The following are the key items considered to be risk factors related to business and other parts of Press Kogyo Group that could have a material impact on investors' decisions. Forward-looking statements reflect the judgment of the Group as of the end of the fiscal year.
As the Group's main products are automotive parts and construction machinery parts, operating income is affected by economic conditions in the countries and regions that directly and indirectly supply products. As a result, we are striving to collect and analyze relevant information, and to reflect our findings in business plans, such as the annual and medium-term business plans. Nonetheless, a recession in the Group's key markets, which include Japan, North America, Europe, and Asia, and an accompanying decline in demand that exceeds forecasts, could adversely affect the Group's business performance and financial position.
The Group conducts production and sales activities in Japan, North America, Europe, and Asia, and the ratio of overseas sales has reached approximately 50%, on a consolidated basis. The occurrence of one or more of the following risks at our overseas businesses could adversely affect the Group's business performance and financial position:
- political or economy instability and social turmoil such as war, terrorism, radical protests, riots, and strikes
- unexpected changes in laws, regulations, and taxes
- labor disputes, rapid rise in personnel costs, and difficulty securing and recruiting human resources
- large-scale natural disasters, and transmittable and infectious diseases
- changes in management policy and business environment, etc. in joint ventures
When preparing the consolidated financial statements, financial statements of the Group's overseas affiliates are presented in local currencies and then converted into yen. The exchange rate at the time of conversion could adversely affect the Group's business performance and financial position.
To maintain and improve competitiveness within our industry, and to strengthen global business activities, the Group recognizes the extreme importance for the future of securing and developing human resources with specialized and excellent management skills. For this reason, we are taking actions, including active recruitment in Japan and overseas, and we are improving training and education as part of our Medium-Term Business Plan strategies of passing on skills and using diverse human resources. Nonetheless, delays in securing and developing human resources within the Group could adversely affect the Group's future business development.
In line with the introduction of next-generation CASE-related (connected, automated, shared, electric) technologies, such as electrification and autonomous driving, the entire automobile industry, including parts manufacturers, is entering a period of major transformation. For this reason, the Group aims to grow the global business based on the corporate vision “To be the world's No. 1 manufacturer of our core products.” In addition, in our Medium-Term Business Plan we set the goal of boosting product appeal and reinforcing competitiveness. For this reason, we are “leading products and high competitiveness” investing management resources in technological innovation and new product development in anticipation of future needs. Nonetheless, if our response to market and customer needs is not effective or not as timely as required, this could adversely affect the Group's business performance and financial position.
To minimize the impact of natural disasters and large-scale infectious diseases on production, the Group will implement training based on a business continuity plan (BCP) and consistently take actions based on government guidelines. We are also promoting risk prevention and awareness. Nonetheless, a large-scale natural disaster of an unexpected magnitude could cause damage to or the collapse of buildings and equipment as well as disrupt the physical and information infrastructures, supply chains, and transportation routes. This could have a serious impact on human resources, which might significantly reduce production capacity and interrupt operations. In these cases, delays in product supply to customers and the large costs required to repair damaged buildings and equipment could adversely affect the Group's business performance and financial position.
The Group purchases many of the materials and parts necessary for business activities from suppliers outside the Group. Therefore, there are concerns that raw materials and parts could be in short supply and costs could rise due to delivery delays from certain suppliers, and over product defects, deterioration of business conditions, and unexpected accidents and natural disasters. We are making every effort to counter this risk based on our procurement policy, such as securing multiple suppliers and prompt recovery support. Nonetheless, such factors as a significant increase in costs and suspension of production could adversely affect the Group's business performance and financial position.
The Group manufactures products based on internationally recognized quality control standards. We strive to ensure stable product quality and make improvements, and have introduced a quality control system that has been inspected by a third party. However, this does not guarantee that all products will be free of defects or that there will be no product recalls in the future. In addition, although we are insured against product liability claims, the insurance may not completely cover all eventual damages. For this reason, a product defect that leads to a recall or liability compensation could result in hefty costs and a loss of social credibility, which in turn could significantly impact the Group's standing and could adversely affect the Group's business performance and financial position.
Employees of our Group must comply with all laws and regulations in such areas as labor relations, antitrust, information management, intellectual property protection, environmental preservation, correct accounting and tax treatment, and preventing insider trading. Accordingly, we established the Code of Ethics as well as rules and etiquette to be followed as a Company-wide code of conduct as well as an approach as a responsible business that we adhere to. We strive to ensure that operations comply with corporate ethics and we make every effort to raise awareness of good corporate behavior. Further, we have established internal and external consultation desks for compliance and for preventing harassment, and we respond correctly and quickly to all transgressions. Nonetheless, if an employee violates the law or causes some other problem, this could lead to tangible and intangible damage, such as an increase in direct costs, social sanctions, or harm due to misinformation, which could adversely affect the smooth running of our business as a result of a loss in the Group's social credibility.