Business Risks
The following is a list of major risks that management recognizes as having the potential to affect the financial position, operating results, and cash flows of the consolidated companies, among the matters related to business circumstances, accounting circumstances, etc., as described in Securities Report. Forward-looking statements in the text are based on the judgment of the Group as of the end of the current consolidated fiscal year.
(1) Trends in the real estate market
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
The real estate industry is affected by the changes of the industry driven by economic conditions, interest rate and land prices, among other factors. Therefore, company's performance and financial condition could be negatively affected if the market's condition dampens the investment willingnesses of the customers.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
We recognize that there is a reasonable possibility that this risk will materialize due to factors such as a downturn in the real estate transaction market.In order to reduce these risks, the Group is closely monitoring trends in the real estate market and is working to build a system that can flexibly respond to such trends.
(2) About competition
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
In the real estate industry, to which our group belongs, there are many competitors. We also recognize that the M&A brokerage business is a business with comparatively low barriers to entry as no licenses or permits or qualifications are required. If we are unable to differentiate ourselves sufficiently due to the entry of other companies into the market and competition intensifies, our business performance and financial position may be affected by price competition, customer defection, a decrease in the number of sales, and an increase in procurement prices.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
We recognize that there is a reasonable possibility that such risks will become apparent due to intensifying competition. In order to reduce these risks, the Group is differentiating itself from other companies by, for example, using RENOSY, an online Real estate investment service that utilizes technology. In addition, in the M&A intermediation digital transformation business, the Group is differentiating itself from other companies by applying the know-how it has cultivated in real estate digital transformation, such as the use of AI, to the M&A field. Going forward, the Group plans to further differentiate itself from other companies by improving the functionality of RENOSY and digital transformation of M&A intermediation.
(3) Risk of vacancy of rental property
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
GA technologies provides a full range of services, including leasing and management of properties for investment purposes. Our customers who bought such kind of property for rental from us, we indeed cover a portion of rent for such rental properties in the event of vacancies. Although we have been taken measures to reduce the vacancy rate, if vacancies increase, the cost which the company bears will increase, which may eventually affect our business performance and financial position.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
However, we believe that the risk is unlikely to burst out because the properties we sell are condominiums targeting single renters located close to train stations in major metropolitan areas in Japan, mainly Tokyo. However, we do keep in mind that there is a possibility that such risks may arise in the future as Japan's demographics change over the medium to long term. In order to reduce these risks, we are taking various measures, such as using AI technology to identify the properties those with low vacancy risk and restore them to their original condition in a short period of time before they are ready to be put on the market.
(4) Interest rate fluctuation risk and inventory holding risk associated with an increase in interest-bearing debt
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
Our main business is the brokerage of real estates for investment purposes. Since the period of time from a real estate came in as a stock until it is sold is short, we do not hold the inventory for too long. Therefore, the interest-bearing debt balances are unlikely to be high. However, it is still likely that exceptionally long-term holdings might increase borrowing funding and increase interest-bearing debt. In that case, the company's business performance and financial status may likely be affected by an increase in interest burden and valuation loss on inventories. In addition, if the whole process is taking longer than expected, we shall take measures accordingly by making discounts on selling prices in order to promote sales. In that case, the business performance may be affected by the deterioration of the profit margin.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
As a result, by bringing technology into the entire selling process, we have established an operation to shorten the inventory holding period, and we believe that the risk is unlikely to become apparent. However, since we are still aware that there will be a certain impacts if the risk becomes apparent, we shall utilize AI technology to manage both the quality and the quantity of our inventory.
(5) Financing risk
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
Part of our business funds and investment funds is generated by borrowing from the banks and issuing of corporate bonds. For this reason, due to factors such as the setbacks of the economy, deterioration of financial markets, rising interest rates, deterioration of the company's business creditworthiness and rating, deterioration of business performance and business environment, etc., the circumstances mentioned above may affect our ability to raise funds in a timely manner under the conditions desired. In addition, covenants (financial restriction clauses) are attached to some of the loans from the relevant financial organizations. In the event of an event that conflicts with the Covenants, it is possible for the company to lose the benefit of the due date for that obligation and, as a result, affect the Group’s financial status.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
We are aware that there is a certain risk that a stable financing for the future will be hindered due to changes in the financing environment and deterioration of the company's business performance. We are currently able to raise funds in a stable manner by building close relationships with the banks and expanding funding methods, but we are striving to further improve and stabilize the funding environment.
