About Us

(1) Basic Policy on Risk Management

Based on our corporate philosophy, The Greatest Leisure for All People, the Group aims for sustainable value creation through the integration of the Content and Digital Business and the Amusement Equipment Business. To promote these business activities in a stable and continuous manner, we recognize that risk management is an essential management foundation.
The Group aims to identify and address risks surrounding the Group in a timely and appropriate manner, while simultaneously pursuing the sustainable enhancement of corporate value through appropriate risk-taking.

(2) Risk Management Structure

The Company has established the Group Sustainability Committee as an advisory body to the Board of Directors. The Committee is chaired by the director responsible for risk management and has established two subcommittees: the Risk Management Subcommittee and the Sustainability Subcommittee. In cooperation with individual Group companies, these subcommittees promote initiatives concerning risk management and sustainability.

At the Group Sustainability Committee, both subcommittees work in cooperation to deliberate on material management issues, based on the relationships between key risks and sustainability materiality, as well as the related risks and opportunities. Furthermore, the Committee deliberates on the selection of key risks, the formulation of response policies, the verification of response status, and reviews based on environmental changes. The details of these deliberations are reported to the Board of Directors as necessary, and under the supervision of the Board of Directors, the Company is committed to enhancing the effectiveness of its risk management activities.
The Group Sustainability Committee is held on a regular basis, while each subcommittee is held flexibly, to deliberate on and verify matters concerning risk management and sustainability. The Group Sustainability Committee met two times during the fiscal year under review.
Furthermore, through cooperation with the Audit and Supervisory Committee, the Internal Audit Division, and Audit and Supervisory Board members of subsidiaries, the Company strives to enhance the effectiveness of organizational audits and strengthen its corporate governance functions

(3) Risk Management Processes

The Group's risk management activities are fundamentally based on understanding changes in the business environment. We identify and review risks in light of changes in the external environment, including macroeconomics, regulatory trends, technological innovations, and social issues, and strive to implement risk management activities that correspond to the latest conditions.

Selection Process for Key Risks

Risks were identified by collecting opinions from management, workplace managerial staff, and the Audit and Supervisory Committee over a total of seven workshops. Furthermore, we assess these risks in light of the external environment and with professional expertise, selecting key risks through multifaceted examination and discussions.

Approach to Selecting Key Risks

Key risks are selected from the perspectives of achieving strategies and business plans tailored to the Group’s business characteristics, as well as enhancing corporate value and preventing its impairment, based on multiple criteria that detail the degree of impact and probability of occurrence.
Specifically, we consider perspectives such as the impact on Group strategies, the chain reaction or ripple effects to other risks, the difficulty of recovery, disclosure and accountability, and the strength of countermeasures. In addition, we confirm the relevance of these risks to sustainability materiality as necessary, clarifying their relationship with management issues.

Approach to Responding to Key Risks

The departments in charge work in cooperation with relevant departments to formulate response plans for each key risk and develop structures to promote these responses. The status of responses to each risk is verified by the Risk Management Subcommittee and in cases where environmental changes or the materialization of risks are identified, a structure is in place to promptly report such events to the chairperson of the Group Sustainability Committee. Furthermore, based on insights gained from the results of monitoring and events that have occurred, the Company verifies the effectiveness of countermeasures through deliberations within the Group Sustainability Committee, and reviews them as necessary.
Additionally, in the event that an emergency or material issue arises during day-to-day operations, we are developing structures to ensure timely and appropriate reporting, initial responses, minimization of damage and impact, and prevention of recurrence, based on the concepts of incident management or crisis management depending on the nature, materiality, and urgency of the event. For risks that have the potential to cause large-scale damage or long-term suspension of business activities, we are committed to taking proactive initiatives to minimize damage through our Business Continuity Plan (BCP) and other frameworks.

(4) Key Risks

The risks that may impact the Group’s operating results, etc., that we recognize are set forth below. The risks listed below represent the major items that the Group recognizes as materially important for management, and the order of listing does not indicate the relative scale of importance. Furthermore, individual risks may be interrelated and exert a compounded impact.
Any forward-looking statements in this text are based on the understanding of the Group as of the filing date of this Annual Securities Report, unless otherwise specified.

