TOP > Investor Relations > Management Policy > Risk Factors
Last updated : 2011/05/20
The following items are major risks related to the business activities of the Benesse Group that could potentially have a significant effect on the judgment of investors. Recognizing the possibility that these risks may arise, the Benesse Group considers and implements concrete measures with the aim of avoiding such risk and minimizing the impact on its results and financial position in the event that they should occur.
The following discussion of risk factors contains forward-looking statements, and reflects management’s judgment as of May 20, 2011.
The Benesse Group’s core correspondence course businesses, Shinkenzemi and Kodomo Challenge (preschool courses), have membership ranging from infants to senior high school students. As of April 2011, the number of members totaled 4.03 million. The Benesse Group strives to satisfy increasingly diverse and individualized customer needs in the education market by enhancing its lineup of educational materials, and seeks to expand its penetration rate through next-generation products that combine the Internet and various other learning media. The Group aims to grow its businesses outside the correspondence course business by providing prep schools and other places for learning. The Group is developing the correspondence course business in East Asian countries, including China, where a high growth rate is expected, and will expand these and other education businesses outside of Japan going forward. In order to respond to the aging of the population in Japan, the Group will also work to expand the senior/nursing care business, centering on operation of nursing homes for the elderly.
The Benesse Group’s core business involves the provision of products and services to individual customers, centered on correspondence courses such as Shinkenzemi and Kodomo Challenge. Existing and potential customers are required to register personal information, such as their name, gender, date of birth, address, telephone number, and the name of a guardian, and this information is deployed effectively in our sales activities. Benesse Corporation ceased using the basic resident register access system in October 2005, shifting to a system in which we acquire personal information directly, on the basis of individual consent. In tandem with this move, we reviewed our marketing strategy and worked to diversify our marketing methods. For example, in addition to using conventional direct mail, we are actively using TV commercials and the Internet and further strengthening telemarketing, as well as promoting marketing activities tailored to the specific characteristics of different regions.
However, the ability to acquire personal information could have an impact on total enrollment in Shinkenzemi and Kodomo Challenge courses.
In the education field, in March 2008 the Ministry of Education, Culture, Sports, Science and Technology announced new curricula for kindergarten, elementary, and junior high schools. Based on the key concept of fostering “zest for life,” the enhancement of the curriculum includes plans for an increase in the number of classroom hours, an increase in the number of textbook pages, and foreign-language activities in elementary schools, among other changes. Furthermore, going beyond acquisition of basic knowledge, the curricula aim to cultivate students’ ability to apply their knowledge. These curricula have already been implemented for kindergartens since fiscal 2009, and will be implemented in elementary and junior high schools in fiscal 2011 and fiscal 2012, respectively. However, the revised content has been taken up in part at all levels during a transitional period that began in fiscal 2009. The next senior high school curriculum was announced in March 2009, and will be implemented starting with the class matriculating at senior high school in fiscal 2013. There is an ongoing movement by the Japanese government to review educational content and the educational system. As part of this trend, a stronger emphasis is being placed on measures to improve, and better evaluate, academic abilities in individual regions and schools. Amid these significant changes, the educational needs of children and their parents are rapidly becoming more diverse and individualized. The Benesse Group is therefore providing products and services that are carefully tailored to these fragmenting needs.
Nevertheless, the Benesse Group’s results and financial position could be affected by a decline in the appeal of its core products and services and a decline in sales, given the high share of total sales accounted for by the Shinkenzemi business, if its response is insufficient to cater for the rapid pace of change in the education environment and in customer needs.
Revisions to nursing care benefits under Japan’s long-term care insurance system are conducted once every three years. The April 2009 revisions saw the first increases in the history of the long-term care insurance system, and were enacted with the aim of improving the terms of employment of nursing staff. The increases also applied to benefits for day-to-day care of residents in specified nursing homes—one of the Benesse Group’s main business domains. However, local governments limit the number of new specified nursing homes. Although the Japanese government’s policy on this matter is to defer total control of nursing home volume to the discretion of local governments, most localities continue to restrict new openings.
In light of the restrictions on establishment of specified nursing homes, the Benesse Group aims to open new locations in line with local governments’ plans to build up the number of such facilities by leveraging its relative edge in terms of service quality and financial position and thus sustain the speed of business expansion as far as possible.
Moreover, ahead of scheduled regulatory amendments in fiscal 2012, the Ministry of Health, Labour and Welfare’s Social Security Council is exploring revisions that will likely be introduced. The committee’s findings are expected to result in more regulatory changes.
The Benesse Group has built a nursing care business model with a low degree of dependence on income from nursing care insurance. Nevertheless, the Group’s results and financial position could be affected by the need to review the nature of products and services, fee structures, and so on, due to revisions in regulations related to the provision of nursing care services, standard reimbursement rates applicable to various nursing care services, payment limits commensurate with care requirements, and other factors.
To ensure its readiness to cope with major earthquakes and other natural disasters, the Benesse Group is implementing business continuity measures. This includes putting in place a system for gathering data concerning damage suffered by Group companies and the strategic dispersal of key information systems and distribution bases in the domestic education business. Nevertheless, in the event of a catastrophic natural disaster, the Benesse Group’s results and financial position could be affected by the interruption of sales activities in the disaster-stricken area, the destruction of Group facilities and other property, subsequent turmoil related to transportation, communications, distribution, and other social infrastructure, and damage to outsourcers. Furthermore, most of the Benesse Group’s operating companies are headquartered in Tokyo, which could adversely impact Group operations should a catastrophic event strike the city.
The Benesse Group’s results and financial position may be affected by the necessity to record impairment losses on such assets as landholdings, buildings, and goodwill in the event of a sharp decline in the profitability of Benesse Holdings, Inc. and Group companies.
The Benesse Group operates a business primarily providing preschool education services in China and other East Asian countries. As of April 2011, the business in China had 340 thousand members, the Taiwan business had 170 thousand members, and the business in Korea had 140 thousand members. In addition, the Benesse Group oversees manufacturing of and procures educational tools and toys through its local subsidiary in Hong Kong. Subsidiary Berlitz Corporation also operates over 550 schools in more than 70 countries and regions worldwide. In an attempt to mitigate risk, the Benesse Group actively collects data concerning legal and regulatory revisions and policy trends, particularly in East Asian countries, and ascertains the status of civil conflicts in which it could inadvertently become involved. Nevertheless, natural disasters, cultural and religious tension, political or economic instability, or the new establishment or amendment of laws or regulations in any of these countries and regions could have an adverse impact on the Benesse Group’s business.
