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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. The Group 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 the Group.

Regarding legal regulations

Based on the laws and regulations, we make a thorough effort to inform users fully about legal compliance and user morals, and are strengthening our efforts on defense and information leakage prevention of unauthorized access. If there would be a new legislation, or strengthening existing regulations for internet business operators or with regard to music copyrights, if we need to pay the royalties to copyright management groups, and the holders of copyright-related rights, or obtain licenses as licensing conditions are changed or new rights emerge, the business performance and financial condition of the Group may be affected. Also, as the service operator, there are possibilities to be brought an action for damages, etc. by the third party who has suffered from an illegal acts in our services.

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 the Group.

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 the Group may be affected.

Regarding information security risks

There is possibilities to cause the leakage of important data, the unauthorized falsification of computer programs, system failure, etc. from the defects in computer systems, computer viruses, the unauthorized access from the outside to computer networks, the errors of executives, employees, or business partners, natural disaster, temporary overload due to the increase of access. This may result in a third party’s claim for damages, the decline in the trust toward the Group, and affecting the business performance and financial condition of the Group.

Regarding the risks in personal information management

CyberAgent holds personal information obtained through the Internet media business, etc., and controls according to the ”Privacy Policy” specified in accordance with ”The Act on the Protection of Personal Information.” If personal information leaks or there emerges a problem with the collection of personal information due to the risks regarding to information security or the like, this may result in the claim for damages against the Group, the damage of decline in the trust, etc., affecting the business performance and financial condition of the Group.

Regarding risks related to intellectual property rights

The Group makes efforts to protect our intellectual property rights, and enhance in-company education and management. However, if a third party files a lawsuit regarding the infringement of his/her intellectual property rights or requests us to stop using his/her intellectual property by the different interpretations of the terms of the contract, it may affect the business performance and financial condition of the Group.

Regarding the risks related to natural disaster, etc.

If we are faced with a natural disaster, such as an earthquake and a typhoon, an unknown computer virus, or a terrorist attack, there is no guarantee that it has only limited impact. In addition, the infrastructure for our strongholds and computer networks is concentrated in a certain area according to services. Accordingly, if a natural disaster or the like occurs there, this may cause significant damage, affecting the business performance and future business operation of the Group.

Regarding the risks in future business operation

Since the Group offers services targeted at general consumers, such as Internet media businesses, there is a possibility that the Group will suffer an unexpected reputational damage. This would degrade our brand image, and affect our business performance.
Moreover, when operating overseas businesses, there is a possibility that we will not be able to cope with potential risks regarding the laws, regulations, politics, social situations, exchange rate fluctuations, and competitive environments in respective countries. 
In order to expand our business, 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, there is a possibility that our profitability will decline due to price-cutting competitions and the cost for increasing users will augment for gaining an advantage over competitors.

 

Regarding the risks in the Internet media and game business

We operate a wide array of contents and services on the internet, including 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 the Group 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 the Group 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 the Group 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, there is a possibility that 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, the business performance of the Group 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. As for the most of ad technology, advertising we handle are for smart devices, there is a possibility that the changes to the regulations, the guidelines for the providers of OS for smart devices and its functions will affect the business performance and future business operation of the Group.

Regarding the risks related to the investment development business

For public companies out of the firms in which we invest, evaluation gains may decrease or evaluation losses may increase, valuation loss by impairment apply may accrue according to share price trends. According to the performance of the invested firms, the profit or loss of the Group may be affected.
As for unlisted companies, there is a possibility that their performance will worsen due to uncertainties, affecting the business performance, financial standing, and future business operation of the Group.

Regarding the risks related to the EC business

As the Group 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.