Shobunsha Holdings, Inc.

The Map & Guide Database is the foundation of the Group's business, and if data is lost due to natural disasters or rapidly becomes obsolete due to technological innovation, it could have a material impact on business performance. In addition, while significant management resources are invested in the continuous development and expansion of the database, there is also a risk that revenue commensurate with the resources invested may not be recorded. As countermeasures, the Group has established a backup system at multiple locations, formulated annual maintenance plans, and built a flexible response system through in-house production.

In the event of a failure in the distribution system, in addition to the loss of revenue opportunities, there is a risk of liability for damages to business partners. The risk of system outages and data encryption due to increasingly sophisticated cyber attacks such as ransomware has also been rising in recent years. As countermeasures, the Group is proceeding with careful system development involving multiple inspection steps, establishing a quality control system, collaborating with specialized security organizations, and introducing employee training and detection systems.

If consumer and business needs change rapidly due to the rapid evolution of information technology or the emergence of new information media, the Group may become unable to record revenue commensurate with the resources invested in its conventional products and services. Regarding the use of the latest technologies, including generative AI, the Group is proceeding with the formulation of internal guidelines and the establishment of specialized organizations aimed at cost reduction and value creation, while also building a legal collaboration and governance system to address risks such as copyright infringement and information leakage.

Approximately 53.4% of net sales depend on sales of commercially published publications, of which approximately 81.5% are transactions via the two major distributors, Tohan and Nippon Shuppan Hanbai. Amid rising delivery costs stemming from the logistics "2024 problem" and ongoing transformation of the publishing distribution structure, changes in the business environment of distributors or reviews of their delivery systems could have a material impact on product distribution and business performance. As a countermeasure, the Group is working to reduce this dependence by expanding peripheral businesses such as e-books, apps, the web, and brand licensing.

Geopolitical tensions and prolonged military conflicts around the world have led to sharp increases in the prices of raw materials such as paper and ink, as well as rising logistics costs, creating a risk of deteriorating profitability in the publishing business. If exchange rate fluctuations, such as the continued depreciation of the yen, persist over the long term, raw material procurement costs may rise further. As countermeasures, the Group continuously gathers the latest geopolitical information and has established a system to review its business and operational areas when the possibility of an emergency is recognized.

Under the publishing industry's returns system, if the value of publications decreases due to special factors, returns exceeding the normal return rate may occur, significantly reducing the gross profit margin. The Group records expected returns as a refund liability by excluding them from monthly sales, but returns exceeding expectations directly affect business performance. As countermeasures, the Group has sales staff patrol inventory at major stores, utilizes online sales channels, and diversifies return risk through the expansion of e-book offerings.

The core portions of the Group's map data are built and updated based on topographic maps and other data published by the Geospatial Information Authority of Japan (GSI). If usage restrictions or constraints fundamental to the business are imposed, or if GSI provides similar map data free of charge, this could have a material impact on business performance. As countermeasures, the Group continuously gathers information on GSI's policy trends while promoting the commercialization of customized maps and the development of products with unique added value.

If customer personal information or confidential business partner information is leaked due to cyber attacks such as ransomware, targeted attacks, or phishing, or due to improper handling, it could have a material impact on business performance and social credibility, and also give rise to significant liability for damages. As countermeasures, the Group strengthens its management system through the establishment of personal information management regulations and internal network management regulations, and contractually obligates business partners and outsourcing contractors to handle information in the same manner.

The Group has recorded impairment losses on software and other assets in the current and past fiscal years, and depending on the recoverability and usage status of fixed assets held, additional impairment losses may be recorded in the future. In addition, fluctuations in factors such as the discount rate, salary levels, and the long-term expected rate of return on pension assets could cause actual retirement benefit expenses and obligations to significantly deviate from estimates, potentially having a material impact on business performance. As a countermeasure, the Group's policy is to incorporate predictable risks into its annual plans, while promptly estimating and disclosing unpredictable risks as soon as they materialize.

Although the direct impact has become limited since COVID-19 was reclassified to Category V, if a new infectious disease outbreak suppresses people's willingness to travel and go outside, this could lead to decreased demand for maps and guidebooks and reduced advertising revenue related to travel and tourism. In the Solutions Business as well, a shift in local government policy focus toward infection countermeasures could stagnate demand related to regional revitalization, and inbound-related businesses face the risk of being significantly affected by the reinforcement of entry and exit restrictions.