(6) Technological innovation, etc.
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
By utilizing the Internet Real Estate investment service, "RENOSY", the company strives to improve business efficiency, strengthen information gathering capabilities, and effectively deliver advertisements to our target audiences through data analysis, aiming to differentiate itself from other similar services. In addition to improving the current system, we anticipate various possibilities. However, the technology aspect that "RENOSY" serves is rapidly advancing. If our services lose the competitiveness due to technological innovation beyond our prediction, it may possibly affect the company's business results and financial status.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
The company always strives to bring cutting-edge IT technology into the services we provide. However, the risk is manifested because it is difficult to predict the direction and speed of how technology is going progress. We are aware that there is a reasonable possibility that such risks might become apparent. However, in order to reduce such risks, We are taking measures such as continuously hiring engineers with according skills and knowledge, and carrying out training programs.
(7) About system troubles
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
Our business rely on telecommunications networks connecting computers and systems. If these telecommunications networks are interrupted due to natural disaster or accident, our business could experience significant impacts. While the Group has worked to implement security countermeasures and strives toward system stability, if system trouble occurs due to some reasons, the company's business performance and financial conditions could be negatively affected.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
We are aware that there is a reasonable possibility that this risk will become apparent. Therefore, we are taking measures such as storing our data on a cloud system.
(8) Legal risk
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
The real estate industry is subject to legal regulations such as the “Real Estate Brokerage Act,” “Construction Business Act,” “National Land Use Planning Act,” “Building Standards Act,” “City Planning Act,” “Act on Building Unit Ownership, etc.,” “Act on Advancement of Proper Condominium Management,” “Act on Land and Building Leases” and “ Act on Proper Management of Rental Housing, etc.” etc. The company is committed to complying with these legal regulations. However, it is possible that the occurrence of legal violations or the enactment of new laws or amendments to laws and regulations could restrict our business activities and affect the results and financial status of the company. The M&A brokerage business is currently not subject to much restriction by the regulatory authorities such as permits and licenses; however, M&A transactions are likely to be impacted by various laws and regulations including the Financial Instruments Act, the Companies Act and various tax laws. The enactment, revision or abolition of laws and regulations in the future that impacts the expansion or promotion of M&A transactions may affect the business results and financial status of the company.
The company has obtained the following permits and licenses in the course of conducting business activities, and there are currently no reasons for the revocation of any of these permits or licenses. However, should these permits or licenses be revoked for any reason in the future, the business performance and financial position could be affected.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
The Legal Department plays a central role in responding to various legal regulations, and the Risk Management and Compliance Committee promotes risk management and compliance plans. Therefore, we believe that it is unlikely that the risk will become apparent, but we recognize that it is an important risk that could lead to an extremely large problem in the unlikely event that it violates legal regulations. In order to reduce such risks, the Group will catch up with the revisions of the laws and regulations of each company in a timely manner at the Legal Department and the Compliance Subcommittee directly under the Risk Management and Compliance Committee, and even at the start of new business. We have established a compliance check system of the Legal Department and a system to cooperate with lawyers out side of the office, and are working to prevent legal violations. In addition, we regularly conduct compliance training related to each department and each group company to raise the compliance awareness of the entire company.
