Business risk

Below are items concerning PARCO’S business and economic situation included in the securities report that could potentially have a significant impact on decision making by investors.
PARCO Group is aware of these risks and is making efforts to avoid them and have a response ready should one occur.
Please note that any forward-looking statements included in this text are based on the judgement of PARCO Group at the time of submission of the securities report (May 29, 2017).

1. Risk relating to changes in demand
PARCO Group operates a Shopping Complex Business, which is engaged in the management of commercial facilities, as well as a Retail Business and a Space Engineering and Management Business amongst others. Events such as a downtrend in consumer sentiment caused by deteriorating economic conditions or tax system revisions including consumption tax increases, or sluggish sales of seasonal products due to climatic conditions such as cool summers and warm winters, may have a significant impact on PARCO Group’s financial situation and financial results.
2. Risk relating to natural disasters and incidents
PARCO Group has business locations both in Japan and overseas, owns or is entrusted with the operation of PARCO commercial facilities in each of Japan’s major cities, and stores opened as a tenant in commercial facilities in each region of Japan. Should a natural disaster such as an earthquake or fire, war, terror incident, or public disturbance occur at any of these locations, it could lead to the interruption of business activities. In particular, we can expect damage to occur at PARCO Group stores and businesses in the Tokai and Kanto regions where a large-scale earthquake has been predicted. Countermeasures being taken include earthquake-resistant reinforcement of buildings, thorough maintenance and dissemination of provisions regarding accident prevention during a large-scale earthquake, and holding disaster-preparedness drills at stores in regions where large-scale earthquakes may occur. These countermeasures are part of a risk response that is being maintained and strengthened to minimize damage should an event occur, but there may be a significant impact on PARCO Group’s financial situation and financial results depending on the situation.
3. Risk relating to Japanese legal restrictions
In the carrying out of its business activities, PARCO Group is subject to a variety of regulations including the Large-Scale Retail Store Location Law, the Central City Invigoration Law, the City Planning Act, the Construction Business Act, and the Building Standards Act. There is the possibility that business activities could be restricted should new store openings, floor space expansions and the like become subject to legal restrictions affecting store opening and operation plans. In this event, there may be a significant impact on PARCO Group’s financial situation and financial results.
4. Risk relating to industry and market movements
PARCO Group conducts detailed marketing when developing shopping complexes and opening retail stores. However, in the event of an unforeseen increase in the intensity of competition or changes in the market situation, there is the possibility that store sales or new store openings may be impacted. To respond swiftly to these kind of changes, we are implementing measures such as streamlining store management structure, and implementing a process of closing unprofitable stores and opening new ones, but there may be a significant impact on PARCO Group’s financial situation and financial results depending on the situation.
5. Risk relating to company reorganization
PARCO Group comprises PARCO Co. Ltd. and affiliated companies in both Japan and overseas that form coordinated partnerships and come together as a whole to carry out business activities. Going forward, changes to the scale of the Group or business areas in which it operates due to new mergers, the sale or transfer of operations, and the sale or liquidation of affiliated companies and the like, may have a significant impact on PARCO Group’s financial situation and financial results.
6. Risk relating to vendors and related parties
As part of PARCO Group’s Shopping Complex Business and Retail Business, we sometime provide lease and guarantee deposits to landowners, leaseholders, and the like. Also, in our Space Engineering and Management Business, we open accounts receivable to contract business partners. While sufficient credit management is being conducted regarding these vendors and related parties, events such as a deterioration in the financial situation of landowners, leaseholders, and the like making it difficult to recover lease and guarantee deposits, or a deterioration in a contract business partner’s credit status making an account receivable unrecoverable, may have a significant impact on PARCO Group’s financial situation and financial results.
7. Risk relating to the provision of goods and services
PARCO Group handles goods such as clothing, sundry goods, and food products, and also provides services such as interior and building work, and building management. Although meticulous care is taken regarding hygiene management and the quality control of goods and services, in the event of a defect, imperfection, or the like involving a product or service provided by a PARCO Group store causing damage to a customer, it may lead to a loss of customers or reputation resulting in a significant impact on PARCO Group’s financial situation and financial results.
8. Risk relating to fixed assets
PARCO Group holds fixed assets for use in its business activities, such as land and buildings for retail use, and events such as a downturn in operating revenue or cash flow, or impairment losses from a decrease in land prices, may have a significant impact on PARCO Group’s financial situation and financial results.
9. Risk relating to personal information management
PARCO Group holds the personal information of customers collected through its business activities. PARCO is firmly aware of the impact a leak of personal information would have on business operations and trust and has established a personal information management framework, including creating regulations and manuals for each business format, educating employees, and acquiring the appropriate certification. In the unlikely event that a leak occurs, resulting compensation payments for damages, loss of trust, and the like, may have a significant impact on PARCO Group’s financial situation and financial results.
10. Risk from systems
PARCO Group primarily outsources the crucial systems necessary for its business activities to data centers operated by external contractors. These data centers implement safety measures, such as using earthquake resistant design, duplicating electrical and communications circuits, installing back-up generators, and defending against unauthorized access. In the event an unforeseen natural disaster or accident causes damage to facilities or stops systems resulting in communication failure between business locations, it may lead to an interruption of business activities and have a significant impact on PARCO Group’s financial situation and financial results.
Updated May. 29, 2017

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