Group Strategy Risks
Risk Details	The Group simultaneously promotes multiple growth themes, such as IP and business investments, global expansion, and in-house development and manufacturing, and is accelerating the creation of synergy among multiple core businesses. Since these initiatives are interrelated, direction-setting and decision-making based on a group management perspective are essential. Under these circumstances, if the management strategies, allocation of management resources, investment decisions, alliance management, and business model transformations for the entire Group cannot be operated in a consistent and integrated manner, the priorities of investments and initiatives may become unclear. This could disperse management resources, cause the continuation of unprofitable investments, stagnate growth initiatives, and lower capital efficiency, which may ultimately impact the Group’s operating results.
Countermeasures	・Foster an understanding of our management policies through cooperation among subsidiaries to improve the certainty of strategy execution and suppress ripple effects to other risks. ・To strengthen products and distribution, promote the reinforcement of organizations, human resources, and product planning and development capabilities, the expansion of partners, and the integrated acquisition of IP and growth investments. ・To maximize IP value, share and utilize the expertise and know-how concerning IP possessed by each company, striving to create Group-wide synergy and expand IP resources.

IP Strategy Risks
Risk Details	The Group positions the multi-layered development of businesses centered around IP as the source of its growth, and considers maximizing the value of major IP, as well as developing and acquiring new IP, to be material growth themes. In addition, contract and rights management are becoming increasingly complex due to factors such as reviewing contracts with master licensees, coordinating competition with sub-licensees, and signing numerous licensing agreements in conjunction with in-house manufacturing and direct sales of merchandising. Furthermore, with the global expansion of our business, particularly in China and other overseas markets, it is becoming increasingly important to address rights protection, contractual terms, and commercial customs region-by-region. Under these circumstances, if any termination or modification of terms for licensing agreements of major IP, loss of opportunities to acquire new IP, decline in IP value, infringement of intellectual property rights by third parties, or deficiencies in contract and rights management occur, it may cause delays in product planning, loss of sales opportunities, incurrence of additional expenses, litigation responses, or a decline in brand value. This, in turn, could ultimately impact the Group’s operating results and corporate value.
Countermeasures	・Strike a balance between “defensive” IP management focused on rights protection and “offensive” IP utilization aimed at improving the reproducibility of monetization. ・Construct a highly reliable IP management structure by expanding the utilization of the Ultraman IP, researching and analyzing powerful IP, and strengthening relationships with content holders.

Governance Risks
Risk Details	The timely and appropriate judgments of management within the Group serve as a crucial factor supporting our growth. On the other hand, in conjunction with future global expansion and the scaling up of growth investments, it is anticipated that the volume of information, complexity, and speed required for management decisions will increase further. Under these circumstances, if organizational operations rely excessively on the attributes, experience, and judgments of specific executives or individuals in charge, it may disrupt decision-making or business execution in the event of their absence or unforeseen circumstances. Furthermore, a decline in the flexibility of management decisions and organizational operations could impact business continuity and the promotion of growth initiatives, which may ultimately impact the Group’s operating results and corporate value.
Countermeasures	・Clarify duties and the division of responsibilities, sharing information group-wide, and developing a mutually supportive structure to strengthen human resource development and cross-organizational collaboration. ・Reinforce our management foundation by separating supervision from execution, enhancing the monitoring functions of the Board of Directors, and delegating authority to improve both the quality and speed of management decisions. ・Strengthen our corporate governance structure by ensuring that outside and independent directors account for half of the Board of Directors.

Brand Risks
Risk Details	The Group is actively engaged in global expansion, in-house product development and manufacturing, and the expansion of new business domains, which has resulted in expanding touchpoints with consumers, business partners, copyright holders, investors, and other stakeholders. Furthermore, against the backdrop of the rapid dissemination of information driven by social media and rising social interest in corporate ethics and information disclosure, any damage to credibility could have far-reaching and prolonged consequences. Under these circumstances, if any scandals or misconduct by the Group or its related parties, lack of information disclosure, or deficiencies in disseminated content occur, it may lower the trust of stakeholders, including customers and investors. This, in turn, could lead to a reduction in revenue opportunities, deterioration of the financing environment, or a decline in brand value, ultimately impacting the Group’s operating results and corporate value.
Countermeasures	・Maintain and improve trust from stakeholders by strengthening brand and reputation management as well as information disclosure. ・To pursue sustainable growth, the Group Sustainability Committee has been established to promote sustainability management. ・Ensure the proactive disclosure of both financial and non-financial information.

