Business risks
Among the items related to the status of business and accounting, etc., as stated in the annual securities report, the following are the main items that may have a significant impact on the judgment of investors.
In addition, JMDM Group’s business and other activities are accompanied by various other risks, and the risks listed here are not fully covered.
JMDM Group recognizes the possibility of these risks materializing, and our policy is to work to prevent them from occurring to possible extent, and to respond appropriately if they do take place.
In addition, items mentioned below referring to the future are based on assessments made at the end of the current consolidated fiscal year.
Risks related to supply chain
The products sold by JMDM Group include our own products procured from Ortho Development Corporation, as well as products purchased from other companies based on sales partnership agreements and other contracts.
There is a risk that our profits and financial position could be affected if there are problems with the suppliers who transact with Ortho Development Corporation which would impact its in-house manufacturing, or if there are delays or delivery delays in the purchase or distribution of products procured from other companies.
We are taking measures to diversify our supplier network and increase the ratio of in-house manufacturing.
Risks related to sales
Unexpected product defects, competition with other companies, etc., can be the factors that reduce sales and generate certain impacts on profits and financial conditions, but we have established a system to review the occurrence of defects and sales trends of other companies on a monthly basis to reduce risk.
Risks related to legal regulations and political trends
The sales activities of medical devices are subject to various laws and regulations.
In Japan, there is also a risk that governmental measures such as revisions in reimbursement price every two years would affect JMDM’s profits and financial situation.
There is also a risk that administrative measures related to the healthcare system in the United States could affect the profits and financial situation of our US subsidiary.
As a countermeasure, we are responding to the profit deterioration risk by reducing the cost of sales through measures such as increasing the ratio of sales of our own products which are highly profitable as well as increasing the ratio of in-house manufacturing.
In addition, if the effective tax rate for corporate taxes, etc. changes due to revisions to tax-related laws and regulations, the amount of deferred tax assets would change, and there is a risk that this would affect JMDM Group’s business performance and financial position.
Risks related to research and development
There is a possibility that the development of a new product may be discontinued during the development period in case the expected efficacy and safety are considered not to be achievable.
In addition, in order to begin selling the developed products, it is necessary to obtain pharmaceutical approval in each market, but there is a risk that the approval may not be obtained or the time frame for obtaining it may take longer than what had been planned.
Risks related to intellectual property
If the products and medical instruments handled by JMDM Group infringe the patents and other intellectual property rights held by other companies, there is a risk that disputes may arise, sales may be suspended, and compensation payments may be made, which could affect JMDM Group’s profits and financial position.
Therefore, we are working to reduce this risk by investigating the content of the patents of other companies related to our products in development and consulting with outside experts if necessary
Risks related to litigation
In addition to cases related to fair trade, there is a possibility that lawsuits would be filed in relation to patents, sales contracts, product liability, labor issues, etc., and depending on how each case develop, there is a possibility that this would affect profits and financial conditions.
Risks related to exchange rate fluctuations
Fluctuations in exchange rates between Japanese yen and US dollars may affect the profits and losses and financial position of JMDM Group due to the reasons that our company mainly imports and purchases from Ortho Development Corporation in US dollars and the US dollar-denominated financial statements of Ortho Development Corporation are converted to yen in the consolidated financial statements.
We have established a foreign exchange forward contract policy, and we are working to reduce the risk of exchange rate fluctuations related to US dollar-denominated imports by managing our operations in accordance with this policy.
Risks related pandemic
There is a risk that JMDM Group’s profits and financial position may be affected by medical institutions postponing non-urgent surgeries such as artificial joint arthroplasty surgeries in accordance with the guidelines of each country’s health administration in response to the pandemic.
In the event of a pandemic, our company would prioritize the safety of our customers, business partners, employees and their families, and would thoroughly implement infection prevention measures such as wearing masks and avoiding the three Cs (Closed space, Crowded places, Close-contact settings), in accordance with the guidelines of each country’s health administration. The travels to high risk profile countries/regions for pandemic would also be prohibited. We would work to prevent further spread of infection by suspending or postponing events that invite large numbers of visitors, holding remote events instead as well as implementing remote work (working from home) for the employees of indirect departments.
Risks related to climate change
There would be significant impact on market conditions and the procurement of raw materials driven by acute or chronic climate change caused by global warming caused by the increase in global GHG (greenhouse gas) emissions, and the policies and measures taken by countries and regional governments in response to this. As a result, there is a risk that these factors could have a negative impact on the continuity of the JMDM Group’s business and business performance.
To this extent, we have established Sustainability Promotion Office, and we are working to reduce climate change related risks by building a system that would enable us to formulate measures for addressing climate change across the entire JMDM Group, promote ESG activities, make recommendations to management, provide education and information to employees, and disclose information to external stakeholders, including investors.
Other risks
In addition to the above, other risks that could affect profits and losses and financial position include: business activity stagnation due to the occurrence of large-scale disasters such as earthquakes, IT system shutdowns due to information security issues, interest rate fluctuations, and bad debts due to the deteriorating financial position of customers.