Square Enix 2009 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 business
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
international 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 opening
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 persons 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 establishment 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
With regard to the 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 personal 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, restrictions
on personnel permitted to access information and establishment
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 reviewing 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, and develops a policy on infectious
diseases to minimize accidents and the impacts of disasters,
including terrorist attacks, infectious diseases, food poisoning,
fires, electrical blackouts, computer system or server malfunctions,
earthquakes, typhoons and flood damage, and other accidents.
However, in the event of accidents or disasters or in the event that
infectious diseases affect the Group, it may not be possible to avoid
or alleviate all adverse impacts. If a major earthquake 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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