Square Enix 2008 Annual Report Download - page 23

(2) Changes in Consumer Preferences in the Digital Content
Market and the Group’s Ability to Respond to the Rapid
Progress of Innovative Technology
It is probable that the drastic changes stated in “4. Strategic
Outlook, Issues Facing Management and Future Direction” may
adversely affect the Group’s business performance if the Group is
unable to respond adequately and promptly to these changes.
(3) Changes in Game Platforms and the Group’s Response
The Group’s core business predominantly involves the sale of software
for use on home-use video game consoles. Consequently, the Group’s
business may be subject to the impact of transition to next-generation
console platforms and changes in console manufacturers’ strategies.
(4) Securing Human Resources to Execute the Group’s Growth
Strategies Concentrating on the Creation of New Content
The Group has been making rapid progress in expanding its busi-
ness operations. Delays in securing human resources may adversely
affect the Group’s business performance.
(5) Expansion in the Group’s International Business
Operations
In the Games (Offline), Games (Online) and Mobile Phone Content
business segments, the Group is pursuing an expansion of its inter-
national business operations. A variety of factors present in the
countries and regions in which the Group operates may affect the
Group’s business performance. Such factors include market trends,
the political situation, the economic climate, laws and regulations,
cultural factors, religious factors, customs and other factors.
(6) Exchange Rate Fluctuations
The Group includes consolidated subsidiaries located in North
America, Europe and Asia. The risk of foreign exchange loss has
been reduced as foreign currency gained by subsidiaries is
expended for settlement or reinvestment in the applicable countries.
However, sales, expenses, assets, liabilities and net assets of the
overseas subsidiaries are converted into Japanese yen amounts in
the consolidated financial statements. Consequently, exchange rates
may affect the Group’s financial results if they fluctuate beyond
management is forecasts.
(7) Entertainment Industry Laws
The operation of game centers is subject to government control
under the Law for Proper Control of Entertainment and Amusement
Businesses and other related laws and regulations. These laws and
regulations include an approval and licensing system for the open-
ing and operation of amusement centers, regulations on business
hours (ordinances vary, but operation is generally prohibited from
midnight to 10 a.m.), age restrictions (ordinances vary, but the
admittance of persons under 16 years of age after 6 p.m. and per-
sons under 18 years of age after 10 p.m. is generally prohibited),
area restrictions on outlet opening, and regulations concerning
facility structures, interiors, lighting and noise. While complying with
the laws and regulations, the Group has actively pursued the estab-
lishment of new amusement centers. However, if regulations were to
change owing to the establishment of new laws or other reasons,
the Group’s business performance may be affected.
(8) Management of Personal Information
In conjunction with the enactment of the Personal Information
Protection Law, the Group has bolstered employee training with
the aim of increasing awareness about the handling of personal
information. The Group has also improved the timeliness of its per-
sonal information management systems and identified all personal
information obtained by the Group. The Group has undertaken a
full range of measures to strengthen its internal control systems,
including ongoing improvements to technology controlling access
to its customer database and to its data security systems, restric-
tions on personnel permitted to access information and establish-
ment of a system to deal with customer inquiries regarding
personal information. To date, no leakage of personal information
has occurred from the Group. The Group intends to maintain its
stringent management systems for personal information by review-
ing current systems and enhancing employee training. However, if
a leak of personal information were to occur from the Group, the
Group’s business performance may be affected.
(9) Accidents and Disasters
The Group periodically carries out accident prevention checks,
facility checks and emergency drills to minimize accidents and the
impacts of disasters, including earthquakes, typhoons and flood dam-
age, fires, electrical blackouts, computer system or server malfunc-
tions, terrorist attacks, infectious diseases, food poisoning and other
accidents. However, in the event of accidents or disasters, it may not
be possible to avoid or alleviate all adverse impacts. If a major earth-
quake or disaster occurs, which could impede the continuation of
business, the Group’s business performance may be affected.
(10) Litigation
The Group is being managed strictly in compliance with laws and
regulations and with full respect for third parties’ rights while
carrying out its operations. However, in the course of its business
activities in Japan and abroad, the risk of the Group becoming a
defendant in litigation cannot be discounted. If such litigation were
to occur, the Group’s business performance may be affected.
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