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Location: Home > About OKI > Investor Relations > Corporate Information > Business and Other Risks


Investor Relations

Corporate Information Business and Other Risks Corporate Information Business and Other Risks

Major risks related to business performance, financial status, and other factors of the OKI Group (the Company and its consolidated subsidiaries) that may potentially have significant influence on investors' decisions include the following:

It should be noted, however, that factors that may affect the OKI Group's financial results are not limited to these items. The OKI Group is aware of the potential impact these risks may have if any were to occur, and it is implementing measures to avoid such occurrence, as well as to minimize the weight of their impact should they occur.

Political and economic trends

Demand for the OKI Group's products is subject to political and economic trends in the individual countries and regions in which they are sold. Accordingly, economic slowdowns, the resulting contraction of demand in the OKI Group's principal operating markets including Japan, North America, Europe, Asia and South America and changes in the import-export policy for foreign products may adversely affect the OKI Group's financial results and position.

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Statutory and regulatory requirements

The OKI Group is subject to a variety of government regulations, including business and investment approvals, export restrictions relating to national security and other factors, and other import and export regulations such as customs, in each of the countries and regions in which it is operating. The OKI Group is also subject to laws and regulations relating to commerce, antitrust, patents, taxation, foreign currency controls, environment and recycling. In the event that the OKI Group is unable to comply with any of the aforementioned laws and regulations, or any unexpected changes occur, the possibility is that its activities would be restricted or suspended. Accordingly, such laws and regulations may adversely affect the OKI Group's financial results and position.

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Sudden technological innovation

The OKI Group's principal business segments are subject to rapid technological innovations, and existing technologies and products become soon obsolete. Accordingly, the OKI Group strives to preserve its competitive advantage that supports its businesses through research and development. However, the OKI Group's financial results and position may be adversely affected in the event it is unable to deliver products and services that appeal to customers due to a delay in the development.

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Market trends

  1. Competitions

    Competitions in the product and geographical markets in which the OKI Group is operating are intensifying, with new participants in addition to the existing competitors. In an effort to get ahead of the competition and secure competitive advantages, the OKI Group strives its best to develop new products and reduce costs. However, the OKI Group's financial results and position may be adversely affected in the event that these measures turn out not effective, and the OKI Group as a result loses its competitive advantage or fails to secure profitability sufficiently.

  2. Customer trends

    In the event that some specific major customers representing a certain percentage of net sales of the OKI Group change their investment decisions due to operational or financial reasons, resulting in a decrease of transactions with the Company, that the public-sector investment significantly declines due to national government policies, or that investment of major customers declines as affected by said policies, etc., the OKI Group's financial results and position may be adversely affected.

  3. Decline in price

    Due to the severe competitions, the OKI Group may find it difficult to maintain appropriate prices of its products and services. Despite every effort to secure profitability through development of new products and cost reduction, the OKI Group's financial results and position may be adversely affected if the prices decline more sharply than projected.

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Overseas business activities

The OKI Group has production sites in Thailand, China and Brazil, being engaged in sales activities across a variety of countries and regions. The OKI Group's financial results and position may be adversely affected by the occurrence of unforeseen events such as economic downturns, political turmoil, fluctuations in local currency exchange rates, and social disorder caused by conflict or terrorism in these countries.

To minimize foreign exchange fluctuation risk, the OKI Group enters into forward exchange and currency swap contracts to address fluctuations of the yen against the U.S. dollar and euro. However, the OKI Group cannot guarantee the complete removal of risks, and abrupt fluctuations in foreign exchange rates in particular may adversely affect the OKI Group's financial results and position.

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Internal Control

The OKI Group has established an internal control system in an effort to ensure appropriateness of the business operation and accuracy of financial reporting, and is operating the system while striving to further enhance it. The OKI Group, however, cannot deny the possibility that the internal control system will become not functional due to a variety of factors such as negligence or wrongdoings by the Group's officer or employee, and any change in the business environment that was not assumed when the system was built. If consequently the OKI Group fails to secure appropriateness of the business operation, which results in a violation of laws and regulations or similar problem, or the Group is unable to maintain effectiveness of the internal control for financial reporting, the OKI Group's financial results and position may be adversely affected.

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Intellectual property

The OKI Group strives to protect its patents and to secure new patents with the aim of differentiating the OKI Group from its competitors. A failure in these objectives may adversely affect the business performance of relevant businesses. The OKI Group also strives to secure the necessary licenses from third parties for the use of their patents required in the development and production of products. There are possibilities that the OKI Group is unable to secure necessary licenses in the future, or is authorized to use patents or rights under unfavorable terms and conditions. In either case, the OKI Group's financial results and position may be adversely affected.
The OKI Group endeavors to heed intellectual properties held by third parties. It is not, however, in a position to completely eliminate the possibility that a lawsuit may be instituted against the OKI Group for violation of intellectual property rights held by third parties. The OKI Group's financial results and position may be adversely affected in the event that such lawsuit is instituted against the OKI Group and its lawsuit costs increase as a result, or in the event that the OKI Group is found to have breached such intellectual property rights and incurs damages.

