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Business Risks

The various categories of risk to which business performance, stock price, financial position and other aspects of the operations of the Hankyu Hanshin Holdings Group are subject are detailed below. Information about future events that appears below was determined by the Group and was current as of March 31, 2021. These risks do not include all of the risks that the Group could face.

1 Natural Disasters and Accidents

1.1 Risk from Epidemics
If an infectious disease becomes widespread and restrictions are imposed on the movement and lives of people in various ways, it may materially affect the Company’s businesses. Specifically, impacts may be seen in the Urban Transportation Business through effects such as a declining number of passengers on railways and other means of transportation; in the Real Estate Business through temporary closings, the shortening of business hours and a decreasing number of visitors to leased facilities; in the Entertainment Business through the cancellation of and attendance restrictions on professional baseball games and performances of the Takarazuka Revue; in the Travel Business through the cancellation of overseas and domestic tours; and in the Hotel Business through falling demand from inbound tourism as well as domestic travel and other adverse effects.
 As a result of COVID-19, the Group has been impacted as described above. Depending on how the pandemic situation evolves, the timing and degree by which demand recovers and other factors, the Group’s future business performance and financial position may fluctuate significantly.
 Given the circumstances, the Group has positioned fiscal 2021 as a crisis recovery phase, during which it is committed to recovering its pre-COVID-19 business and preventing and limiting the deterioration of its financial position as much as possible.
1.2 Natural Disasters
Operating across an extremely wide range of businesses in its Urban Transportation, Real Estate, Entertainment, Information and Communication Technology, Travel, International Transportation and Hotels segments, the Group maintains a correspondingly large assortment of facilities necessary for conducting business. In the event of earthquakes, typhoons or other natural disasters, largescale accidents or acts of terrorism, the business performance and financial position of the Group could be adversely affected by damage to these facilities, its customers and/or limitations placed on its business operations. Especially in recent years, it has been pointed out that climate change in the form of rising air and sea temperatures may increase the frequency of torrential rains and strong typhoons, and there is an increasing risk of the abovementioned adverse effects being brought about by these natural disasters.
 To minimize the impact of natural disasters and accidents, the Group is investing in the maintenance and renovation of existing facilities, conducting seismic reinforcement work, and working to develop systems with a priority on safety, especially at group companies engaged in the railway business and other public transportation.

2 Information Management

The Group uses information systems in each of its business segments. If the functions of these systems are materially impacted by accidents, disasters, human errors or cyber-attacks, system failures or malfunctions, information leaks or other events may occur and disrupt the Group’s business operations whereby affecting its business performance and financial position. Regarding personal information, the Group manages databases containing customer data and other personal information in each of its businesses. If information is leaked due to an unexpected incident, claims for damages and loss of public credibility may substantially affect the Group’s performance.
 In accordance with internal regulations, such as fundamental policies on electronic information security, the Group takes measures required to prevent leaks, falsification or unauthorized use of information and to operate its information systems securely. A framework is also in place to report and deal with problems promptly. For personal information, in addition to the above, the Group has established regulations, such as fundamental policies on the management of personal information, and developed a system to help ensure the appropriate use and protection of personal information. Relevant training programs for employees are also provided.

3 Compliance

The Group promotes compliance management in each of its business segments not only by strictly observing the Companies Act, Financial Instruments and Exchange Act, labor laws, Act on the Protection of Personal Information, tax laws, economic laws, various industrial laws and other relevant laws, but also through adherence to corporate ethics. However, in the event of noncompliance, claims for damages and loss of public credibility may affect the Group’s business performance and financial position.
 The Group aims to meet the expectations of all its stakeholders and operate as a corporate group that is trusted and applauded by them. Based on the idea that one of the preconditions for achieving that goal is a compliance-focused business attitude, the Group has developed internal regulations such as a code of corporate ethics. Various education and training programs are also implemented for employees to raise their awareness of compliance and prevent noncompliance. The Group has also established a whistleblower system that allows prompt detection of and dealing with events that threaten our compliance stance and record.

4 Finance (Interest-Bearing Debt)

The Group makes continuous capital investments in each of its business segments. Most of the necessary funds are procured by borrowing from financial institutions and issuing corporate bonds, among other means. For this reason, in the case of future increases in interest rates, changes in financial markets, or downgrades in the Group’s credit rating due to changes in its financial position, the Group’s interest expenses may increase, and raising additional funds on desirable terms, including funds needed to refinance interest-bearing debt that reaches maturity, may become difficult.
 The balance of interest-bearing debt held by the Group as of the end of March 2021 on a consolidated basis was ¥1,063,048 million. Going forward, the Group plans to make capital investments required for maintaining and improving facilities, etc., and proceeding with large-scale projects such as the Umeda 1-1 Project, construction of which is to be fully completed in the spring of 2022. Amid the deep impact of the COVID-19 pandemic and depending on the extent of the impact on the Group’s business performance, consolidated interest-bearing debt is expected to increase to a certain degree.
 The Group will continue to diversify its funding and secure its liquidity, take steps to avoid interest rate risks through fixed rate financing, and strive to maintain the soundness of its financial position by controlling interest-bearing debt through cost reduction and investment in maintenance and replacement.

