1.Re-growth of the Domestic Working Business
The most important issue for the Group’s sustainable growth is the re-growth of the Domestic Working Business, which has been stagnant since the spread of COVID-19 in 2020. Therefore, we will work on the following three initiatives.
(1) Further expansion and profit generation in the construction management engineer domain
In the construction management engineer domain, we intend to double the annual number of hires during the period of the Plan, to become profitable in the fiscal year ending March 31, 2025, and to make it one of the pillars of our business in the fiscal year ending March 31, 2026.
(2) Resumption of growth in Domestic Working Business (excluding the construction management engineer domain)
We will work to expand contracted management of foreign workers and temporary staffing of regular employees. For the expansion of contracted management of foreign workers, we will strengthen the acquisition of new orders by increasing the number of sales personnel, and for local hiring, we will strengthen alliances with local corporations, schools, etc. For expansion of temporary staffing by regular employees, we will extend the recruiting know-how cultivated in the construction management engineer and sales outsourcing domains to the factory outsourcing domain.
(3) Unprecedented growth through M&A
The most important issue for the Group’s sustainable growth is the re-growth of the Domestic Working Business, which has been stagnant since the spread of COVID-19 in 2020.Therefore, we will work on the following three initiatives.
2.Stable growth in Overseas Working Business
Although the rapid increase in post-COVID-19 demand for human resources has run its course in both Singapore and Australia, demand for human resources is expected to remain strong as the number of job openings remains high in both countries. While increasing the number of consultants, etc., the Group will work to expand permanent placement sales, and in order to reduce downside risk and improve business stability, the Group will work to increase temporary staffing sales in stable areas such as government, reduce costs, and strengthen governance.
3.Secure and develop human resources
Securing human resources is the cornerstone of the Group’s growth, and recruiting, nurturing, and retaining staff are critical issues for achieving competitive advantage and sustainable growth.
In our recruitment activities, we unified the service brands of our major subsidiaries with the name “WILLOF” in October 2019. Due to the subsequent spread of COVID-19, we have been postponing our service brand promotion, but will begin implementing promotional activities in phases from the fiscal year ending March 31, 2024. Through these implementations, we will work to raise the awareness and the hiring capability for the Group as a whole, thereby solidifying the Group’s capability of hiring.
In terms of staff development and retention, we will further enhance the training to develop staff before and during the employment period that incorporates the essential skills and mindset of the client company and provide regular follow-up for staff on the job to improve the retention rate.
4.Enhancement of sustainability
Based on our Sustainability Policy, the Group is making the following efforts to contribute to the sustainable development of our society and companies.
(1) Environmental initiatives
Along with strengthening our resilience against disasters, we have established Environmental Policies on climate change and are promoting initiatives to contribute to the achievement of a decarbonized society. We have expressed our support for the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and joined the TCFD Consortium in January 2023 to disclose climate-related information based on the TCFD framework.
(2) Social initiatives
We believe that in order for the Group to achieve sustainable growth, it is essential that we leverage the participation of diverse human resources, rather than allowing our thinking to be dominated by a homogeneous perspective. We provide support for each and every one of our employees so that they are able to achieve self-directed career formation irrespective of gender, age, nationality, disabilities or other characteristics. In addition, we expect that technological innovations will significantly change the types of human resources and jobs in demand, and the gap between labor supply and demand will be wider than now. Therefore, the Group will work to “maximize” and “optimize” career paths that transform workers into experts.
(3) Governance initiatives
We strive to strengthen corporate governance by establishing both voluntary a Nomination Committee and a Remuneration Committee, the majority of whose members are independent outside directors, and by continuously evaluating the effectiveness of the Board of Directors with outside advice.
2.Business licenses and permits
(1) Worker dispatching businesses
We conduct our temporary staffing business in Japan after obtaining a license from the Minister of Health, Labour and Welfare under the Act on Securing the Proper Operation of Worker Dispatching Businesses and Protecting Dispatched Workers (hereinafter the “Worker Dispatching Act”). In order to ensure the proper operation of the worker dispatching business, the Worker Dispatching Act stipulates that the business license may be rescinded or the business may be suspended in whole or in part if any of the grounds for disqualification as a dispatching business operator or grounds for revocation of the license concerned are met. We also conduct overseas temporary staffing businesses in accordance with the laws and regulations of each country or region in which we engage in operations.
In the unlikely event of a serious violation of laws and regulations by any of the Group companies, if we receive an order for rescission of licenses or discontinuance of the business, it could hinder the entirety of the Group’s major business activities and could have a negative impact on the Group’s business performance.
Furthermore, the Worker Dispatching Act and related laws and regulations in Japan, as well as laws and regulations in other countries and regions, may be revised in response to changes in the environment of the labor market and other factors. In particular, domestic laws and regulations regarding the content of work which the dispatched workers are to engage in and the limitations of dispatch period are subject to revision from time to time, and such revisions may affect the business performance of the Group.
