intellectual Property Rights Risks

The Group has been executing business with the utmost care about intellectual property rights. It has been making efforts to protect its intellectual properties by obtaining intellectual property rights such as patent rights and trademark rights for its technologies as well as products and services. Furthermore, it has been exercising extreme caution not to infringe upon third parties’ intellectual property rights.
However, there are possibilities that any third parties may infringe upon our intellectual property rights. Also, there are possibilities that third parties’ claiming that our products and services infringe upon their intellectual property rights may be developed into lawsuits, and costs may be incurred on our side.
Furthermore, there are possibilities that the Group may not be able to provide specific products or services in an event where it fails to obtain license from holders of intellectual property rights necessary for its business execution.
These possibilities are likely to impact business results of the Group.

8 Risks Associated with Key Supplier Relations

We procure hardware, software and services from suppliers in Japan and overseas, and provide them to customers. For this reason, changes to product specifications or the suspension of the supply of products/services due to factors such as unforeseen changes in the business strategy or deterioration in the business conditions of supplier companies could impact the Group’s business results. We have been implementing measures in order to avoid such impacts.
We are the sole authorized distributor of Unisys Corporation–made computers and other products. We handle the import, sales, and maintenance services of those computers and other products in Japan. Unisys Corporation grants us the use of its trademark, technical information, and assistance. Up to this point, the trading relationship with Unisys Corporation has been stable. However, in an event where the relationship cannot be sustained, it would have a material impact on the Group’s business results.

9 Exchange Rate Fluctuation Risks

The Group imports and sells Unisys Corporation-made computers and other foreign-made products. Thus, the Group’s procurements in foreign currency denominations could be exposed to fluctuations in foreign exchange rates.
To avoid such risks, the Group takes risk-hedging measures through forward exchange contracts.

10 Compliance Risk

The Group has established the Nihon Unisys Group Charter of Corporate Behavior, the Group Compliance Basic Regulations, and the Nihon Unisys Group Code of Conduct, based on which all of the Group’s executives and employees conduct ethical behavior in compliance with laws and regulations, social norms, and in-house regulations.
However, there are possibilities that any compliance violation risks can not be completely avoided. In an event where the Group infringes upon laws and regulations, it is exposed to the risk of losing social confidence and paying damage compensation, and ultimately having its business results negatively impacted.

11 Natural Disaster Risks

In an event where an occurrence of natural disaster or terrorist attack such as an earthquake causes devastative damages to social infrastructure or the Group’s major business bases, the Group will be forced to pay a significant amount of costs in order to cope with the situation.
Similarly, in an event where the Group must restrict activities of many of its employees and suppliers in order to secure their safety and well-being due to an outbreak of infectious disease, its business activities such as service provision will be impacted enormously, which will eventually be reflected in the business results. Therefore, in preparation for such a situation where such an occurrence is anticipated, the Group is making strenuous efforts to enable its operations to be continuously in effect.