SAN HOLDINGS and its group companies have measures encompassing a broad range of risk factors associated with changes in the business climate in order to fulfill their responsibilities to stakeholders and the communities where these companies operate. We have a strong commitment to our obligations to society by taking actions for the safety and security of our business operations. All risk factors involving business activities and organizations are assessed in a comprehensive manner. Our risk management system, which we are constantly improving, includes the identification of significant risk factors and extends from measures to prevent problems during normal operations to emergency response measures for the restoration of business operations.
March 19, 2009
SAN HOLDINGS, INC.
Satoshi Harishima President and Representative Director
The fundamental purposes of risk management at the SAN HOLDINGS Group are to (1) minimize damage to property and people, the loss of public trust and losses involving corporate resources associated with business operations, natural disasters and accidents and (2) quickly resume business operations and continue corporate activities in the event of an emergency while preserving corporate functions.
This section explains risk factors that may affect the performance and financial position of the SAN HOLDINGS Group (as of June 2022).
The number of deaths determines the quantitative demand for funerals. Based on “Population Projections for Japan” (April 2017) by the National Institute of Population and Social Security Research, the median estimate for the number of deaths in Japan is an increase at an average annual rate of slightly more than 1% during the next decade. However, the actual number of deaths in each year has been different than this forecast.
Consequently, even if there is no change in the market share or the average revenue per funeral at the SAN HOLDINGS Group, a change in the number of deaths in areas where group companies operate may have a significant effect on the performance in a particular fiscal year of the funeral and related services business, which is the group’s core business.
Due to seasonal factors that affect the number of deaths, the largest number of funerals at the SAN HOLDINGS Group is usually between December and February. Therefore, operating revenue of the SAN HOLDINGS Group, where the core business is funerals and related services, are typically higher in the second half of each fiscal year than in the first half.
The peak period for funerals, and particularly January and February, is also when the number of influenza infections is highest. Therefore, the severity of influenza in each year may affect the SAN HOLDINGS Group’s performance.
The SAN HOLDINGS Group has extensive experience in providing memorial services such as company funerals, farewell events, and joint funerals for companies, organizations, and educational institutions. Compared to funerals for individuals (general funerals), the number of such funerals is limited but they tend to be larger with a greater number of persons attending. As a result, the number of funerals and the revenue fluctuate from year to year. Therefore, the Group's performance may be affected by the number and amount of memorial services, a relatively large-scale funeral. Large-scale funerals costing more than ¥5 million account for about 10% of the total revenues of KOEIKISHA CO., LTD.
Japan’s funeral industry is not regulated and there are no administrative directives, but this lack of regulatory oversight also means the industry has low barriers to entry. There are two categories of funeral companies. One is companies specializing in funerals. Almost all of these companies are small and midsize family-operated businesses closely tied to the communities they serve. The other category is mutual-aid societies that handle funerals, weddings and other ceremonies. This category includes large businesses that have regional operations.
Ceremony mutual aid societies that have been focusing on weddings are currently turning their attention to the funeral market. The Buddhist memorial service sector is also targeting the funeral market. In addition, due to the growth of the funeral market, there is an increasing number of new entrants nationwide from different business sectors, including the railroad, retail, consumer and agriculture cooperative, and hotel sectors. The emergence of companies using the internet to provide people with information about funeral service providers is further increasing competition. Low barriers to entry may result in more new competitors in the funeral market that alters the competitive landscape and has an effect on the SAN HOLDINGS Group’s performance.
Pandemics and other outbreaks of diseases restrict the ability of people to travel and gather. In the worst cases, these events may make it impossible to conduct a funeral in the conventional manner, such as by preventing mourners from viewing the deceased for a final farewell. The result may be a decrease in the number of people who attend funerals and a smaller size of funerals. In addition, holding corporate funerals, farewell events and other large ceremonies may not be possible. As a result, there may be a negative effect on the SAN HOLDINGS Group’s performance.
*Risk involving the COVID-19 pandemic
Beginning in the middle of February 2020, the pandemic has negatively affected the performance of the SAN HOLDINGS Group mainly by reducing the size of funerals due to the smaller number of mourners. During the fiscal year that ended in March 2023, average revenue per funeral started to recover.
Three years after the start of the COVID-19 pandemic, social and economic activity in Japan has mostly returned to normal because of numerous measures for living with the pandemic.
Due to recent changes involving the pandemic, we believe the impact of the pandemic will be small in relation to the impact in the prior three fiscal years. If the impact of the pandemic differs from the current assumption, the results of operations and financial position of the SAN HOLDINGS Group may be affected.
The SAN HOLDINGS Group has a substantial volume of non-current assets consisting primarily of funeral halls. If the profitability of these assets decreases due to a change in the business climate and business conditions and the decision is made that assets can no longer generate adequate cash flows, impairment losses may be posted for these assets. These losses may affect the SAN HOLDINGS Group’s performance and financial position.
The SAN HOLDINGS Group has a large volume of personal information in association with the funeral and other business operations. The maintenance of a framework for compliance with the Act on the Protection of Personal Information, which was enacted in April 2005, is one of the group’s highest priorities. The SAN HOLDINGS Group has received Privacy Mark certification.
However, in the event of a personal information leak caused by unforeseeable circumstances, the negative effect on public trust in the group, substantial expenses to respond to the leak and damage to the group’s reputation may affect the SAN HOLDINGS Group’s performance.
