Business and Other Risks

  1. The following are major risks that may affect the Group's operating results and financial position (including stock price, etc.), and that may have a significant impact on the decisions of investors, among other matters related to the status of business and accounting described in the Company's Annual Securities Report.

  2. Particularly important risks

    (1) System failure

    The Group mainly provides services using internet communications. There is the possibility of system failure due to human error, malfunction of communication network equipment, rapid increase in online traffic, software defects, computer viruses, unauthorized access, power outages, natural disasters, accidents, etc. The Group strives to prevent or avoid failure in advance through regular backup and monitoring of operating status. However, if system failure occurs despite such measures and the provision of services is hindered, the business and performance of the Group may be affected.

    (2) Protecting of personal information

    The Group may collect personal information regarding the services provided by the Group. The Group manages personal information in accordance with the Act on the Protection of Personal Information. Moreover, the Company has acquired the Privacy Mark in order to establish an appropriate protection system for information security and personal information. If a situation such as leakage or unauthorized use of personal information occurs despite such measures, the Group may be targeted for damage claims or may lose trust from society. As a result, the business and performance of the Group may be affected.

    (3) Securing, retaining, and cultivating human resources

    The Group recognizes the importance of securing, retaining, and cultivating outstanding human resources in order to improve competitiveness and develop business in the future. However, if the securing, retaining, and cultivating of outstanding human resources do not proceed as planned, or if outstanding human resources leave the Group, it may decrease our competitiveness and become a limiting factor on our business scale expansion. As a result, the business and performance of the Group may be affected.

    (4) Market trends, etc.

    By continuously providing new services that meet customer needs, the Group aims to improve its competitiveness and leverage the first-mover advantage of the e-gift platform it has already built to achieve further growth. However, since the e-gift market is in the process of growth, the emergence of new business models or unforeseen factors that impede market expansion, as well as intensifying competition due to new entrants and other factors that make it difficult for the Group to maintain its competitiveness and advantage, could affect the Group's business and earnings. In addition, if competition intensifies due to new entrants and it becomes difficult for the Group to maintain its competitive edge and superiority, the Group's business and performance may be affected.

  3. Important risks

    (5) Technological innovation

    The Group operates its business based on internet-related technologies. Internet-related fields are a rapidly changing industry in which the development of new technologies and the introduction of new services using those technologies are occurring in rapid succession. For this reason, the Group is continuously developing new technologies and services, and is working to secure outstanding human resources. However, if our response to changes in the business environment is delayed, or if large amounts of expenditures are required to respond to the development of new technologies and services, the business and performance of the Group may be affected.

    (6) M&A and capital/business alliances, etc.

    The Group is examining and promoting M&A, capital/business alliances, etc., in order to accelerate our own growth. During this examination, we plan to conduct a preliminary survey on such as financial content and contractual relationships of the target company, and to proceed only after considering the risks. However, there is the possibility that problems which were not identified in the preliminary examination may occur; for example, the occurrence of contingent liabilities or the discovery of unrecognized liabilities at the target company. There is also the possibility that business expansion may not proceed according to plan. In such cases, it may be difficult for the Group to recover its investment, etc., and the business and performance of the Group may be affected.

    (7) New businesses

    The Group is considering the provision of new services such as point services and payment services via the eGift platform. We will continue to actively expand into new services and new businesses in order to expand the scale of our business and strengthen our earnings base. Such efforts may require additional investment such as hiring human resources and developing systems, and some time may be required until stable profits can be generated. If system development related to new services does not progress according to expectations, or if new business development does not proceed as originally planned, it may be necessary to take actions such as recording an impairment loss and the investment may not be recovered. Furthermore, depending on the content of new services and new businesses, unique risk factors may be encountered, and the business and performance of the Group may be affected.

    (8) Overseas expansion

    The Group possesses a subsidiary in overseas and plans to continue expanding our services overseas in order to grow our earnings base. Overseas business development contains potential risks such as unexpected enactment of laws, etc., deterioration of political, economic, or social conditions, differences in culture, religion, user preferences and business customs, and fluctuations in exchange rates. The Group will engage in careful consideration so that we are able to deal with these potential risks. However, overseas expansions of the Group may be hindered by unforeseen circumstances, and the business and performance of the Group may be affected.

    (9) Malpractice

    The Group provides a “giftee” service that enables individual users to purchase eGifts. The terms of use for this service stipulate that membership can be suspended or revoked if the Group deems the user’s actions as inappropriate. We have also taken measures such as setting an upper limit on the amount of money that can be used in transactions in a single day. Nevertheless, there is the possibility of giftee being used fraudulently; for example, access by impersonating another person or the purchase of eGifts through fraudulent payment methods such as using another person's credit card. The excessive occurrence of such fraud may harm the reputation of the Group or the Group’s services, and the business and performance of the Group may be affected.

    (10) Securing new customers and continuing relationships with existing customers

    The Group's main business is the e-gift platform business. We provide services to eGift issuing companies and eGift user companies.
    In order to expand the business of the Group, we must maintain continued usage by improving customer satisfaction through the pursuit of convenience for each eGift issuing company and user company. Also, we must expand the scale of eGift issuing companies and user companies through acquisition of new customers. To achieve these goals, we are implementing new proposals to existing customers, and are conducting advertising and publicity activities to secure new customers. However, if our continuous transactions with existing customers and acquisition of new customers do not progress smoothly, the business and performance of the Group may be affected. In particular, since eGift user companies utilize eGifts as part of their sales promotion activities, if the sales promotion activities of corporate customers become stagnant, eGift sales will not proceed as planned, and the business and performance of the Group may be affected.

    (11) Fees associated with the issuance and sale of eGifts

    The Group usually receives sales fees and issuing fees from eGift issuing companies and user companies. These fees are calculated by multiplying the issuance amount of eGifts by a specific fee rate. However, in the case of particular sales destinations, from among the issuance amount of eGifts, the Group receives fees equal to the issuance amount of eGifts which have expired without being utilized by the user. In the latter case, if the fee calculation method is changed to the former method of multiplying the eGift issuance amount by a specific fee rate, or if users’ eGift usage rate rises significantly and the issuance amount of unused eGifts decreases significantly, the business and performance of the Group may be affected.

    (12) Legal regulation

    The Group operates its business in accordance with generally applied laws and regulations. There are no unique laws or regulations which significantly affect the continuity of our business. However, if the Group is forced to respond to the future enactment, amendment, etc., of laws or regulations, and if said response places restrictions, etc., on a portion of our businesses, the business and performance of the Group may be affected.