Business risks
The following is a list of major risks that management recognizes as having the potential to materially affect the financial position, operating results, and cash flows of the consolidated companies, among the matters related to business conditions, accounting conditions, 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 transaction 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 trends in the real estate market driven by economic conditions, interest rate levels and land prices, among other factors. Therefore, the Group’s management performance and financial condition could be negatively affected if real estate market conditions dampen the investment appetite of customers.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal 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 deal with the risk
We recognize that there is a reasonable possibility that such risks may materialize due to increasing competition. In order to reduce these risks, our Group is using “RENOSY,” an investment real estate platform utilizing IT, to differentiate itself from other companies. Moreover, in the M&A brokerage DX business, we will seek to differentiate ourselves from our competitors by using the knowhow we have accumulated in real estate DX in areas, including the utilization of AI. We intend to continue to strengthen our differentiation from other companies by improving the functions of "RENOSY“, through DX of the M&A brokerage and other measures.
(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
The Group provides a full range of services, including leasing and management of investment properties that it has sold. The Group has rent contracts with customers who have purchased such properties where the Group covers a portion of rent for such rental properties in the event of vacancies. Although the Group has taken measures to reduce the vacancy rate, if vacancies increase, the cost which the Group bears will increase, which may affect the Group's business performance and financial position.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
We believe that this risk is unlikely to materialize because the investment properties we sell are condominiums for single persons located close to train stations in major metropolitan areas in Japan, mainly Tokyo. However, we consider that there is a possibility that such risks may change 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 and sell investment properties with low vacancy risk and restore them to their original condition in a short period of time.
(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
The Group sells investment real estate, but since the period from purchase to sale is short, it basically does not hold the real estate for a long period of time, but for the purchase of investment real estate. Interest-bearing debt balances are unlikely to be high. However, exceptionally long-term holdings may increase borrowing funding and increase interest-bearing debt. In that case, the Group's business performance and financial position may be affected by an increase in interest burden and valuation loss on inventories. In addition, if the period from purchase to sales is longer than expected, we may take measures to promote sales by discounting the selling price. In that case, the business performance of the Group 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 deal with the risk
As a result of introducing technology in the process from purchase to sale of investment real estate, the Group has established an operation to shorten the inventory holding period, and we believe that the risk is unlikely to become apparent. However, since we recognize that there will be a certain impact if the risk becomes apparent, we will use AI technology to manage inventory quality and quantity of investment real estate after establishing purchasing standards for the property. We are working to reduce this risk by thoroughly implementing it.
(5) Financing risk
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
Part of the Group's business funds and investment funds is procured by borrowing from financial institutions and issuing corporate bonds. For this reason, due to factors such as the recession, deterioration of financial markets, rising interest rates, deterioration of the Group's creditworthiness and rating, deterioration of business performance and business environment, etc., you may not be able to raise funds in a timely manner under the conditions desired by the Group. In addition, covenants (financial restriction clauses) are attached to some of the loans from the relevant financial institutions. In the event of an event that conflicts with Covenants, you may lose the benefit of the due date for that obligation and, as a result, affect the Group’s financial position.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
We recognize that there is a certain risk that future stable financing will be hindered due to changes in the financing environment and deterioration of the Group’s business performance. The Group is currently able to raise funds in a stable manner by building close relationships with financial institutions 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 Online Real Estate investment service brand, "RENOSY", the Group strives to improve business efficiency, strengthen information gathering capabilities, and effectively deliver advertisements to customers through data analysis, aiming to differentiate itself from other companies. We are doing it. In the future, in addition to improving existing systems, we anticipate various possibilities including BtoB sales, but the IT technology field that "RENOSY" provides services is rapidly advancing. If the Group's technology and services lose their competitiveness due to technological innovation beyond the Group's expectations, it may affect the Group's business results and financial position.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
The Group always strives to operate its business in order to introduce cutting-edge IT technology into the Group’s services, but the risk is manifested because it is difficult to predict the direction and speed of technological progress in IT technology. We recognize that there is a reasonable possibility of becoming a company. However, in order to reduce such risks, the Group is taking measures such as continuously hiring engineers with the latest technology and conducting continuous in-house training.
(7) About system troubles
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
The Group’s operations rely on telecommunications networks connecting computers and systems. If these telecommunications networks are interrupted due to natural disaster or accident, the Group’s operations 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 reason, the Group’s management performance and financial conditions could be negatively affected.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
We recognize that there is a reasonable possibility that this risk will become apparent. Therefore, we are taking measures such as holding our data on the cloud.
(8) Legal risk
(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, 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. Our group is committed to complying with these legal regulations. Although our group strives to comply with these legal regulations, the occurrence of legal violations or the enactment of new laws or amendments to laws and regulations could restrict the Group‘s business activities and affect the Group’s operating results and financial position. 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 position of the Group.