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Information management

Although the OKI Group implements defense measures to protect its internal systems against computer viruses and to prevent information leakage, the OKI Group cannot guarantee complete protection from system failure and information leakage caused by human error, new viruses, etc. The OKI Group may incur additional losses if such events occur.

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Securing and fostering human resources

The ability to secure and foster high-performance human resources is a key factor in ensuring further growth as a company capable of generating stable profits. Accordingly, the OKI Group strives to recruit capable employees at every level, including new graduates and mid-career employees. In an effort to foster high-performance human resources, the OKI Group also conducts on-the-job training, education and a variety of supporting activities. In the event that the OKI Group is unable to secure and foster high-performance human resources, or a number of key employees leave the OKI Group, the OKI Group's future growth may be adversely affected.

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Raw materials and component procurement

The OKI Group procures a variety of raw materials and components in support of its production activities, and, due to the effect of disasters, it may become incapable of stable procurement of raw materials and components, and incapable of switching suppliers or replacing components due to special properties of these raw materials and components. In such cases, there may be delays in product shipment, leading to delays in delivery to customers, missed business opportunities and other losses, and the OKI Group's financial results and position may be adversely affected.

The OKI Group is reliant upon the direct and indirect supply of crude oil and materials, such as metals, as a part of its manufacturing activities. A sharp rise in the price of these and other key materials may impact the OKI Group's performance and financial position.

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Product defects and delays in delivery

Despite every effort to maintain quality assurance, the OKI Group is unable to eliminate entirely the possibility of product or service defects. In the event of such defects, the OKI Group may be liable for damage incurred by the customers. In addition, any incidence of a defect may impact the OKI Group's reputation, resulting in a drop in demand for the OKI Group's products and services. In either case, the OKI Group's financial results and position may be adversely affected.

While the OKI Group adopts complete and thorough measures to ensure the timely delivery of its products and services, unforeseen incidents in material procurement, production control and design may lead to a delay in delivery. In this case, the OKI Group may become liable for damage incurred by the customers due to delivery delays.

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Alliances

The OKI Group is constructively engaged with other companies in strategic alliances for research and development, manufacturing, sales and other activities. However, there may be instances where the OKI Group is not able to maintain desired cooperation with a strategic partner in business strategy, product and technical development, financing or other activities, or where the alliance does not yield satisfactory results. In such cases, the OKI Group's financial results and position may be adversely affected.

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Changes to accounting standards

The OKI Group prepares consolidated and non-consolidated financial statements in accordance with corporate accounting standards generally accepted as fair and valid. In the event that the OKI Group changes its accounting policy in association with the establishment or revision of accounting standards, etc., the OKI Group's financial results and position may be adversely affected.

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Interest-rate fluctuations

The OKI Group maintains interest-bearing debt that is subject to the impact of fluctuations in interest rates. The OKI Group utilizes interest-rate swaps and other instruments to manage the risks of the impact. However, a rise in interest rates may lead to an increase in interest charges and may adversely affect the OKI Group's ability to raise working capital due to increase in financing costs in the future.

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Stock price fluctuations

The OKI Group holds shares of stocks in listed companies as part of its investment securities portfolio. A fall in stock prices may lead to valuation loss and/or a decrease in valuation difference, which may adversely affect the OKI Group's financial results and position.

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Debt recovery

The OKI Group constantly appraises the financial conditions of its customers and estimates and provides an appropriate amount of allowances for bad debts that are expected to accrue after the balance sheet date. However, a sudden deterioration of the financial condition of a customer may adversely affect the OKI Group's financial results and position.

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Impairment loss on noncurrent assets

In the event that it becomes necessary for the OKI Group to recognize impairment loss on property, plant and equipment, intangible assets, investments and other assets, the OKI Group's financial results and position may be adversely affected.

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Deferred tax assets

The OKI Group provides appropriate amounts of retained losses carried forward and other temporary differences for deferred tax assets. In the event that the OKI Group derecognizes deferred tax assets as it is unable to eliminate such retained losses carried forward and other temporary differences due to the decline in taxable income brought on by future changes in its financial results, the OKI Group's financial results and position may be adversely affected.

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Retirement benefit obligations

The OKI Group provides appropriate amounts of retirement benefit obligations based on assumptions and preconditions such as a discount rate established using actuarial calculations and on expected long-term rate of return on pension assets. However, such assumptions and preconditions are susceptible to changes in market interest rates and stock market trends, which may cause actual results to differ from such provision and may lead to an increase in retirement benefit obligations. In such a case, the OKI Group's financial results and position may be adversely affected.

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Natural and other disasters, and accidents

The OKI Group strives to ensure that its disaster prevention framework remains well maintained through periodic inspections on disaster prevention measures and maintenance of facilities to minimize negative impacts from interruption of its manufacturing lines caused by a disaster or an accident. However, there is no guarantee that the OKI Group will be able to completely prevent adverse impacts from such factors as earthquakes, wind or flood damage, fire, major power outages, other disasters, accidents, conflicts, and terrorism. If any business location of the OKI Group is closed, or its business activity is suspended due to any of these factors, the OKI Group's financial results and position may be adversely affected.

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