Risk ManagementSUSTAINABILITY FOR THE MEDIA DO GROUP

Basic Policy

The MEDIA DO Group has established risk management regulations to mitigate risks and minimize the potential losses should risks be realized. In addition, the Risk Management Committee has been put in place to help identify, asses, and combat risks with the potential to impact the ongoing growth and business activities of the Group. This committee meets once a quarter, in principle, and the results of its examinations and discussions are reported to management. Based on these reports, management examines the relative weight of risks from its perspective to prioritize the risks needing to be addressed. Identified risks are categorized as either business strategy risks or operational risks.

Business Strategy Risks Business strategy risks represent the potential that the Company will be unable to achieve the desired results or benefits of its management policies or business strategies. Measures for countering these risks are to be formulated based on the scope and extent of their potential impact on the ongoing growth of the Company.
Operational
Risks
Operational risks refer to the risk of operational phenomenon, obstructions, or losses occurring during the course of implementing business strategies. These risks shall be limited to a predetermined level during the course of business activities.

For risks judged to be material, response measures and countermeasures are examined and discussed after various levels, including the business, corporate, and senior management levels. The Risk Management Committee monitors progress in such measures as it works to promote ongoing improvements. In addition, Audit & Supervisory Board members attend meetings of the Board of Directors, review important documents, and coordinate with the accounting auditor to confirm the effectiveness of measures implemented in response to high-priority risks. Furthermore, the Company establishes compliance-related regulations, defines the roles and regulations to be observed by Group officers and employees, and conducts internal audits to confirm the status of compliance.

Risk Management Cycle

Risk Assessment Map

Major Business Risks and Scope of Impacts

Recognized Risk Scope of Impact Degree of Impact Supplementary Information
Business Strategy Risks Risks related to growth potential of the eBook industry
  • Risk of impacts on management policies and growth strategies
  • Risk of impacts on business performance
Potential for medium to large impacts (¥100 millions of yen to billions of yen) on performance The eBook market is expected to grow going forward, and the Company is committed to improving its systems and services to contribute to this growth.
External factor (natural disasters, etc.) risks
  • Risk of impacts on growth strategies and business activities
  • Risk of impacts on supply and demand
  • Risk of impacts on earnings
Potential for medium to large impacts (¥100 millions of yen to billions of yen) on performance In response to the COVID-19 pandemic, as high as 98% of MEDIA DO’s employees transitioned to teleworking, enabling the Company to continue its business activities. Conversely, the Company recognizes the need to establish business continuity plans and crisis response manuals and take other exhaustive measures to limit the potential impact of external factors on business activities.
Risks of piracy websites, etc.
  • Risk of impacts on growth strategies and business activities
  • Risk of impacts on supply and demand
  • Risk of impacts on earnings
Potential for medium to large impacts (¥100 millions of yen to billions of yen) on performance The emergence of small to medium-sized piracy websites has been confirmed after the closure of a major piracy website in April 2018. Although several websites are expected to be closed over the next year, it is possible that MEDIA DO’s business will be impacted by piracy websites in the future.
Risks related to dependence on specific suppliers
  • Risk of impacts on business activities
  • Risk of impacts on performance and financial position
Potential for medium to large impacts (¥100 millions of yen to billions of yen) on performance MEDIA DO does not engage in frequent conditions negotiations with suppliers, but conditions are regularly reviewed from a two-way perspective.
Systems and information security risks
  • Risk of impacts on performance and financial position
  • Risk of damage to brand value
Potential for medium impacts (¥100 millions of yen) on performance Over the past year, there were no incidents resulting in economic losses and one incident of information leakage. The information leakage incident involved the NetGalley distribution service MEDIA DO utilizes in Japan. In December 2020, unauthorized access to the backup files of U.S.-based NetGalley, LLC, the company that manages and operates this service on a global basis, resulted in the leakage of personal information of users in Japan and other countries and corporate information of certain publishers. MEDIA DO recognizes the need for a Groupwide effort to enhance security systems in order to prevent future incidents and information leaks.
Investment and impairment risks
  • Risk of impacts on financial position
  • Risk of impacts on business activities, performance, cash flows, and stock price
Potential for medium to large impacts (¥100 millions of yen to billions of yen) on performance In the fiscal year ended February 28, 2019, the Company recorded a loss on valuation of investment securities of ¥1,217 million under extraordinary loss. In response to this loss, steps were taken to improve the rationality of investment decisions, including the establishment of the Investment Committee and the formulation of investment strategy policies. Regardless, it is possible that performance may be impacted by the intensification of competition going forward.
  • Risk of impacts on growth strategies and business activities
  • Risk of impacts on performance and financial position
Potential for medium to large impacts (¥100 millions of yen to billions of yen) on performance No major delays to business activities have been incurred as a result of human resource recruitment issues, but demand is already rising for human resource recruitment to fuel future growth.
  • Risk of impacts on performance and financial position
  • Risk of damage to brand value
Potential for medium impacts (¥100 millions of yen) on performance No corporate governance issues have occurred at this point in time, but MEDIA DO recognizes the need to enhance internal control systems in order to prevent future issues.
  • Risk of impacts on growth strategies and business activities
  • Risk of impacts on performance and financial position
  • Risk of damage to brand value
Potential for medium impacts (¥100 millions of yen) on performance The Company is not currently dependent on any specific individuals. However, it is still necessary to develop succession plans and otherwise prepare for unforeseen events.