Business and Other Risks
The following presents particularly significant risks that could affect the Link and Motivation Group’s performance and financial position. The information contained herein may not cover all scenarios, and risks not currently apparent or considered significant may affect the Group in the future. Forward-looking statements contained herein are judged by the Group’s management to be consistent with information available as of the end of the previous consolidated fiscal year.
1. Changes in the Economic Environment (Risk of occurrence: High; Period when likely to occur: No specific period; Size of impact: Medium)
The Organizational Development Division and the Matching Division operate B-to-B businesses, and are subject to industry trends, changes in social conditions, economic fluctuations, and other factors. While the probability and timing of relevant risks are not always clearly apparent, they can significantly affect the Group, depending on the circumstances.
The COVID-19 pandemic had a significant impact on the Group’s consolidated results for the consolidated fiscal year ended December 31, 2020, due to the cancellation or postponement of events and training, and cutbacks in investment in human resources by small and medium-sized enterprises. During the consolidated fiscal year ended December 31, 2021, although the impact of the COVID-19 pandemic gradually eased as vaccination rates increased, and the Japanese economy showed signs of recovery, the outlook remains uncertain, as new strains have been identified. Nevertheless, revenues recovered, increasing 6.0% year-on-year. This was the result of effectively identifying customer needs in areas such as online training of new employees and managers and improving engagement of employees working from home. The Group will structure its organization to respond flexibly and quickly to changes in social conditions and minimize their impact.
2. Response to Competition (Risk of occurrence: Low; Period when likely to occur: No specific period; Size of impact: Large)
The Link and Motivation Group operates its businesses based on its unique core technology, Motivation Engineering, and therefore considers that, as a group, it has no direct competitors. Nevertheless, if, due to the emergence of companies imitating this technology, the Group becomes unable to sufficiently demonstrate an advantage over competing companies, this could reduce sales and have a significant impact on Group results.
The Group is countering this risk by enhancing its R&D, continuing to evolve Motivation Engineering and making further efforts to reduce the possibility of imitation. Furthermore, the Group has established its brand by developing businesses based on Motivation Engineering. The Company takes measures to protect and maintain its intellectual property, such as the acquisition of trademarks and patents, and the specification of copyrights to protect its brand.
3. Impairment of Goodwill (Risk of occurrence: Medium; Period when likely to occur: No specific period; Size of impact: Medium)
The Link and Motivation Group has been accelerating its growth through business expansion, including through M&As, and is actively entering new fields and adding to its lineup of products/services. As a result, its consolidated financial statements record a substantial amount of goodwill resulting from the acquisition of shares through M&As, etc. Going forward, the Group will apply impairment accounting to recognize non-recurring loss on acquisition of equity if factors including changes in the operating environment or business conditions reduce the profitability of acquired businesses significantly, which could significantly affect the Group’s businesses, results, and financial position. Moreover, the Group recognized loss on impairment of ¥59 million in the fiscal year ended December 31, 2021 and may recognize loss on impairment in the future. The Group is working to minimize impairment losses by generating synergies and regularly monitoring results following acquisitions.
4. Leakage of Personal and Confidential Information (Risk of occurrence: Low; Period when likely to occur: No specific period; Size of impact: Large)
In the course of its businesses, the Link and Motivation Group handles large volumes of personal and confidential information, including information about the organization and human resources of client companies (Organizational Development Division), customer information such as name and date of birth (Individual Development Division), and company information such as job applicants and open positions (Matching Division). The Group makes every effort to build systems for the appropriate management of information, including rules and training on the handling of personal and confidential information, and acquiring/renewing Privacy Mark certification.
In the event that unforeseen events cause personal information to be leaked to external parties, and this causes damage to the owner of the personal information, client companies or others, the resulting damage claims and loss of public trust could affect the Group’s business results and financial condition.
5. System Failure and Business Suspension Due to Large-Scale Disasters and Infectious Disease Pandemics (Risk of occurrence: Low; Period when likely to occur: No specific period; Size of impact: Large)
The Group recognizes the risk of earthquakes, typhoons or other natural disasters and the spread of infectious diseases as in the case of the COVID-19 pandemic, and has implemented countermeasures such as safety confirmation systems to the best of its ability. A disaster of greater scale than anticipated or infectious disease pandemic could cause the Group to terminate or discontinue services due to system failure or business suspension, which could affect the Group’s businesses, results and financial condition.
6. Reliance on a Specific Individual (Risk of occurrence: Low; Period when likely to occur: No specific period; Size of impact: Medium)
Ozasa Yoshihisa is the Group’s founder and has served as representative director since its establishment. The Group is countering relevant risks by hiring and training excellent personnel and standardizing services to systematically structure business management that is not dependent upon the skills of any single individual. However, at present, Mr. Ozasa plays an important role in terms of projecting the Group’s overall brand image. In this regard, the Group is taking steps to build a stronger organization that projects a systematic brand image. This includes the appointment of Sakashita Hideki as president and representative director in January 2013. Any difficulty on the part of Mr. Ozasa to continue his work for the Group could affect the Group’s ability to promote its businesses and execute its management strategies.