(2) Job placement business
We conduct our permanent placement business in Japan after obtaining a license from the Minister of Health, Labour and Welfare under the Employment Security Act. As in the case of the Worker Dispatching Act, the Employment Security Act stipulates that the business license may be rescinded or the business may be suspended in whole or in part if any of the grounds for disqualification as a provider of paid employment placement services or grounds for revocation of the license concerned are met. We also conduct the overseas permanent placement business in accordance with the laws and regulations of each country or region in which we engage in operations.
In the unlikely event of a serious violation of laws and regulations by any of the Group companies, if we receive an order for rescission of licenses or discontinuance of the operations, it could hinder the entirety of the Group’s major business activities and could have a negative impact on the business performance of the Group.
The Employment Security Act in Japan, as well as laws and regulations in other countries and regions, as well as laws and regulations in other countries and regions, may be revised in response to changes in the environment of the domains and other factors. If such laws and regulations are revised, the business performance of the Group may be affected depending on the content of the revision.
3.Securing human resources
(1) Employee
In order for the Group to be capable of securing a strong position among competitors, responding to changes in the business environment, and achieving sustainable growth, securing and developing excellent human resources is recognized as an important management issue.
We have established a specialized department to formulate and implement various human resource strategies. However, if we are unable to secure or train the relevant human resources as planned, the business performance of the Group may be affected. In addition, the outflow of highly skilled personnel to competitors or greater personnel turnover than we assumed, the business performance of the Group may be affected.
(2) Staff
Securing staff is one of the key elements of the Group’s business activities. Recruiting and developing staff are important issues for the continued growth of the Group. Hence, the Group is focusing on our unique web-based recruiting media to diversify our recruitment methods, as well as implementing measures such as online staff registration and counseling, refer-a-friend campaigns, and the establishment of recruiting centers. We also endeavor to win projects for non-full-time positions such as working less than five days a week or shorter hours for housewives, seniors, and international students.
As the COVID-19 situation is improving and along with upturn in the employment situation, the mobility of human resources will be further accelerated in the future. If we are unable to secure the skilled staff that meets the customer’s requirements or the adequate number of staff that satisfies the customer’s demand, the business performance of the Group may be affected.
4.Risk of surging costs
(1) Social insurance premiums
The Group carefully ensures that eligible employees and staff who meet social insurance coverage requirements must be enrolled in social insurance. Since the premium rates and coverage of social insurance are revised appropriate to social conditions, if the amount of social insurance contribution is significantly increased due to revisions to the social insurance system, the business performance of the Group may be affected.
(2) Revision of Labor Contracts Act
In April 2013, the revised Labor Contracts Act came into effect, introducing a new system whereby fixed-term employment contracts that began on or after the effective date and have been renewed over a total of more than five years can be converted to permanent employment contracts (employment contracts with no fixed term) upon application by the worker. According to this new system, when the Group hires temporary or other staff for open-ended contracts, we may incur labor and other expenses for the staff during their waiting period until client companies will be found.
The laws on equal pay for equal work came into effect on April 1, 2020, and require that temporary staff be assured equal and balanced treatment with regular workers regardless of staff’s employment status and that any unreasonable differences in treatment must be corrected. The Group strives to pay salaries at an appropriate level and negotiates with client companies to raise the fees when requiring an increase in temporary staffing rate or social insurance contributions. However, in some cases, the increase in the rate for temporary staff salary and invoicing amount to client companies do not always synchronize. In such cases, the increase in revenue cost ratio or other factors may affect the business performance of the Group.
5.Intensifying competition
In the human resource service industry, in which the Group functions, there are a large number of competitors. The Group is differentiated from its competitors by obtaining a higher level of customer satisfaction through the accurate and prompt response to customers by recruiting staff who meet the customer’s requirements which we have fully understood. However, if competition intensifies further, the business performance of the Group may be affected.
6.Future acquisitions of companies or businesses
We believe that merger and acquisition (M&A) is one of the main management strategies of the Group. There are a variety of risks inherent in M&A. Those may be revealed after the completion of M&A, such as the defects in operating processes during the system integration, stagnation of operations or decline in business performance due to frictions caused by the integration of different corporate cultures, employee turnover, and the emergence of internal conflicts. In order to minimize these risks and produce the maximum benefits we expect when M&A has been completed, the Group believes it is extremely important to appropriately proceed with the process of management integration after M&A (post-merger integration or PMI) as well as the implementation of detailed due diligence. We formulate the PMI plan promptly and from a long-term perspective.
However, if the PMI plan cannot be executed as envisioned, the value of the acquired assets may be impaired and then losses may be incurred. If such an event occurred, the business performance of the Group may be affected.
7.Goodwill associated with M&A
To calculate goodwill arising from M&A, if the book value is potentially unrecoverable, the book value may be reduced to the recoverable value, and the amount of such reduction may be recorded as a loss. Consequently, an impairment loss may be recorded depending on the cash flow forecast of the business for which the goodwill value is calculated, the business performance of the Group may be affected.
8.International business development
The Group advocates global business development, and currently we have business locations in Singapore, Malaysia, Australia, the U.S., China, Vietnam, the U.K., and Germany. These overseas business developments involve risks with each country, such as economic fluctuation risk, foreign exchange fluctuation risk, and country risks arising from government regulations, political instability, and restrictions on funds transfer.