Our company
| Name of license | Responsible ministry/agency | License number | Expiry | Reason for Cancellation |
|---|---|---|---|---|
| Real estate brokerage license | Ministry of Land, Infrastructure, Transport and Tourism | Minister of Land, Infrastructure, Transport and Tourism (2) No. 9135 | February 22, 2027 | Building Lots and Buildings Transaction Business Law Article 66, Article 67 and Article 67-2 |
| General construction business license | Tokyo Metropolitan Government | Governor of Tokyo permission (General-3) No. 145636 | August 18, 2026 | Construction Business Act ActArticles 29 and 29-2 |
| Specific construction business license | Tokyo Metropolitan Government | Governor of Tokyo permission (Special-3) No. 145636 | August 18, 2026 | Construction Business Act ActArticles 29 and 29-2 |
| Condominium management business registration | Ministry of Land, Infrastructure, Transport and Tourism | Minister of Land, Infrastructure, Transport and Tourism (1) No. 034425 | March 8, 2024 | Article 83 of the Act on Promotion of Appropriate Management of Condominiums |
| First class architects’ office registration | Tokyo Metropolitan Government | Governor of Tokyo No. 65523 | May 14, 2028 | Act 9 of the Construction Business Act |
ITANDI Inc.
| Name of license | Responsible ministry/agency | License number | Expiry | Reason for Cancellation |
|---|---|---|---|---|
| Real estate brokerage license | Tokyo Metropolitan Government | Governor of Tokyo (1) No. 103729 | July 26, 2024 | Building Lots and Buildings Transaction Business Law Article 66, Article 67 and Article 67-2 |
RENOSY ASSET MANAGEMENT Inc.
| Name of license | Responsible ministry/agency | License number | Expiry | Reason for Cancellation |
|---|---|---|---|---|
| Real estate brokerage license | Ministry of Land, Infrastructure, Transport and Tourism | Minister of Land, Infrastructure, Transport and Tourism (1) No. 009817 | November 5, 2025 | Building Lots and Buildings Transaction Business Law Article 66, Article 67 and Article 67-2 |
| Condominium management business registration | Ministry of Land, Infrastructure, Transport and Tourism | Minister of Land, Infrastructure, Transport and Tourism (1) No. 034543 | December 1, 2025 | Article 83 of the Act on Promotion of Appropriate Management of Condominiums |
| Rental housing management business | Ministry of Land, Infrastructure, Transport and Tourism | Minister of Land, Infrastructure, Transport and Tourism (1) No. 4254 | March 14, 2027 | Article 23 of the Act on the Appropriation of Rental Housing Management Operations |
RENOSY PLUS Inc.
| Name of license | Responsible ministry/agency | License number | Expiry | Reason for Cancellation |
|---|---|---|---|---|
| Real estate brokerage license | Tokyo Metropolitan Government | Licensed by the Governor of Tokyo (3) No. 091130 | November 20, 2024 | Building Lots and Buildings Transaction Business Law Article 66, Article 67 and Article 67-2 |
| Condominium rental housing management business registration | Ministry of Land, Infrastructure, Transport and Tourism | Minister of Land, Infrastructure, Transport and Tourism (1) No. 7525 | July 19, 2027 | Article 23 of the Act on the Appropriation of Rental Housing Management Operations |
RENOSY FINANCE Inc.
| Name of license | Responsible ministry/agency | License number | Expiry | Reason for Cancellation |
|---|---|---|---|---|
| Money lending business registration | Tokyo Metropolitan Government | Licensed by the Governor of Tokyo (1) No. 31767 | November 28, 2026 | Article 24-6-4 and Article 24-6-5 of the Money Lending Business Act |
PARTNERS Co., Ltd.
| Name of license | Responsible ministry/agency | License number | Expiry | Reason for Cancellation |
|---|---|---|---|---|
| Real estate brokerage license | Ministry of Land, Infrastructure, Transport and Tourism | Minister of Land, Infrastructure, Transport and Tourism (1) No. 10432 | June 15, 2028 | Building Lots and Buildings Transaction Business Law Article 66, Article 67 and Article 67-2 |
| Real estate specific joint venture | Tokyo Metropolitan Government | Governor of Tokyo No. 126 | - | Article 11 and Article 36 of Real Estate Specified Joint Enterprise Act |
| Rental housing management business | Ministry of Land, Infrastructure, Transport and Tourism | Minister of Land, Infrastructure, Transport and Tourism (2) No. 005441 | May 24, 2027 | Article 23 of the Act on the Appropriation of Rental Housing Management Operations |
| Housing accommodation management company registration | Ministry of Land, Infrastructure, Transport and Tourism | Minister of Land, Infrastructure, Transport and Tourism (01) No. F01666 | May 10, 2024 | Articles 42 and 43 of the Housing Accommodation Business Law |
Ricordi Inc.
