H.I.S. Co., Ltd.

There is a risk that changes in political and economic trends, legal systems, geopolitical factors, etc. in various countries may affect the business. These factors are external factors over which the Group has no control, and if sudden changes occur, they may have a material impact on the financial position and business results. The Group's policy is to respond by making maximum use of the knowledge and accumulated information within the Group.

There is a high degree of business and regional concentration, with the Travel Business accounting for 82.9% of segment sales and Japan accounting for 79.6% of sales by country. If changes occur in the environment surrounding the Travel Business in Japan, this may have a direct and significant impact on the financial position and business results of the Group as a whole. In addition, intensifying competition due to business model transformation by business partners and new entrants from other industries is also recognized as an ongoing risk.

In providing travel products, if a subcontractor for vehicles, optional tours, etc. causes an accident or violates laws and regulations, the Group may be held responsible for its selection of the subcontractor, which could result in a loss of public trust, claims for damages, or administrative sanctions under the Travel Agency Act. HIS has established its own "Quality and Safety Management Guidelines" and strives to manage quality and safety through dissemination and on-site inspections at overseas branches and business partners; however, it is difficult to fully control the actions of subcontractors.

If a system failure or information leakage/tampering occurs due to a communication network malfunction, program failure, computer virus infection, etc., the provision of services to customers may be interrupted, leading to increased repair costs and a decline in social credibility. In addition, there is a risk that failure to keep pace with future technological innovation could lead to a loss of competitiveness and missed business opportunities. Although the Group strives to ensure sufficient security, complete defense is difficult given the increasing sophistication of external threats.

There is a risk that if the development and recruitment of talented personnel, which is essential for corporate growth, does not proceed as planned due to labor market conditions and other factors, it could hinder competitiveness against other companies and business operations. Although the Group has established a human resource development policy based on Vision2030 "Change＆Create: Becoming a company overflowing with a spirit of challenge, connecting the world, and continuing to be chosen," intensifying competition in the labor market may become a barrier to recruitment and retention.

In addition to climate change and stricter environmental regulations, the occurrence of natural disasters, epidemics, aviation accidents, terrorism, wars, etc. may affect tourism demand and infrastructure, potentially having a material impact on the financial position and business results. For the Group, whose core business is the Travel Business, these external shocks pose a risk directly linked to a sharp decline in demand. Details regarding climate change-related risks are also disclosed in the Group's approach to and initiatives on sustainability.

While conducting business activities under a diverse range of domestic and international laws, regulations, business customs, and social morals, there is a possibility that unexpected new regulations or changes in the policies of regulatory authorities may result in situations deemed to be compliance violations. If a violation occurs, it could affect the financial position and business results due to the costs of responding to legal proceedings and damage to brand image. The Group strives to maintain and improve its compliance function through the activities of the Risk and Compliance Committee and the formulation and dissemination of a code of conduct.

Although the Group hedges against foreign exchange rate fluctuation risk associated with foreign currency-denominated transactions through forward exchange contracts and other means, sudden foreign exchange fluctuations could affect the financial position and business results. In addition, the translation of the financial statements of overseas consolidated subsidiaries into Japanese yen is also affected by exchange rate fluctuations. Furthermore, a significant rise in crude oil prices could lead to a surge in fuel surcharges, causing overall travel demand to stagnate, which poses a risk of adversely affecting the Group's business results.

The Group holds listed and unlisted stocks, bonds, and other securities, and there is a risk of incurring losses on sale or valuation losses due to trends in the stock and bond markets or a deterioration in the financial position of investee companies. Securities with market prices are directly affected by market fluctuations, while for securities without market prices, a deterioration in the performance of investees may lead to the recognition of valuation losses.

Property, plant and equipment, intangible assets, stocks, goodwill, and other assets arising from domestic and overseas investment activities and acquisitions are recorded on the consolidated balance sheet, and there is a risk of recognizing impairment losses if it is determined that expected results will not be achieved due to changes in the business environment or competitive conditions. The recognition of impairment losses has a direct impact on the financial position and business results. Amortization is conducted over a reasonable period during which future synergies are estimated to materialize; however, such estimates may change due to changes in the business environment.