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Business Risks

We take various measures to mitigate risks that could have a significant impact on the financial position, business performance, and cash flows of the Group, which we define as follows.

Business environmental risks

Risk item Assumed impact Measures to address the risk
Fluctuations in private capital investment As a result of the suspension, postponement, change, etc. of investment plans of customers, the demand for construction and HVAC systems may fall more than previously estimated. We will implement comprehensive company-wide measures including the reduction of fixed costs.
Fluctuations in procurement costs When material and equipment prices for ducts, piping, heat insulation, refrigerants, and other utility works have sharply risen but it is difficult to reflect the cost increase on the contract amount, the costs of the construction work may increase more than previously estimated. We will strengthen the procurement function based on the advantage of scale by enhancing the system to control purchases and accelerating the integration of purchases by all offices.
Shortage of technical staff and skilled workers We may fail to establish a sufficient construction structure to complete the construction work by the specified deadline and lose the trust of customers as a result. We will try to improve productivity through the establishment and use of an outsourcing system, the utilization of IT tools such as Apple Watch and SPIDERPLUS and standardization of operations. We will also secure technical staff through commitment to the recruitment of new workers in contract construction firms and the introduction of the construction career development system promoted by the MLIT.
Regulations placing a limit on working hours With the start of the application of limits on working hours for construction work, a decrease in the total number of hours worked by engineers and other workers will lead to a reduction in construction capacity. We will work to improve productivity through means such as transforming the way construction is carried out by shifting from conventional site-bysite “construction management” to platform-based “production management" (T-Base® project).
Overseas business development We may face various risks in our target countries such as regulations and supervision by authorities including voluntary regulatory bodies, economic and political instability and differences in business practices, as well as intensified competition with competitors that have a competitive edge in a specific country/region or the global market. We will promote the review of the strategic bases in our international businesses as a whole and implement proper monitoring through the constant exchange of information with overseas Group companies.
Expansion of business fields In a target market, the technologies we own may not be suitable or we may not be able to achieve the initially anticipated results depending on the speed of the market expansion, the scale of the growth, or difficulty in entering the market. We will judge whether we need to withdraw from the market or not according to the predetermined criteria.
M&A / Investment Contingent liabilities may occur or unrecognized liabilities may be found after an acquisition. The possibility to recover invested capital may decline to losing the whole or part of the investment if the revenue cannot be produced as expected due to changes in the business environment, sluggish performance of the invested company, etc. Before an M&A or investment, we will perform due diligence on details including the financial statements and contractual relationships of the target company.
Trend of the financial market/ Decrease in the credit strength of our Group We may fail to raise funds in a timely manner under favorable conditions for our Group, which may constrain the execution of our business. We will successively communicate and exchange information with financial institutions.
Occurrence of liability for damage or liability for non-conformity We may be required to pay compensation for damage that is too large to be covered by the umbrella liability insurance carried for unforeseeable circumstances. To prevent such a situation, we will thoroughly control health and safety through measures such as the provision of instructions on health and safety to sites and the establishment of a proper working environment.
Aging of employees Decreases in the number of employees are anticipated due to increases in the employees who retire at mandatory retirement age, possibly leading to problems for our future business activities. We will promote long-term employment by reinforcing the retirement age extension and re-employment systems and increase productivity with labor saving and efficiency improvement through the visualization of techniques by using IoT, etc.
We will enhance the use of diverse human resources including international personnel.
Appointment of young workers and professional human resources If we cannot appoint sufficient young workers and professional human resources, it may create problems for the continuity of our business activities. We will visit universities, etc. in Japan actively, organize recruitment workshops, and conduct an internship program while also increasing professional human resources by employing mid-career workers.
Absence or infringement of patents The technologies, etc. used in our Group are not protected if we fail to acquire their patent rights and other intellectual property rights. In the meantime, in case we unintentionally infringe any patent rights and other intellectual property rights of others, we may be required to pay compensation for damage. We will establish a system to thoroughly investigate infringed patents and constantly share information among all departments.
Asset holding Marketable stocks, etc. involve the risk of price fluctuations. We may suffer an impairment loss due to a significant decline in market prices and post it as an extraordinary loss. While paying attention to the economic trends, we will consider options, including the sale of the assets we own, to reduce the risk of a decrease in the value of the assets.
Fluctuations in the exchange rate The financial results, assets and liabilities of overseas affiliates can be affected by fluctuations in the exchange rate because those figures are converted from the local currency to yen for the preparation of consolidated financial statements. When conducting a transaction in a foreign currency, we will try to reduce the risk of fluctuations in the exchange rate with foreign exchange reserves and other actions while paying attention to the economic trends.
Possession of personal information and confidential information of customers In case of external leakage, abuse, etc. of information with illegal access, etc., we may be involved in a legal dispute and subject to punishment from supervisory authorities in Japan and overseas. We will take measures to address cyber-attacks and strengthen IT governance.
To enhance our approaches to incidents, we aim to construct a Computer Security Incident Report Team (CSIRT) system while giving relevant training to employees and taking other initiatives to improve their information technology literacy.
Application of legal regulations, etc The operation of our Group may be subject to new constraints due to the establishment or revision of legal regulations, withdrawal of an approval/license or punishment by supervisory authorities, the establishment or revision of new guidelines or voluntary rules, etc. We will promote cross-sectoral initiatives for compliance in the Group and report the status of the initiatives to the Risk Management Committee and the Board of Directors to ensure proper execution of duties while also conducting internal audits to reinforce the compliance system.
Lawsuits, etc. Our Group may face lawsuits and other claims concerning various issues including the environment, labor and intellectual property rights. We will try to prevent them through the establishment of a crisis management system to prepare for emergencies, as well as the activities of the Crisis Management Council, while also purchasing various insurance policies.
Natural disasters The occurrence of large-scale natural disasters, such as earthquakes, typhoons and tsunamis, and pandemics of infectious diseases might result in a suspension or significant delay of construction works as well as a decline in the demand for construction due to the slowdown of economic activities in society as a whole. We will work to improve the accuracy of the business continuity planning (BCP) manual and develop measures to address emergencies.
Expansion and prolongation of infectious diseases An increase in infected people within the company could disturb operations. This could also cause a decline in the demand for construction due to the economic downturn, as well as sharp rises in the prices of materials and equipment. We will set up task forces internally and take various measures to prevent infection and develop measures to address emergencies.
Climate change Delays or lack of response to climate change may lead to a reduction in business activities due to a decline in reputation among investors, customers, workers, and other stakeholders, and a corresponding decline in corporate value. In order to handle the transition to a decarbonized society, the ESG Promotion Committee has been established to constantly monitor changing conditions, review environmental targets, and put in place a system to prevent and promptly address risks before they materialize.

Learn about Our Other ESG Initiatives