| Name of license | Responsible ministry/agency | License number | Expiry | Reason for Cancellation |
|---|---|---|---|---|
| Real estate brokerage license | Tokyo Metropolitan Government | Governor of Tokyo (2) No. 9396 | July 27, 2028 | Building Lots and Buildings Transaction Business Law Article 66, Article 67 and Article 67-2 |
| Rental housing management business | Ministry of Land, Infrastructure, Transport and Tourism | Minister of Land, Infrastructure, Transport and Tourism (1) No. 2077 | October 19, 2026 | Article 23 of the Act on the Appropriation of Rental Housing Management Operations |
(9) Information management
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
We hold the personal information of our users subject to the "Act on the Protection of Personal Information". In addition, RENOSY X Co., Ltd. develops systems by order made and provides services for financial institutions, and is required to build and operate a system that complies with the "FISC (Financial Information System Center)" safety measure standards. If this information is leaked for any reason, credit loss, transaction suspension, claims for damages, etc. may occur, which may affect the business performance and financial status of the company.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
The company has a personal information protection management system, and the subsidiary that develops the system has established and operates a management system that meets the FISC safety measures standards and ISO27001. Although it is unlikely that this risk will become apparent, we are aware that in the unlikely event of an information leak, it could lead to an extremely serious problem. The company has acquired the privacy marks and ISMS certification, and has taken measures such as continuously educating employees through in-house training, etc. regarding the importance of handling various types of information.
(10) Intellectual property rights
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
The company is currently unaware of the fact that it infringes the intellectual property rights of other companies. However, if the business operations of the company are restricted due to the establishment of intellectual property rights that we are unaware of , or if infringement of the intellectual property rights of a third party is discovered, etc. Credit loss and claims for damages may occur, which may affect the business results and financial condition of the Group. In addition, there is a possibility that a third party may use the technology we developed, etc., and adversely affect the Group's competitiveness in the market.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
The company has established a system that does not infringe the intellectual property rights of third parties, but in the unlikely event that the company infringes the intellectual property rights of a third party, it will be extremely serious. We are aware that this is an important risk that can lead to problems. In order to reduce these risks, We have established a process such as undergoing a compliance check by the Legal Department (including confirmation of infringement of intellectual property rights of a third party) at the start of a new business. We operate so as not to infringe intellectual property rights.We also recognize that there is always the possibility that a third party will use the technology developed by us. In order to reduce this risk, we prevent infringement of intellectual property rights by third parties by registering trademarks and obtaining patents related to our products.
(11) About natural disasters
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
Regions where the company has business operations are mainly found in the Tokyo metropolitan area and Kansai Region. If a natural disaster such as an unexpected major earthquake or typhoon were to strike these regions, the values of the properties hold by the company could decline and business operations could be hindered, and as a result, the business performance and financial conditions could be negatively affected.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
The likelihood for the risk to occur is rare, but we are still aware of the impact if it does occur is reasonable. For this reason, we have built a business system that does not physically depend on the facilities of the head office and branch offices, such as by establishing a system environment that enables remote support at all times.
(12) Securing and training people
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
Since we do not rely our business totally online, it is important to secure and develop excellent human resources for future business expansion and to secure the number of employees required for business growth. We are aware of the importance of human resources, and we are actively hiring the capable talents. However, there is a possibility that we will not be able to secure the necessary human resources and that the people we have trained will not be able to fully contribute to the business. In that case, it may affect the business performance and financial position of the company.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
There is always a certain degree of possibility that such a risk will occur, and if it does occur, we do recognize that it will have a considerable impact on the growth of the company's business to certain degree. In order to reduce these risks, we shall actively hire people from a wide range of hiring routes and shall work to develop human resources through trainings.
