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1. Risks related to the character business
The Group's business performance is influenced by the popularity of its characters and market trends. While we face various challenges such as intensifying competition, reliance on certain characters or markets, and issues related to new businesses and human resources, we continue to pursue long-term character development and the expanded use of multiple characters across various platforms. However, the outcomes of these efforts remain uncertain.
Major Response Measure
- Diversify our character portfolio through the use of multiple characters
- Strengthen our approach to addressing changing consumer preferences
- Optimize brand strategies for each global market
- Conduct marketing activities utilizing advanced data analytics
2. Market risks
As the Group operates globally, its business performance and financial condition may be affected by various factors, including economic and geopolitical risks, differences in business practices, and foreign exchange fluctuations in merchandise sales, which have a high overseas production ratio, and overseas sales, which account for roughly 30% of total sales.
Major Response Measure
- Respond to economic fluctuations and declining disposable income by diversifying price ranges
- Reduce reliance on inbound tourist demand by establishing cross-border e-commerce channels and diversifying markets
- Strike a balance between consistency in global branding and adaptation to local markets
- Adjust receivables and payables positions based on foreign currency balance forecasts
3. Risks related to management strategies and plans
While the Group aims to enhance corporate value based on the medium-term management plan, the execution of its strategies and business performance may be affected by factors such as economic fluctuations, failure to meet the medium-term plan targets, or unsuccessful integrations.
Major Response Measure
- Regularly monitor management status through the Board of Directors meetings and management meetings
- Establish an Investment Committee to make appropriate investment decisions based on strict criteria
4. Risks related to brands
The Group outsources production overseas to reduce costs; however, factors such as quality risks, brand damage, reliance on external operators in the and digital businesses, and fluctuations in the supply system may adversely affect its business performance.
Major Response Measure
- Strictly manage quality and monitor contract manufacturers
- Strengthen collaboration with licensees
- Select licensees based on reputation considerations
5. Contingent risks (e.g., earthquakes, fires, etc.)
The Group's domestic theme parks, a key source of earnings, face risks such as declining visitor numbers, natural disasters, and brand damage caused by accidents or safety issues. Both domestic and overseas sites may be affected by natural disasters or pandemics, potentially disrupting the supply chain and affecting business performance.
Major Response Measure
- Establish a flexible operational system to respond to disasters and extreme weather
- Strengthen safety and hygiene management systems, including regular safety audits by third-party organizations
- Enhance business resilience by diversifying earnings sources, such as e-commerce and digital experiences
6. Risks related to impairment of non-current assets
The Group holds non-current assets, and any impairment may have an impact on its financial position and business performance.
Major Response Measure
- Monitor net realizable value and value in use, and conduct detailed investment profitability assessment when acquiring property, plant and equipment
- Regularly conduct impairment risk checks and establish a coordination framework with the audit firm
7. Risks related to information security and technology infrastructure
While the Group implements strict information management and security measures, information leaks or damages caused by cyberattacks or system failures could lead to legal liability, brand damage, and negative impacts on business performance.
Major Response Measure
- Ensure the protection of personal and customer information and provide thorough employee training
- Strengthen the information security framework and improve incident response capabilities
- Conduct regular data backups and recovery drills
- Mitigate potential damage by migrating to cloud-based systems
8. Legal and intellectual property risks
Key intellectual property rights are exposed to risks such as expiration of protection periods and infringement. Losses from counterfeit products or litigation, reputational damage, and increased costs may adversely affect business performance. In addition, legal violations or disputes may negatively impact the Group's operations and financial position.
Major Response Measure
- Strengthen the intellectual property protection framework and enhance measures against counterfeits and infringement by third parties
- Reinforce compliance, including adherence to overseas laws and regulations
- Invest in proactive measures against counterfeits, such as the use of AI, and provide employee training
9. Risks related to internal controls
While the Group has established an internal control system to ensure the reliability of financial reporting, potential future deficiencies may affect the credibility of its financial reporting and damage its reputation.
Major Response Measure
- Ensure the flexibility and sustainability of the internal control system
- Conduct surveys, dialogues, CSR audits, and internal training for business partners
- Establish consultation desks for employees and business partners, and respond with appropriate corrective and remedial measures