|Business Environment||Impact of COVID-19 and other infectious diseases||The Group conducts its business activities on a global scale, which means the emergence of new high-risk variants could have a significant impact on its business. Potential examples include restrictions on production activities due to supply chain disruptions caused by lockdowns, as well as major unexpected changes in customers’ investment sentiment. Any of these factors could adversely affect the Group’s performance or financial position.|
|Rapid development of cashless economy/Strong reliance on cash handling machines||The Group is working to expand its new business domain, including non-cash areas such as the DMP business. However, should the cashless economy develop drastically and globally in a short period of time (e.g., due to the issuance of digital currencies by central banks) before the Group’s new business domain matures, the Group’s performance could be adversely affected.|
|Overseas business conditions||The Group is actively expanding its business in overseas markets. However, it has identified several factors that could adversely affect its performance. In addition to geopolitical risks, these include exchange rate fluctuations that exceed expectations, increases in counterfeit products, and infringement of intellectual property rights.|
|Laws and regulations of countries and regions where the Group operates||The Group is subject to business permits and import and export regulations, as well as various laws and regulations in the countries and regions where it operates. Should these laws and regulations be revised or repealed, or if new public regulations were to be established, or if any other special factors influencing the market environment were to arise, the Group’s performance could be adversely affected.|
|Intensified competition||Intensification of competition in the Group’s business areas could lead competitors to launch new products and services or engage in aggressive sales activities such as significant price reductions and might cause a shift in demand to lower-priced products. Any of these factors could adversely affect the Group’s performance.|
|Strategic investments||The Group strategically allocates its management resources to expanding core businesses and creating new ones, with the aim of constantly improving corporate value over the medium to long term. As of March 31, 2023, goodwill and customer relationships amounted to ¥55,528 million and ¥26,428 million, respectively, and accounted for 14.6% and 6.9% of total consolidated assets, respectively. These intangible assets are subject to impairment assessment, and if the Group does not achieve expected outcomes due to changes in the business environment, it might incur impairment losses that could adversely affect its performance.
In addition, if an investee company that has become an entity accounted for using equity method fails to fulfill its business plan, it might incur Share of loss of entities accounted for using equity method, which could affect the Group’s performance.
|Procurement of parts and materials||In procuring parts and raw materials, the Group strives for stability in purchasing by using general-purpose items as much as possible, but suppliers are limited due to the highly specialized nature of some items. Therefore, natural disasters and/or accidents may result in suspension or interruption of suppliers’ production, making it difficult to procure parts and raw materials. Moreover, the global supply/demand balance for semiconductors, raw materials, and other products is breaking down, increasing the risk of delays in product deliveries. Any of these factors could impact the Group’s production activities and adversely affect its performance.
In addition, inflation and other factors that raise the prices of parts and raw materials might increase the Group’s business costs and affect its performance.
|Securing human resources||The Group conducts business activities on a global scale and employs people with a diverse range of nationalities, values, and expertise. Its medium- to long-term growth is highly dependent on these human resources, so attracting new talent and fostering talent among existing employees is indispensable. As such, the Group’s performance could be adversely affected if it fails to attract and foster human resources who match the characteristics and growth stage of each Group company, or people with exceptional talents in the areas of development, production, sales, maintenance, and management, especially experts in digital transformation, who are indispensable to expanding our new business domain.|
|Business Operation||R&D investment||The Group is an R&D-based enterprise and continues to aggressively invest in R&D. Depending on the R&D themes, however, development periods could be longer, and costs higher, than initially planned. If such circumstances were to arise, the Group’s performance could be adversely affected.|
|Intellectual property rights||The Group constantly conducts research on the products of other companies to prevent infringements by its products on the material intellectual property rights of third parties, as well as those by third parties’ products on the Group’s intellectual property rights. As an R&D-based enterprise, however, the Group might experience intellectual property disputes with other companies. If such disputes were to materialize, the Group’s performance could be adversely affected.|
|Information security||To maintain its credibility and ensure smooth business operations, the Group considers it essential to prevent leakages of personal and confidential corporate information. Based on this, the Group has taken various measures, such as formulating regulations, conducting thorough in-house training, and establishing an information security system. In the event of an information leakage, however, the Group might not only suffer a loss of credibility but also be liable for damages to customers and other parties.
Furthermore, the Group is implementing security measures for both hardware and software because its business activities are increasingly dependent on information systems. However, there is a possibility that information system failures might occur due to cyberattacks and/or computer virus infections. Any of these factors could adversely affect the Group’s performance and/or financial position.
|Quality of products and services||The products and services provided by the Group are required to operate in a reliable manner, such as in the case of cash handling at financial institutions and retail stores. To this end, the Group focuses on providing highly reliable products by verifying quality and safety at each stage, including product design, evaluation, component procurement, and manufacturing. In maintenance services, the Group works to prevent serious product quality and safety issues by conducting regular inspections. However, unexpected quality problems might occur during the development, production, and maintenance service processes, such as uncertainties associated with sophisticated product and service functions. Any of these factors could adversely affect the Group’s performance.|
|Fundraising||The Group raises funds for its business activities through internal funds, borrowings from financial institutions, and the issuance of bonds. However, interest rate hikes to counter inflation, mainly in the United States and Europe, as well as downgrades of our credit rating by rating agencies, might increase the cost of fundraising and adversely affect the Group’s performance.|
|Environment||Climate change||The Group views climate change as an unavoidable and urgent issue and endeavors to develop environmentally friendly products while considering government policies and legal requirements for climate change and the demands of the market. If these requirements and demands exceed expectations, however, transition risk might increase, leading to higher procurement costs due to investment in energy-saving/renewable energy facilities and the introduction of carbon taxes, emission trading schemes, and the like, as well as lost sales opportunities and decreased corporate value stemming from damage to the corporate brand, which could adversely affect the Group’s performance. In addition, physical risks might increase due to abnormal weather conditions, such as typhoons and torrential rains, which have been on the rise due to climate change, or earthquakes and other large-scale natural disasters. Any of these factors could cause damage to the Group’s own factories and employees or suspension of operations of parts suppliers, which could restrict the Group’s business activities and adversely affect its performance.|
|Internal Control||Internal control||To ensure the accuracy of financial reporting, the Group strives to strengthen its internal control system by documenting operational processes and conducting rigorous internal audits. Even if the Group’s internal control system is effective, however, it might cease to function properly in the event of operational errors or fraud on the part of employees or others. Any of these events might require the Group to revise its financial information, which could adversely affect its performance and/or financial position.|