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 2021).
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.
Large funerals (revenue of more than ¥5 million), which are primarily corporate funerals, account for approximately 10% of total funeral revenue at the SAN HOLDINGS Group. Many activities are under way to increase the group’s share of the large corporate funeral market in the Tokyo area, where the group’s market share is currently low. In the Osaka area, where the group has a high market share, the number of orders for corporate funerals is generally steady and predictable. Although reliance on large funerals is slowly decreasing, the ability to receive orders for large funerals, mainly corporate funerals, and the level of revenue from these funerals may affect the SAN HOLDINGS Group’s performance.
For more than a decade, the corporate funeral market has been changing because of the increasing number of farewell events held at hotels. If there are more changes involving customs, formats and social standards concerning corporate funerals, the SAN HOLDINGS Group’s performance may be affected.
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 COVID-19 crisis has negatively affected the performance of the SAN HOLDINGS Group by reducing the size of ordinary funerals as the number of mourners declined and by causing postponements and cancelations of corporate funerals and farewell events to say farewell to the deceased. This crisis may continue to affect the SAN HOLDINGS Group’s performance until these negative effects end due to measures to stop the spread of infections.
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.