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Risk Factors

Risk Factors

The following passages will describe major possible risk factors related to the business operation of our Group. In addition, the items that are not related to the risk factors, but considered important for investment judgment will be mentioned below, from the viewpoint of proactively disclosing information to investors. CyberAgent will recognize these risks, and implement some measures for avoiding or coping with these risks.

Regarding business trend

If there emerges a hindrance to the growth of the Internet, game markets or if business confidence worsens, and affecting the Internet ad market, our business performance and financial standing may be affected.

Regarding fluctuations in business performance

Earnings forecast is based on management’s assumptions and it should be noted that the accuracy of information is not guaranteed. Changes in unforeseen factors could cause actual results to differ materially. Also, if accounting standards or taxation systems are changed considerably, it may affect our business performance and financial condition of CyberAgent.

Regarding legal regulations

CyberAgent’s field of business is regulated by various laws and regulations, such as the Act on the Limitation of Liability for Damages of Specified Telecommunications Service Providers and the Right to Demand Disclosure of Identification Information of the Senders, the Act on Prohibition of Unauthorized Computer Access, the Consumer Contract Act, the Act Against Unjustifiable Premiums and Misleading Representations, the Act on Specified Commercial Transactions, the Act on the Protection of Personal Information, the Act on Establishment of Enhanced Environment for Youth’s Safe and Secure Internet Use, the Payment Services Act, and the Food Sanitation Act, and procedures and guidelines from supervisory government agencies. There may be changes to royalties paid to copyright organizations or holders of neighboring rights or the terms and conditions of licenses on music copyright, or new licensing other than the music copyright may be necessary. CyberAgent’s business may be subject to new restrictions, and business performance and future business expansion may be impacted as a result of the enactment or revision of rules and regulations, or the formulation or revision of new guidelines or voluntary-regulatory rules. In addition, third parties who have suffered damage or loss from illegal acts within our services may file lawsuits against us as the service operator to claim damages.

Regarding internal control systems

CyberAgent takes various measures for maximizing the value of each group company, while considering that our important managerial mission is to enrich our corporate governance. However, if the development of sufficient internal control systems cannot keep up with the rapid expansion of our businesses, etc., it may become difficult to operate our businesses appropriately, affect the business performance and financial standing of CyberAgent.

Regarding the risks accompanying the dependence on specific management and recruitment

If it becomes difficult to secure personal or if as represented by board members, including the president or executive who has technical knowledge, skills, or experiences resigns or retires for some reason and there are no successors, the business performance and financial standing of CyberAgent may be affected.

Regarding information security risks

There are risks of the leakage of important data, the unauthorized falsification of computer programs and system failure due to such occurrences as remarked below. Defect in computer systems, deterioration in existing security measure, malware or computer viruses, an unauthorized access to computer networks, an error of executive, employee, or business partner, natural disaster and temporary overload by the increase of access. It may result in a third party’s claim for damages, fallen credibility of CyberAgent, and af fecting the business performance and financial condition of CyberAgent.

Regarding risks from managing personal information

CyberAgent holds personal information obtained through businesses such as our internet media business, and manages that information in keeping with the Privacy Policy prepared in accordance with the Act on the Protection of Personal Information. If personal information is leaked or an issue arises in the process of collecting personal information due to events such as a computer system defect, compromised existing security measures, malware or a computer virus, unauthorized access of a computer from an outside source, an error by an executive, employee, or business partner, natural disaster, or sudden mass network access, CyberAgent may incur damage due to a claim against us or a deterioration of trust in CyberAgent, or our business performance and financial standing may be impacted.

Regarding risks related to intellectual property rights

CyberAgent makes efforts to protect our intellectual property rights that accompany Regarding the risks in the Internet media and game business technological innovations in the internet industry and the expansion of our intellectual property rights business, and reinforces awareness of our intellectual property rights and our internal management structure so that our officers and employees do not violate third party intellectual property rights. However, if a third party files a lawsuit against CyberAgent Group regarding intellectual property right infringement or CyberAgent Group receives a claim to stop using the intellectual properties based on the content of the intellectual property rights held by the third party, extensive funds and time may be required until that situation is resolved, and CyberAgent Group’s performance and future business expansion may be impacted.

Regarding the risks related to natural disaster

If there is an event such as a natural disaster (including an earthquake or a typhoon), or a terrorist attack, CyberAgent's business may be greatly impacted or fall into a state of confusion. If there is a natural disaster or similar event, CyberAgent will make efforts to appropriately and promptly carry out emergency measures or restoration measures. However, we do not guarantee that the impact of any interruption to or termination of the computer system due to a natural disaster or similar event can be completely prevented, and business activities may be impacted, our brand image may be harmed, or there may be physical or damage injury as a result of that event. Further, our base and the computer network infrastructure are concentrated in a certain area according to the services. Therefore, if a natural disaster or similar event occurs at that location, there may be significant damage and our performance and future business expansion may be impacted.