Our group 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 Group's business performance and financial position could be affected.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal 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 external lawyers, 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 Group.
Our company
| Name of license | Responsible ministry/agency | License number | Expiry | Cancellation reason |
|---|---|---|---|---|
| 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 | Cancellation reason |
|---|---|---|---|---|
| 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 | Cancellation reason |
|---|---|---|---|---|
| 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 | Cancellation reason |
|---|---|---|---|---|
| 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 | Cancellation reason |
|---|---|---|---|---|
| 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 | Cancellation reason |
|---|---|---|---|---|
| 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 | Cancellation reason |
|---|---|---|---|---|
| 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
The Group holds the personal information of its members and owners, and is subject to the "Act on the Protection of Personal Information". In addition, RENOSY X Co., Ltd. develops orders for systems 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. increase. 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 position of the Group.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
The Group 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 recognize that in the unlikely event of an information leak, it could lead to an extremely large problem. The Group has acquired the privacy marks and ISMS certification of each company, and has taken measures such as continuously conducting educational activities to 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 Group is currently unaware of the fact that it infringes the intellectual property rights of other companies. However, if the business operations of the Group are restricted due to the establishment of intellectual property rights that the Group does not recognize, 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 Group's technology, 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 deal with the risk
The Group has established a system that does not infringe the intellectual property rights of third parties, but in the unlikely event that the Group infringes the intellectual property rights of a third party, it will be extremely large. We recognize that this is an important risk that can lead to problems. In order to reduce these risks, the Group has 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 technologies of the Group. 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 Group 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 Group’s real estate value could decline and business operations could be hindered, and as a result, the Company’s management performance and financial conditions could be negatively affected.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
It is unlikely that this risk will occur, but we recognize that the impact if it does occur is reasonable.For this reason, the Group has built a business system that does not physically depend on the facilities of the Group's head office and branch offices, such as by establishing a system environment that enables remote support at all times.
(12) Securing and training human resources
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
Since the Group has operations not only online but also in business, it is an important issue to secure and develop excellent human resources for future business expansion and to secure the number of personnel required for business growth. We are aware that there are, and we are actively hiring human resources, but there is a possibility that we will not be able to secure the necessary human resources and that the human resources we have trained will not be able to fully contribute to the Group's business. In that case, it may affect the business performance and financial position of the Group.
(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 will occur, and if it does occur, we recognize that it will have a considerable impact on the growth of the Group in particular. In order to reduce these risks, the Group will actively hire human resources from a wide range of hiring routes and will work to develop human resources by conducting training.
(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 Group relies on Ryu Higuchi, Executive Officer and Director, for an important part of the Group's management. If for some reason it becomes difficult for him to carry out the Group's business, it may affect the Group's business activities.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
Although it is unlikely that such a risk will occur, we recognize that it will have a considerable impact if it does occur.The Group is making efforts to improve the internal control system and human resources development so as not to rely excessively on him.
(14) Dividend policy
(1) Details of the impact on the status of consolidated company's business performance, etc. when risks become apparent
The Group recognizes the continuous growth of corporate value and the return of profits to shareholders as an important management issue, 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 Group 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 Group has a policy of paying dividends in the future, taking into consideration its financial condition and operating results, but at this point, it is possible to invest free cash flow in investment for 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 Group will continue to carry out M & A as necessary if it is an effective means for continuously improving corporate value 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 Group's 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 deal with the risk
Since the Group is continuously conducting M & A, we recognize that the risk is unlikely to become apparent. The Group thoroughly examines market trends, customer needs, performance of partner companies, financial conditions, technological superiority and market competitiveness, Group's business portfolio, etc. based on investment management rules, and also the Investment Committee. We recognize 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 Group is expanding its business in Thailand and China, and is also considering expanding its business in Southeast Asia and North America, including Singapore. 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 the Group's business performance is expected. May be affected.
(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 will occur, and if it does occur, we recognize that it will have a considerable impact on the growth of the Group in particular. In order to reduce these risks, the Group conducts careful investigations before expanding overseas, establishes a governance system after expanding overseas, and establishes a timely understanding system for changes in the legal system, political, economic, and social conditions. We recognize that this risk can be reduced.
(17) Concerning 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 new businesses to create new value. 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 Group's 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 Group's business results and financial position.
(2) Degree and timing of the possibility that the risk will become apparent, and measures to deal with the risk
As the Group will continue to actively develop new businesses, we recognize that there is a reasonable possibility that this risk will materialize. The Group strives to reduce 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 and work to reduce risks by making decisions on business downsizing or withdrawal.