Business Risk Factors

Matters relating to the qualitative information contained in these summary financial statements and relating to the consolidated financial statements that could be envisaged as having a possible material impact on investors are described below.
Every effort, including the establishment of various internal committees such as Compliance Committee and Risk Management Committee, are made to identify factors that may now or in the future pose a risk to the undertaking of business by the Amano Group, and these risk factors are then eliminated or otherwise managed in the course of business. The activities of each committee are reported to the Representative Director as appropriate and to the Board of Directors as necessary. The outline of each committee is available for inspection on the website of our company.
Forward-looking statements are current as of the date of release of these financial results (April 26, 2023).

(i) Impact on earnings due to changes in the business environment

The Amano Group uses the unique technologies and know-how we have accumulated to provide customers with high-quality products, services and solutions, thereby gaining large market shares in each sphere of business in Japan, North America, Europe, and Asia, and developing our business globally.
In the year ended March 31, 2023, the Time Information System business accounted for 74.4% of total sales, and the Environment System business accounted for 25.6%. Before the deduction of unallocated expenses, the Time Information System business contributed 76.0% to operating profit, while the Environment System business contributed 24.0%. In terms of weighted average sales over the last five years, the Time Information System business accounted for 74.2% of total sales and 74.1% of operating profit.
One future risk factor is that if market expansion is forecasted for a business activity within the Time Information System business segment (which accounts for a large proportion of the Group’s business), for such reasons as a significant change in the demand structure or the creation of a new market, entities in other industries or other powerful competitors may be tempted to enter the market. In such an event, if a competitor were to enter with innovative products or solutions that surpass Amano’s, the Amano Group’s market advantage would decline, which may have a material impact on our business performance.
As part of our efforts to prepare for these risks, the Amano Group works to develop competitive products on an ongoing basis and strives to strengthen support systems further, engaging in business activities to maintain and improve our competitive advantage in each business by strengthening the relationship with existing customers and expanding transactions with new customers.

(ii) Fluctuations in exchange rates

Our group engages in business activities on a global scale and has production and sales bases overseas. In view of this, our group’s business results may be impacted by fluctuations in exchange rates when the proceeds for overseas transactions are converted into yen.
As precautionary measures against such a risk, our group strives to reduce it by considering entering into, for example, forward exchange contracts as necessary.

(iii) Information security

In the course of providing system solutions and developing cloud business services (e.g., ASP, SaaS, and hosting services), the Amano Group handles confidential information, such as personal information concerning, or provided by, customers. The occurrence of an unforeseen situation such as a cyberattack that results in loss or leakage of confidential or personal information as described above could have an adverse material impact on our group’s business performance due to factors such as loss of confidence.
As precautionary measures against such a risk, our group has established an Information Security Management Committee to strengthen and ensure thorough implementation of security control measures based on the “Information Security Management Rules.” More specifically, we have implemented measures to prevent the leakage of confidential information based on the encryption of hard disks and external storage media and are providing regular employee education using e-learning. Our company received the PrivacyMark certification in February 2014 and makes every effort in the area of information security, including the supervision of subcontractors and thorough compliance with internal regulations. European subsidiaries of our company are also working to reduce risk by, for example, implementing adequate measures regarding the EU General Data Protection Regulation (GDPR) enacted in May 2018, taking into consideration the guidance of local experts.

(iv) Natural disasters and infectious diseases

Natural disasters, such as large-scale earthquakes and windstorms, floods, etc., caused by climate change on a global scale, are occurring more and more frequently, and in the event of a natural disaster, our group may sustain damage to human lives or our property, such as the destruction of sales business sites and production bases. In the event of an outbreak of an infectious disease that makes it difficult for employees to continue to work, our group may temporarily lose the ability to continue to perform our operating activities.
As precautionary measures against such risks, our group has put in place measures to ascertain and ensure the safety of employees by introducing an emergency contact network and safety confirmation systems. In addition, our group is moving our file servers and other equipment to external data centers and is improving the environment to facilitate working from home to ensure business continuity. Other necessary measures that we have taken to reduce risk include the establishment of the protocol for the establishment of the disaster control headquarter in the event of an emergency.

(v) Overseas business development

Our group has been developing our business globally in Japan, North America, Europe, and Asia. Therefore, there is a possibility that a situation may arise in which business operations are disrupted due to the application of unique laws, ordinances, or regulations or social disorder due to political disturbances, war, or terrorism, or pandemic, etc. in countries or regions where our group conducts business, which may adversely impact our group’s business performance.
In order to be ready for these risks, our group collects information on the situation in the countries and regions in which they operates on an ongoing basis before any emergency occurs. Our group also holds quarterly meetings of the Global Strategy Conference Executive Management Board, at which top management directly ascertains the situation and gives instructions to reduce risk. In the event that various risks are materialized, our group will grasp the situation quickly by sharing and exchanging information with overseas group companies.

(vi) Accounting estimate assumption change

Our group makes estimates regarding impairment accounting for fixed assets and deferred tax assets recoverability at the time of preparing the consolidated financial statements. These estimates are based on certain assumptions about the future. If the assumptions differ significantly due to the occurrence of unexpected events such as natural disasters that may have a significant impact on domestic and overseas economic activities and an outbreak of an infectious disease, it may affect our business performance.
In order to be ready for these risks, our group strives to calculate a reasonable amount based on available information at the time of accounting estimation.