(13) Dependence on a specific manager
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
The running of the business relies heavily on the representative of the company, Ryu Higuchi for the management of the entire company. If for any reason it becomes difficult for him to carry out the business, this may have an adverse effect on the company's business activities.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
Although it is unlikely that such a risk will occur, we do recognize that it will have a considerable impact if it does occur. The company is making efforts to improve the internal control system and to cultivate more people so as not to rely excessively on only one individual.
(14) Dividend policy
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
The Group understand that the continuous growth of corporate value and the return of profits to shareholders is important. And our basic policy is to maintain a sound financial structure and return profits to shareholders through dividends from surplus, taking into account operating results and financial condition for each period and maintaining a balance with internal reserves for future business expansion.However, the company is currently in the process of growth, and it is important for shareholders to enhance internal reserves and effectively utilize it as a financial resource for investment in business expansion, organizational structure, and system environment improvement for further growth. We do not pay dividends because we believe that it will lead to the maximum return of profits.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
The company does have a policy of paying dividends in the future, taking into consideration its financial condition and business performance, but at this point, it is possible to invest free cash flow in order to boost up growth to improve corporate value. Since we believe that this will lead to maximizing the profits of our shareholders, we have not yet decided when to pay dividends.
(15) About M&A
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
The company will continue to carry out business merge as necessary if it is an effective means for improving corporation growth, or if it is expected to have a large synergistic effect such as establishing an advantage in the market in a short period of time. It is a policy to implement. However, in the event that there are inadequate points in the preliminary research and examination, or if there are significant changes in the market environment or competitive environment after the acquisition, the acquired business will not be able to develop as planned. Or, the invested funds may not be recovered and goodwill may be impaired or additional costs may be incurred. In such cases, it may have a significant impact on the business performance, growth prospects, business development, etc. In particular, under IFRS, which we have adopted, goodwill is not amortized, and the impact of impairment losses tends to be greater than when Japanese GAAP is adopted.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to tackle with the risk
Since the company is continuously conducting business merge, we understand that the risk is unlikely to become apparent. The company thoroughly examines market trends, customer needs, performance of partner companies, financial conditions, technological advantages and market competitiveness, group's business portfolio, etc. based on investment management rules, and also the investment committee. We are aware that the risk can be reduced by holding the event, selecting investment targets, deciding research policies, and conducting research and examinations when making investment decisions.
(16) Overseas business development
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
The company is expanding its business in Thailand and China, and is also considering expanding its business in Southeast Asia and North America. In overseas business development, various factors such as legal systems, business customs, labor relations, economic trends, exchange rate fluctuations, and other political and social factors that are different from those in Japan are expected to occur, and there is the possibility that the business performance could be affected by these factors.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
There is always a certain degree of possibility that such a risk can occur, and if it does take place, we understand that it will have a considerable impact on the growth of our business to certain extent. In order to reduce these risks, the company conducts careful investigations before expanding overseas, establishes a governance system after the expansion, and establishes a system for timely catching up with the changes in the legal system, political, economic, and social conditions of a country. We understand that this risk can be reduced.
(17) Regarding the new businesses
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
While further strengthening existing businesses, our group is also working on cultivating new businesses. A certain period of time is required from the start of a new business until stable earnings are obtained, and this period may have a negative impact on the business performance. Furthermore, if a decision is made to downsize or withdraw from business due to significant deviations from business plans, etc., this could have a significant impact on the business performance and financial position of the company.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
As the company will continue to actively develop new businesses, we are aware that there is a reasonable possibility that this risk will become apparent. We strive to reduce the risk by going through the processes of the Investment Committee and Management Strategy Committee, and by evaluating the feasibility of new businesses in advance. In addition, after making an investment, we conduct regular monitoring to reduce risks by making decisions on business downsizing or withdrawal.