Regarding the risks in future business operation

The business model of CyberAgent has contact points with both internet users and advertisers. In order to expand our business in rapidly growing internet industry, we need to bear additional investment in recruiting new personnel, improving equipment, developing businesses, etc. and it would take some time to earn stable profits from these businesses. In addition, our profitability may decline due to price-cutting competitions and the cost for increasing users will augment for gaining an advantage over competitors.
Moreover, when operating overseas businesses, we may not be able to cope with potential risks regarding the laws, regulations, politics, social situations, exchange rate fluctuations, and competitive environments in respective countries. Since CyberAgent offers Internet media services targeted at general consumers, CyberAgent may suffer an unexpected reputational damage. This would degrade our brand image, and affect our business performance.

Regarding the risks in the Internet media and game business

We operate a wide array of contents and services on the internet, including “AbemaTV,” blogs, social media, games, videos, music, and informative websites. We plan to increase and retain users, by developing new contents, enriching the functions of existing services, stabilizing our business operation, and so on. However, if we cannot offer attractive contents and services liked by a broad range of users, the business performance and future business operation of CyberAgent may be affected.

Our company takes various measures when necessary, for the purpose of promoting the sound development of markets related to the usage of games incorporate with industry groups.However, if system adjustment and improvement or an unexpected event occurs, the business performance and future business operation of CyberAgent may be affected.
Our Internet media business offers services in accordance with the contracts with the card companies, platform operators, telecommunications carriers, etc. If there are changes in technical specifications, revisions to contracts, cancellation of contracts, or other unexpected events, the business performance and future business operation of CyberAgent may be affected.

Regarding the risks in the Internet advertising and Ad Tech Businesses

The Internet Advertisement Business may be affected by business trends, including the reduction of Ad costs by advertisers. In addition, we may have to fulfill the obligation to pay additional Ad fees to the media because of the worsening the financial standings of advertisers, the wrong distribution of Ads etc.
If we become unable to procure ad spaces or products due to the discontinuance of transactions with media firms or if the conditions for transactions are changed, or if our profitability decline due to an intensifying price-cutting competitions , the business performance of CyberAgent may be affected.

In the Ad Technology, if new technologies or methods for advertisement are invented, the competitiveness of services we offer may decline considerably. the As for the advertising utilizing ad technology for smart devices, there are possibilities that the changes to the regulations, guidelines for the providers of OS for smart devices and its functions will affect the business performance and future business operation of CyberAgent.

Regarding the risks related to the investment development business

Public companies that we invest in may see a decrease in the gain on valuation or an increase in the loss on valuation due to share price trends. In addition, investments may not be collectible due to future performance by the companies that we have invested in, and CyberAgent Group's profit and loss may be impacted.
Unlisted companies may experience a deterioration in performance due to uncertain factors in the future, and CyberAgent's performance, financial standing, and future business expansion may be impacted.

Regarding the risks related to the EC business

As CyberAgent operates E-commerce businesses, we manage product control systems, and sign contracts with suppliers thoroughly, but if the product we sold goes against the law or has defects, producing problems of safety, etc., we may become liable for damages.

Regarding risks related to sporting business

CyberAgent carries out sporting business, including the operation of sporting exhibits and events, and in the case of sporting exhibits, there may be an accident due to attendance by a large number of spectators. The necessary prevention measures are taken, but CyberAgent Group's performance may be impacted due to incidents of liability for damages or a loss of confidence.

Regarding risks related to M&As

CyberAgent attaches great importance to diversification of earnings through entry into and strengthening of business peripheral to “AbemaTV,” and entry into and strengthening of new business fields, such as business that utilizes resources and know-how of existing business.
One method to achieve that is to strengthen investments and lending, including M&As. The target business is investigated in detail beforehand as much as possible, and once the risk is sufficiently considered, the M&A is proceeded with. However, if there are issues in the prior investigation, such as being unable to ascertain unrecognized debt or contingent liability post-acquisition, or post-acquisition business expansions do not proceed as planned, CyberAgent's performance, financial standing, and future business expansion may be impacted. In addition, if new areas of business are added to our group through M&A or similar means, risk factors specific to those businesses will be taken on by CyberAgent.

Regarding risks related to food and beverage business

CyberAgent operates restaurants and has thorough quality control and hygiene management. However, if a food related incident arises due to certain circumstances, CyberAgent Group's performance may be impacted due to incidents of liability for damages or a loss of confidence.