| Risk of changes in logistics and business environment due to geopolitical fragmentation
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Geopolitical |
- Geopolitical tensions are rising, and divisions over political, security, and economic policies between nations are deepening. This could lead to changes in trade rules, logistics routes, freight rates, and various regulations over the medium to long term.
- These changes, while highly uncertain at this time, could potentially impact the assumptions underlying our group's logistics network and business operations in the future, and we recognize them as one of the emerging risks.
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- Should this risk materialize, political instability and conflicts in various countries could undermine the stability of energy supplies and key logistics routes, potentially leading to transportation delays and increased freight rates.
- Furthermore, trade restrictions and strengthened border controls may necessitate the review and restructuring of existing logistics routes, potentially leading to additional costs and fluctuations in lead times.
- These changes may also impact the supply and demand trends and supply chain strategies of our client companies, potentially affecting the group's business opportunities and profitability over the medium to long term.
- Furthermore, in overseas M&A, changes in the policy and regulatory environment of the target country may introduce uncertainty into the progress of the PMI (post-merger integration) process and the realization of anticipated synergies.
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- Our group continuously collects and monitors information regarding geopolitical trends and changes in the policy and regulatory environment concerning this risk.
- Given the high level of uncertainty at this time, we are advancing discussions on measures to enhance network flexibility, including diversifying transport modes and logistics routes, and utilizing multiple carriers.
- Furthermore, in preparation for future changes in the business environment, we are advancing the establishment of a system that enables relevant departments to collaborate and examine the impact on business and formulate response policies.
- Regarding overseas M&A, we continuously review PMI (post-merger integration) progress management and governance approaches, taking into account the impact of policy and regulatory trends in the target investment country.
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| Risk of competitive environment changes due to digital disruption
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Technological
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- In the logistics industry, the rise of digital forwarders and digital platform operators, along with advances in AI and automation technologies, may lead to changes in the business environment over the medium to long term.
- Our group recognizes that delayed responses to these changes could potentially impact our customer touchpoints, pricing power, and operational efficiency competitiveness. We identify this as one of the emerging risks that could affect future business operations.
- Furthermore, depending on the direction of laws, regulations, and guidelines concerning AI and automation, there is a possibility that certain impacts may arise on business operations and work processes.
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- Should this risk materialize, it could lead to a decline in our Group's ability to acquire customers and set prices, as well as a decrease in the volume of goods handled.
- Furthermore, if we fall behind in digitalization and automation, we may find ourselves at a relative disadvantage in terms of operational efficiency and cost competitiveness, potentially impacting profitability.
- Furthermore, if regulatory compliance regarding AI and automation is insufficient, operational constraints and additional compliance costs may arise, potentially impacting medium- to long-term business development.
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- Our group continuously monitors this risk under our company-wide risk management framework and assesses its potential impact on our business.
- Regarding the utilization of digital technology and the advancement of business processes, we are considering a phased approach while taking into account the feasibility at the operational level and the specific characteristics of the business.
- We are also working to establish a system that enables us to gather information on competitive environments and relevant regulatory trends and consider countermeasures as necessary.
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