5 Changes in Political, Economic and Social Environment

5.1 Legal Risk
In accordance with the stipulations of Article 3 of the Railway Business Law, the Group must obtain separate permissions from the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) for each category of railway operations on each route that it intends to operate. Under Article 16 of the Law, a railway operator must obtain MLIT’s approval for the passenger fares it intends to set and on each occasion when it wishes to change the fares. Therefore, these regulations may limit the activities of the Group’s railway business. Notably, no fixed periods are prescribed for the permissions or approvals of MLIT.
 In addition to the railway business, other businesses in which the Group engages are also subject to various laws and regulations. If these are tightened, the cost of regulatory compliance may increase, while failure to comply with regulations may limit the Group’s activities and affect the Group’s business performance, financial status, etc.
The Group is working to minimize any such effects by investigating and ascertaining in advance information regarding changes in existing regulations and the establishment of new regulations and their respective impacts.
5.2 Decline in the Market Value of Assets Held by Members of the Hankyu Hanshin Holdings Group
In the case of a substantial decline in the market value of inventory assets, property and equipment and intangible assets, investment securities or other assets, the recording of impairment loss or valuation loss would likely have a negative impact on the business performance and financial position of the Hankyu Hanshin Holdings Group.
5.3 Declining Birth Rate
In the Group’s mainstay Kyoto-Osaka-Kobe area, demographic changes accompanying the declining birth rate and other factors are expected to decrease demand for railway, bus, taxi and other types of passenger transportation services, as well as decrease demand in other business areas. In addition, securing personnel is likely to become difficult as an imbalance between supply and demand develops in the labor market. Such situations could affect the business performance and financial position of the Group.
 In addition to efforts to increase the resident population in areas along the railway lines operated by the Group and to increase the influx of visitors to these areas by capturing the demand generated by foreign tourists, etc., the Group will broadly promote efforts to improve productivity by introducing advanced technologies.
5.4 Changes in Lifestyle and Workstyle
People’s lifestyles and workstyles are now changing because of the COVID-19 pandemic. If effects of the pandemic and other events continue to transform people’s lives, it may affect the existing business models of the Group since it operates businesses closely related to the way people live.
 In view of the new socioeconomic environment (the socalled“New Normal”) and the business environment in the New Normal era against the backdrop of rising awareness of Sustainable Development Goals (SDGs), the Group will update its Hankyu Hanshin Holdings Group Long-Term Management Vision for 2025 (to be released in the spring of 2022). The Group will also take a needs-oriented approach to offer and leverage a range of products and services in order to continuously improve its corporate value.
5.5 Addressing Climate Change
To cope with climate change, efforts are being made on a global basis to reduce greenhouse gas emissions. Although the Group’s railway, its core business, has less of an environmental impact than other means of transportation, it may require future investment or incur additional expense for measures required to move toward a more decarbonized and recycling-based society. Moreover, if the Group fails to adjust to these social demands, it may face a decrease in revenue due to the loss of public credibility and/or financing difficulties.
 The Group recognizes that greenhouse gas reduction is necessary for realizing a sustainable society. With “environmental protection” set as one of the priority issues in its Sustainability Declaration, the Group is moving forward with environmental protection activities, including the setting of Key Performance Indicators (KPIs) tied to the CO2 emission reduction rate. The Group has also agreed to and is taking steps in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The Group will strive to solve various social issues through its business in order to help realize a sustainable society.
5.6 International Operations
The Group’s Real Estate, Travel, International Transportation and other businesses are also active overseas and are, therefore, subject to various risk factors in each country, ranging from drastic changes in political and economic conditions to incidents of conflict, dispute or terrorism and the outbreak of infectious diseases. The Group is working to address these risks based on risk analyses supported by the advice of lawyers, consultants and other experts. However, in the case of an unexpected development, the business performance and financial condition of the Group may be affected.

As a Corporate Group, We Strive to Provide Enriched Lifestyles
by Supporting and Improving the Daily Lives of Our Customers

  • Hankyu Corporation
  • Hanshin Electric Railway
  • Hanshin Electric Railway
  • Hankyu Travel International