Product Development and Sales Risks
Risk Details	In the Amusement Equipment Business, the continuous creation of hit PS machines and the achievement of unit sales targets serve as material financial resources supporting the Group’s growth investments. On the other hand, factors such as demand fluctuations in the PS machine market, changes in consumer preferences, failure to adhere to regulatory compliance standards, and product planning and development relying excessively on individual experience or chance may arise. If the creation of hit machines that match market needs, the achievement of unit sales targets, or the number of PS machine titles below plans under these circumstances, it could decrease revenue and profits, potentially lowering our capability to generate the funds necessary for growth investments. In addition, within the Content and Digital Business, a lack of proper product planning structures, mismatch with market trends and consumer needs, and the level of proficiency of demand forecasting, inventory management, manufacturing management, and quality control can affect short-term sales, customer trust, and medium- to long-term profitability. If these systems do not function adequately, it may impact the Group’s profitability through inventory valuation losses, loss of sales opportunities, delays in investment recovery, and the incurrence of additional expenses.
Countermeasures	・Construct a structure to reduce reliance on specific individuals by standardizing product development and sales processes and utilizing data, while simultaneously advancing sophisticated demand forecasting, inventory management, and quality control. ・Continuously develop and sell products that draw out the appeal of major IP, pursue gameplay that satisfies market needs, and reinforce our private brand (PB) development structures.

Supply Chain Risks
Risk Details	Within the Group, the complexity of our supply chain, including procurement sources, contract manufacturers, logistics, and sales channels, is increasing in conjunction with the expansion of in-house product planning, development, and manufacturing, global expansion, and the expansion of our private brand (PB) product ratio. Consequently, it is becoming increasingly critical to ensure stable supply and quality guarantee through securing copyrights, securing and standardizing component procurement routes, utilizing reused parts, and making capital investments. Furthermore, the destabilization of supply chains due to geopolitical risks or natural disasters, alongside rising demands for quality, legal, and regulatory compliance, are factors that further heighten the importance of supply chain management. Under these circumstances, if any deficiencies arise in procurement, quality control, or legal and regulatory compliance, or if problems such as an overdependence on specific regions for component procurement or suspension of sales due to legal violations occur, it may cause supply disruptions, production halts, delivery delays, loss of sales opportunities, incurrence of penalties, or a decline in trust from customers and business partners. This, in turn, could ultimately impact the Group’s brand value, profitability, and medium- to long-term investment capacity.
Countermeasures	・Strengthen the management of issues concerning the supply chain, including procurement, quality, and legal and regulatory compliance. ・Promote responsible procurement activities in collaboration with business partners and suppliers. ・Improve our competitiveness through the integration of production and logistics bases. ・Establish direct retail stores and utilize both in-house e-commerce (EC) sites and external EC platforms to develop sales channels and distribution networks, constructing a structure to deliver products stably to our customers in the expansion of merchandise of various IP, including Ultraman.

AI/DX Risks
Risk Details	Within the Group, AI and DX represent more than mere operational efficiency, they serve as a management execution foundation that supports the refinement of our business portfolio, improvement in the precision of investment decisions, expansion of IP resources, and the pioneering of new businesses. Under these circumstances, as competitors advance their investments in AI and DX, if the development of data foundations, the utilization of digital technologies including AI, and the optimization of IT investments do not progress as planned at the Company, it may delay the sophisticated advancement of demand forecasting, inventory management, investment decisions, marketing, and operational efficiency. This, in turn, could lead to a decline in productivity, competitiveness, and group-wide synergy. Furthermore, if internal rules regarding AI usage, rights clearance, personal information management, or fact-checking are inadequate, it may result in information leaks, intellectual property rights infringements, or the utilization of erroneous information. This could ultimately impact the Group’s operating results and corporate value through a loss of credibility, incurrence of additional response expenses, or the loss of medium- to long-term growth opportunities.
Countermeasures	・Develop AI, data, and IT foundations on a group-wide basis. ・Establish a specialized department to promote AI utilization, while simultaneously deliberating and implementing effective utilization initiatives to improve operational efficiency and accelerate the business speed of each business segment. ・Improve AI governance by establishing internal guidelines and reinforcing digital literacy.

