Densan System Holdings Co., Ltd.

In the Information Services Business, if information resources including personal data are leaked or destroyed due to large-scale disasters or attacks by malicious third parties, this could significantly impact business performance through loss of trust or damages claims. As countermeasures, the Group has obtained Privacy Mark, ISO/IEC 27001, and PCI DSS certifications, and implements information security management measures in daily operations.

If operations of the Payment Collection Agency Services Business are restricted by amendments to laws such as the Payment Services Act, this could significantly impact business performance. The Act calls for institutional reviews including strengthened inspection and supervision of funds transfer service providers and ensuring the protection and refund of retained funds, presenting a risk of future regulatory tightening. As a countermeasure, the Group continuously gathers information and works toward the sound development of the industry through membership in the Japan Association of Agency Collection Services.

Goodwill has arisen as a result of business expansion through M&A, and if it is determined that sufficient future cash flows will not be generated, impairment of goodwill may become necessary, which could significantly impact business performance. As countermeasures, the Group conducts impairment testing and asset valuation in accordance with accounting standards for impairment of fixed assets, and has established a system for deliberating the appropriateness of acquisition amounts at the Investment Committee and monitoring progress after M&A.

The Payment Collection Agency Services Business is centered on payment collection via payment slips at convenience store counters and post office windows, but if innovative technologies such as cryptocurrency, electronic money, or mobile technology replace the core means of payment collection agency services, or if powerful new entrants emerge, this could significantly impact business performance. As a countermeasure, the Group continues to gather information on new payment services and prepares to adopt them as necessary.

In contracted system development, there is a risk that work hours exceed initial estimates due to significant specification changes during development, rendering projects unprofitable. In long-term projects, changes in various requirements due to environmental and technological changes, as well as quality issues, may also occur, which could significantly impact business performance. As countermeasures, the Group implements quality, deadline, cost, and risk management by project managers, and monitors project duration and costs using a project management system.

If cyberattacks, information security incidents, system or hardware malfunctions, natural disasters such as earthquakes or typhoons, or large-scale power outages occur, this could impact business performance through customer damages claims or loss of trust. As countermeasures, in addition to applying ISO/IEC 27001, the Group has developed facility environments including earthquake-resistant and seismic isolation building structures, uninterruptible power supply through in-house power generation equipment, and comprehensive security equipment.

The Payment Collection Agency Services Business depends on fee collection contracts with convenience store headquarters nationwide, including major chains, and if continuation of these contracts becomes difficult, or if a particular user's handling volume increases sharply and switches to a direct contract with convenience stores, this could significantly impact business performance. As countermeasures, the Group monitors the management conditions of convenience stores to take early measures in the event of contract termination, and diversifies risk by concluding a wide range of contracts with payment service providers other than convenience stores.

In the receivables-guaranteed deferred payment service, the Group advances sales proceeds to merchants and subsequently collects payment from consumers; if bad debts occur beyond expectations due to deterioration in economic conditions or other factors, this could significantly impact business performance. As countermeasures, the Group has established a management system to curb bad debts exceeding expectations through regular monitoring of bad debt allowance ratios and adjustment of the credit screening system.

The Group procures services and products from overseas, and exchange rate fluctuations in foreign currency-denominated transactions may affect financial position and operating results. In particular, during periods of yen depreciation, there is a risk that rising procurement costs could put pressure on business performance. As a countermeasure, the Group uses forward foreign exchange contracts to hedge risk on some transactions.

With business expansion and the increasing sophistication and complexity of information services projects, if the Group is unable to sufficiently secure and develop the excellent talent and engineers required, this could significantly impact business performance through disruptions to operations or reduced sales due to lost orders or smaller order sizes. As countermeasures, the Group promotes the creation of a culture where diverse talent can thrive, reviews its compensation structure, actively pursues new graduate and mid-career hiring, and systematizes support for qualification acquisition and training programs.