The Group established an intermediate holding company in Singapore as a control office, and this company is promoting the business development in cooperation with us, paying attention to country risks in each country. However, if the Group is unable to cope with such risks, the business performance of the Group may be affected.
9.Risks on handling of personal information and related to Act on the Protection of Personal Information
Due to the nature of its business, the Group holds a great deal of personal and confidential information, including registered temporary staff and job applicants.
If personal or confidential information is leaked to outside parties due to an unforeseen contingency and the information provider suffers from damage, the business performance of the Group may be affected by claims for damages, loss of social credibility, or sanctions under the EU General Data Protection Regulation (GDPR).
10.Risks related to compliance with laws and regulations
(1) General risks
The relevant laws and regulations that the Group complies with in its business activities include various laws and regulations in Japan (Act on Securing the Proper Operation of Worker Dispatching Businesses and Protecting Dispatched Workers, Employment Security Act, Labor Standards Act, Industrial Safety and Health Act, Industrial Accident Compensation Insurance Act, Health Insurance Act, and Employees’ Pension Insurance Act, etc.) and various laws and regulations in overseas countries. The Group recognizes that compliance with laws and regulations is a crucial corporate responsibility, and has strengthened its compliance system to ensure strict adherence to laws and regulations.
However, even though we are carrying out these measures, we may not be able to completely eliminate compliance risks including misconduct by officers and staff of group companies, or risks of loss of social credibility. In this case, the business performance of the Group may be affected.
(2) Risks of serious lawsuits, etc.
The Group is mainly engaged in temporary staffing and permanent placement services. In the process of conducting its business activities, the Group may be subject to lawsuits or other legal proceedings brought by client companies, job seekers, competitors, or other related parties concerning inadequacies in the services we have provided, leakage of personal or confidential information, or infringement of intellectual property rights. In addition, we may be subject to investigation or punishment by the authorities, etc. These legal proceedings may result in a large amount of expenditure and may interfere with business activities.
Furthermore, the legal procedures involved may be lengthy and costly, and the outcome may be difficult to predict, which may affect the business performance of the Group.
11.Impact of natural disasters and contingencies
The Group has sales offices in throughout Japan and various countries in the world, mainly in Asia and Oceania. In the event of natural disasters such as earthquakes, typhoons, and tsunamis, or other contingencies such as large-scale fires and power outages, outbreak of new infectious diseases, terrorist attacks, and international conflicts, the business activities of the Group may be disrupted. If we are unable to completely avoid these disasters or events and suffer from damage, the business performance of the Group may be affected.
12.Risks of information systems
The business activities of the Group depend on IT systems including computers and the network, and we outsource part of the development, maintenance, and management of these IT systems to third parties. We also ensure system availability in the event of a natural disaster, such as a large-scale earthquake, and created a remote work environment, by using data centers with high rating classification and cloud services, etc. Furthermore, we have taken measures against external cyberattacks and unauthorized access to ensure business continuity.
However, in the worst case, if a large-scale system failure occurs for any reason, the business performance of the Group may be affected.
13.Changes in environment surrounding the industry
In recent years, advances in technologies and other factors have accelerated the changes in the environment surrounding the human resource service industry, in which the Group functions. To respond to these new business environments, we are implementing a variety of measures to expand our earnings structure including measures to improve our service and brand strength in existing business domains and to develop newly emerging business opportunities through corporate venture capital. In October 2019, we unified the service brands of our major subsidiaries in Japan with the name “WILLOF” in order to increase awareness of the Group as a whole and to improve our services. By implementing the “Chance-Making-Company” branding, we intend to increase awareness among job seekers.
However, if the Group is unable to adapt to changes in the business environment, the business performance of the Group may be affected.
14.Dilution of share value by exercising share acquisition rights, etc.
The Company grants share acquisition rights to officers and employees of the Group. If these share acquisition rights are exercised, additional Company shares will be issued, which may dilute the value of the shares and the percentage of voting rights held by existing shareholders. The numbers of shares under share acquisition rights are described in “5. Status of accounting, 1. consolidated financial statements, etc. (1) Notes to the consolidated financial statements, 17 Share-based payment” (in Japanese).
15.Financing
The Group raises a portion of its business capital through borrowings from financial institutions, etc. In this situation, if the Group is unable to raise funds with desired conditions in a timely manner due to factors such as recession, slumps in the financial markets, rising of interest rates, deterioration in the Group’s creditworthiness, or downward outlook for business performance, the financial conditions and business performance of the Group may be affected.
16.Risk of economic fluctuations
Since the Group’s performance is generally affected by economic conditions in Japan and overseas, particularly in Asia and Oceania, the Group is enhancing its sales activities in industries including nursing care, construction, contracted management of foreign workers, that are not significantly impacted by economic fluctuations in order to mitigate the impact of economic fluctuations on the business performance of the Group.
If required, we will take necessary measures such as reducing fixed costs, investing in IT systems, slowing down investments in new businesses, and securing cash and deposits to flexibly secure stable management.
However, if economic stagnation is prolonged, such as a decline in demand for jobs or shrinkage in consumers spending, the business performance of the Group may be affected.
