[As of June 19, 2023]
Of the matters related to the status of the business and accounting as described in the Annual Securities Report, the following may have a significant impact on the decisions of investors.
The degree and timing of these risks that could materialize and the impact that they would have on the Group’s business earnings, etc., if they were to materialize have been omitted since they are difficult to rationally forecast.
Any forward looking statements contained in this section are made based on the judgment of the CRESCO Group as of March 31, 2023.
The Company has formulated “Risk Management Rules” and categorizes and manages risks within the Group based on these rules. The Company’s Board of Directors stipulates the responsible department depending on the type and details of the risk, and the managers of the various responsible departments, various executive directors, and Internal Control Committee maintain a risk management system and conduct monitoring.
Service risk refers to the risk that services that the Group supplies, such as software development and maintenance, are not profitable and the risk of claims for compensation due to defects in delivered items, etc. The Group decides whether to accept orders after fully forecasting expenses and revenue and conducting technical verification, but if additional man hours are required for any of various reasons, including demands for changes in specifications by customers or unforeseen technical mismatches, and there are claims for compensation for damages based on liability due to non-conformity with contracts related to delivered software, this could undermine trust in the Group and impact the Group’s earnings. The Group works to promote quality management process, which is centered on the Company’s Quality Management Unit, and prevents these risks.
During the fiscal year under review, the Company recorded 51,415 thousand yen in provision for loss on orders received.
If the confidential information of third parties or assets were lost or leaked due to a cyberattack, the Group’s negligence, etc., this could lead to claims for compensation for losses and deterioration in trust of the Group and have a negative impact on Group’s business performance. The Group tries to limit this impact by regularly conducting compliance checks, working to raise compliance awareness among officers and employees, and maintaining a system to prevent security incidences.
If there were a massive natural disaster or epidemic, it would be difficult for the Group to maintain its business due to damage to information systems necessary for business and danger of going out of the office, and this could impact the Group’s earnings, etc. The Group promotes the introduction of cloud technology for systems and has formulated and implements a business continuity plan (BCP), which includes expanding the remote work system.
Because of the distinguishing nature of the Group’s business, if it were impossible to secure the human resources who work on development as planned and to appropriately and properly collaborate with business partners, this could hinder the launch and undertaking of projects and provision of services and impact the Group’s earnings, etc. The Group is moving forward with aggressive recruiting activities by promoting work style reforms, which include remote work and office space strategy, and responding to the shortage of workers in Japan by promoting offshoring (distributed development overseas).
In addition to moving forward with aggressive investments in M&As and alliances to expand business fields, the Company possesses extensive financial instruments in order to manage surplus funds. Therefore, if M&As and alliances were not to have their initially expected impact or there were major changes in financial markets, a decline in the value of financial instruments held and the recording of unrealized losses on goodwill and securities could impact the Group’s earnings. The Company is building a group management system, centered on the Group Supervisory-Unit, and maintains a management system based on the Finance Department.
During the fiscal year under review, the Company recorded a loss on valuation of derivatives of 226 million yen and a loss on valuation of investment securities of 170 million yen.
In addition to the above, if third parties were to sustain damages during the Group’s execution of business, the Company could be a target of a lawsuit or other measures seeking damages, which could impact the Group’s earnings, etc. The Group works to prevent these risks through the above risk management system.
The following event has occurred which the management recognizes can materially impact the Group’s financial position, operating results and status of cash flow.
・Material lawsuit, etc.
In the past, a suit was filed against Cresco Wireless, Inc., a consolidated subsidiary of the Company. For details, refer to the Annual Securities Report, “V. Financial Information, 1. Consolidated Financial Statements, (2) Others, 2. Significant Lawsuits, etc.”