Cyber Risks
Risk Details	The Group is expanding initiatives premised on e-commerce (EC), customer data management, IP information management, and data utilization, which has increased the importance of information management across the entire Group, including subcontractors. Furthermore, against the backdrop of increasingly sophisticated and stealthy cyberattacks, the expanding range of attack targets encompassing subcontractors and supply chains, and rising social demands for personal and customer information management, the importance of information security management is heightening further. Under these circumstances, if cyberattacks from external sources, internal misconduct, human error, system failures, deficiencies in management structures, or intentional misuse by employees occur in information systems possessed or utilized by the Group or its subcontractors, confidential information, personal information, customer information, or IP-related information could be leaked. This, in turn, could cause the suspension of EC sites, business interruptions, burdens of damages, or a loss of trust from business partners, ultimately impacting the Group’s business continuity, operating results, and corporate value.
Countermeasures	・Strengthen structures to centrally manage and support information security management on a group-wide basis. ・Ensure thorough information management by providing education and awareness-raising to executives and employees. ・Promote initiatives to properly protect personal and confidential information, aiming to prevent information leaks and unauthorized utilization.

Human Resource Risks
Risk Details	As the Group pushes forward with global expansion and the promotion of new business domains, securing and developing human resources in specific fields serves as a prerequisite for strategy execution. Furthermore, against the backdrop of intensifying competition to acquire professional talent and rising interest in human capital management, increasing importance is placed on frameworks to flexibly secure and develop necessary talent, as well as leadership structures to drive global expansion. Under these circumstances, if securing and developing human resources does not progress as planned, or if leadership structures are inadequately established due to a lack of diversity or flexibility within management, or if the outflow of core human resources occurs, it may cause a decline in business execution momentum or delays and stagnation in growth strategies. This, in turn, could ultimately impact the execution of medium- to long-term growth strategies and evaluations from the market.
Countermeasures	・Secure and develop necessary human resources based on the gap between our medium- to long-term human resource strategies and the current status, thereby reinforcing our strategy execution capabilities. ・Reinforce core human resources who will be responsible for building overseas bases, strengthening distribution networks, and driving product development and business promotion. ・Promote initiatives to realize employee well-being, such as enhancing non-monetary rewards and welfare benefits.

Business Continuity Risks
Risk Details	Within the Group, the head office functions of major Group companies and a portion of our management resources are concentrated in the Tokyo metropolitan area. Concurrently, with global expansion and the scaling up of supply chains, it is becoming increasingly critical to coordinate with domestic and international business partners, subcontractors, customers, and overseas affiliates. Under these circumstances, in the event of large-scale disasters, material accidents, conflicts, the spread of infectious diseases, or other emergencies, there is a potential risk of disruptions arising in our head office functions, information systems, logistics, contract manufacturers, sales channels, or coordination with overseas affiliates. Furthermore, if a major earthquake directly beneath the Tokyo metropolitan area, a Nankai Trough earthquake, an eruption of Mount Fuji, or abnormal weather conditions occur, it may become difficult to ensure safety, make prompt decisions, issue instructions, and handle external communications. If these risks materialize, it could cause the suspension of product supplies, prolonged recovery periods, delays in decision-making, and confusion in external communications, which may ultimately impact the Group’s operating results and corporate value.
Countermeasures	・Develop chains of command in times of emergencies, establish initial response and business recovery procedures, and strengthen global crisis management public relations. ・Improve our capacity to respond to emergencies by strengthening cooperation among Group companies, refining disaster response manuals and our Business Continuity Plan (BCP), and constructing safety confirmation structures.