Starzen Company Limited

Although manufacturing is conducted in accordance with food hygiene and safety standards, there is a risk that product defects or quality issues affecting society at large may occur. If such risks materialize, they could result in significant costs and decreased sales volume due to large-scale product recalls, product liability compensation, and loss of social trust. As countermeasures, SQF certification has been obtained at 56 business sites, and a group-wide quality control and assurance system has been established through the Quality Assurance Division.

There is a risk that procurement volumes may decrease due to delayed livestock growth caused by abnormal weather or the outbreak of livestock diseases, and a risk that meat market prices may fluctuate significantly due to changes in domestic and overseas supply and demand. If these risks materialize, gross profit may decrease due to reduced procurement volume, higher procurement prices, and lower selling prices. The Company aims to reduce these risks through geographic diversification of domestic affiliated farms, imports from multiple countries, thorough appropriate inventory management, and strengthening the development and sale of value-added products.

A prolonged spread of epidemics or infectious diseases is expected to lead to increased consumer preference for low prices, sluggish demand from the restaurant industry, significant price fluctuations in imported goods, and credit concerns among business partners. In addition, if infections are confirmed among employees, partial suspension of operations may disrupt product supply, potentially reducing operating profit due to weak sales of Wagyu beef and commercial-use products, higher procurement costs, and bad debts on trade receivables. Measures such as establishing BCP arrangements, encouraging work-from-home and telework, and thorough receivables management have been implemented.

There is a risk that import and movement restrictions resulting from outbreaks of livestock diseases such as African swine fever, classical swine fever, BSE, foot-and-mouth disease, and avian influenza, or the invocation of tariff safeguards, could cause sharp market price fluctuations and restrictions on product procurement. In addition, new laws and regulations related to quality labeling could result in additional compliance costs, potentially reducing operating profit. Risk diversification is achieved through procurement from numerous domestic partner producers and imports from multiple countries, along with a rapid regulatory response system established by the Quality Assurance Division.

There is a risk that if production, storage, and logistics infrastructure suffer severe damage from natural disasters such as major earthquakes, fires, typhoons, or heavy snowfall, production and shipping could be disrupted for an extended period, leading to a decrease in net sales. There is also a possibility of significant fluctuations in meat market prices due to disruptions in the domestic supply-demand balance, as well as temporary losses from deterioration of stored inventory quality or damage to facilities. A mutually complementary system in the event of a disaster has been established by dispersing manufacturing, storage, and sales sites across the country.

The Group conducts business activities in North America, Europe, Oceania, Asia, and other regions, and is exposed to a variety of risks including differences in business customs, changes in laws and regulations, terrorism and war, exchange rate fluctuations, unfavorable political and social factors, and leakage of intellectual property. If these risks materialize, various restrictions on business activities may arise, potentially worsening the financial position and business results. When entering new markets, risk assessments are conducted through information gathering on target countries and analysis of megatrends, and in the event of social unrest, a system is in place to ensure the safety of resident employees and to comply with the instructions of local governments and embassies.

Since a portion of raw materials and products are imported and exported in foreign currencies, and the financial statements of overseas affiliated companies are also prepared in foreign currencies, fluctuations in foreign exchange rates affect the profit and loss of import/export transactions, the yen-denominated value of foreign currency-denominated receivables and payables, and the yen conversion of the financial statements of overseas affiliated companies. While risk is mitigated through forward exchange contracts, if exchange rate fluctuations exceed the assumed range, the mitigating effect may not be sufficiently achieved.

There is a risk that profitability of held fixed assets may decline due to environmental changes such as rising procurement costs from global supply-demand fluctuations, increasing manufacturing costs due to labor shortages, and intensifying competition from the shrinking domestic market, making it impossible to recover the amount invested. If this risk materializes, the book value would be written down to the recoverable amount, and an impairment loss would be recognized. For significant investments, validity is verified by the Investment Review Committee, and after investment, continuous monitoring and variance analysis are conducted to implement appropriate improvement measures.

There is a risk that natural disasters, prolonged power outages, computer virus infections, unauthorized access, and similar incidents could cause information leakage, destruction, tampering, or loss, as well as long-term restrictions on access. If such risks materialize, the leakage of confidential information could result in a loss of social trust and extensive restrictions on business activities, potentially having a significant adverse impact on financial position, business results, and cash flows. Measures implemented include establishing information systems/security regulations, conducting regular IT security training, introducing remote data deletion and isolation mechanisms, and BCP measures through distributed server placement at two domestic locations.

There is a risk that securing the necessary number of employees and developing human resources may become difficult due to a decline in the working population resulting from the falling birthrate and aging population, as well as the outflow of talent due to changes in the employment environment. If this risk materializes, it could lead to reduced competitiveness and a shortage of product supply, adversely affecting business performance. The Company positions human resources as its most important management resource and addresses this risk by developing a work environment in which diverse talent can thrive, along with promoting evaluation systems and education and training programs.