Currently, the major risks and variables that may affect the operating results and financial situation of the Fuji Electric E&C Group are as listed below. Recognizing the existence of these risks, the Fuji Electric E&C Group will continue its efforts to avoid the impact of the occurrence of such risks as much as possible.
Note that the following statements do not cover all risks associated with the Group’s business or investment in the Group’s shares. In addition, while the list does include matters relating to the future, the matters noted are based on an interpretation made as of 31stMarch 2022.
Risks Related to the Economic Environment
1. Trends in the Construction Market
The facility construction business, which is the main business of the Fuji Electric E&C Group, is greatly affected by trends in the construction industry; a larger-than-expected decline in construction investment in Japan, or the cancellation, postponement or revision of investment plans, could affect our business results.
2. Fluctuations in Material Prices or Labor Costs
While we do strive to control the purchase price of materials through centralized bulk purchasing and to build an efficient construction structure in cooperation with our partner companies, a stiff rise in the price of materials and cost of labor that cannot easily be reflected in the contract price could have an impact on our business results.
Risk Related to Business Activities
3. Business Partner Credit Risks
While we do what we can to manage credit with respect to our business partners, when concerns arise over the financial stability of a business partner, be it a client, partner company or supplier, this may lead to the inability to recover contract payments, construction advances, or other amounts due, or interfere with the progress of work, which may have an impact on our business results.
4. Unprofitable Construction Work
We carry out painstaking cost management, systematically holding regular consultations with stakeholders at the design stage and during construction; but when at the construction stage the work becomes unprofitable due to unexpected additional costs occurring, the appropriation of reserve funds to cover losses may have an impact on our business results.
5. Occurrence of Serious Accidents
Safety being our top priority, we carry out safety education and safety patrols on a regular basis; but a claim for compensation for damages, etc., due to an accident at the construction site involving serious personal injury or damage to equipment, could have an impact on our business results.
6. Risk Relating to Overseas Expansion
Sudden changes in the business environment of the regions in which the Fuji Electric E&C Group operates, such as outbreaks of terrorism, conflict or political instability, rapid fluctuations in the economic situation or exchange rate, or changes in laws and regulations, may have an impact on our business results.
Risks Relating to Natural Disasters / Infectious Diseases
7. Natural Disaster, Outbreak of Infectious Disease
We have taken a variety of measures, including the preparation of a disaster response manual, the operation of an emergency safety check system, and the establishment of an emergency response headquarters as and when necessary; but a major natural disaster or an epidemic of an infectious disease interrupting or severely delaying construction or causing damage to equipment may have an impact on our business results.
Other Risks
8. Risks Relating to Compliance
The business activities of the Fuji Electric E&C Group span a variety of business sectors in multiple regions around the world, in accordance with the laws and regulations of each country concerned. In addition to stipulating that directors and employees of the Group adhere to the laws, customs and social norms of Japan and other countries, the Fuji Electric E&C Group works to ensure that this applies throughout the Group, through the establishment of a compliance program, regular meetings of the Compliance Committee and the provision of compliance education to all employees. However, in the event of a violation of these rules, action by the competent authorities, the filing of a lawsuit, etc., may have an impact on our social credibility or business results.
9. Risks Relating to Retirement Benefit Plans
In order to ensure the proper operation of the defined-benefit pension plan, Fuji Electric Engineering & Construction regularly obtains from trust banks and other asset management institutions information on the status of our investments; the Asset Management Subcommittee holds quarterly meetings under the supervision of officers in charge of investment management so as to properly manage the investments, and reports regularly to the Management Meeting and the Board of Directors on the status of investments. However, a decline in the market value of the pension and trust assets, a deterioration in investment yields, or changes in assumed discount rates could affect our business results.
10. Risks Relating to Information Security
With respect to the handling of important information, personal information, etc., we implement a variety of security measures and provide information security education to all employees; should this information be leaked to the outside due to a cyber-attack, unauthorized access, hardware or software failure, etc., there may be an impact on our social credibility or business results.