Issues to be Addressed

The outlook for the global economy is beset by marked uncertainty due to increasing risk, despite heightened expectations that prevalence of vaccination for the novel coronavirus disease (COVID-19) will help end this pandemic that brought unprecedented uncertainty for the future. This risk is associated with a series of continuing developments that are having a major impact on world affairs, which include the spread of infections of variant viruses and the situation in Ukraine.

Even in such an unpredictable operating environment, the Group aims to achieve sustained growth through the initiatives listed below.

The Group takes the material misstatement due to inappropriate accounting or error that was carried out at the Group in prior years with utmost seriousness, and will pursue the strengthening of the corporate governance system.

(I) Strengthening the Corporate Governance System

The Group is aggressively undertaking M&As and expanding its business globally, and even acquired companies must implement sound management suitable for a company whose parent company is a listed company. To continually achieve this, a priority objective will be to enhance the Group-wide corporate governance and compliance system, in addition to applying the internal control system to the Group as a whole, with common goals and methodology established from the viewpoint of global management.
The Company received an investigative report from the external investigative committee on December 28, 2021, and it came to light that material misstatement due to inappropriate accounting or error had been carried out at 17 companies inside the Group in prior years. Therefore, corrections were made in annual securities reports, etc. for the periods of the fiscal year ended December 31, 2019 to the second quarter of the fiscal year ended December 31, 2021 and summary of financial statements, etc. for the periods of the fiscal year ended December 31, 2020 to the second quarter of the fiscal year ended December 31, 2021. Following these corrections, the Company received a notice of request to submit an improvement report and public announcement from Tokyo Stock Exchange, Inc. on February 22, 2022, and submitted the improvement report on March 8, 2022.
We deeply apologize again for causing considerable concern and inconvenience to our shareholders, investors, business partners, and other stakeholders. While taking this matter solemnly, the Company will strive to restore the trust of its stakeholders by steadily implementing the following measures to prevent recurrence.
・Clarifying management responsibility
・Reforming the corporate culture under the initiative of top management
・Changing the consciousness about compliance and thoroughly implementing the measures to prevent recurrence
・Strengthening the management system
・Restructuring the corporate governance system and organizational structure
・Strengthening internal control division
・Revising the internal reporting system
・Reviewing internal rules on accounting treatments, and finance and accounting systems
・Establishing feasible business plans and budget
・Terminating trade contracts that become breeding grounds for inappropriate accounting

(II) Enhancement of an SDG Approach in Management

The Group is making efforts to contribute to sustainable development of society and companies based on the sustainability policy. The Group has further enhanced this activity and set KPIs in line with five materiality themes (priority issues), and will contribute to achievement of targets for SDGs while doing much for resolution of social issues through its business.

(III) Strengthening Corporate Structure through Staff Development

Being engaged in a business that deals with human resources, the Group recognizes its staff as its foremost business asset. The Group undertakes thorough training and educational activities to increase not only the basic knowledge and skills for properly handling human resources and providing various services related to human resources, but also labor and production management skills for production worksites. Together with these, the Group is tackling important issues of securing top-quality human resources and training them in order to meet customer needs quickly, flexibly, and precisely, which are growing more sophisticated and diverse.
In particular, a critical priority going forward will be the global recruiting and training of qualified individuals, regardless of their nationality or gender, who can successfully manage and develop the Group’s new businesses and overseas businesses, have a broad range of expertise and experience, are acquainted with global protocols, and have a globally acceptable law-abiding awareness.

(IV) Constructing a System to Supplement Highly Variable Businesses

For the Manufacturing Outsourcing Business, a large number of workers can suddenly lose their job when a major recession, such as the one caused by the collapse of Lehman Brothers, hits because of the nature of dispatching workers and outsourcing operations related to mass production, which entails sudden changes in production. However, some of these companies that let workers go are unable to reach the same level of earnings they previously had because their hiring cannot keep up with demand when production grows during the subsequent economic expansion. These lost opportunities create major issues.
It is important, therefore, for the Group to create a system in which the overall group can not only continue to be profitable even when there is a sudden, massive contraction in manufacturing activity and keep workers without letting them go, but also generate the same level of earnings when manufacturing activity begins to pick up by immediately dispatching workers. To do that, the Group aims to make the foundation for growth more resilient by smoothing out earnings by curtailing the relative proportion of revenue it generates from the Manufacturing Outsourcing Business through expansion of its businesses in fields that have different business cycles from that of the manufacturing industry and fields that are not easily impacted by business conditions.

(V) Creating a Foundation that Does not Miss Growth Opportunities

Because of Japan’s declining population, the Japanese human resource market is limited, and it cannot be expected to experience strong future growth. On the other hand, the global population is expanding, and some believe that it may grow by an additional 3.0 billion. For many of the Group’s businesses, earnings are tied to the number of people working. Therefore, the Group will build a system to facilitate the international flow of people from countries with growing, excessive populations to ones with insufficient populations, and will strive to capture that growth potential. At the same time, the Group is working to develop and provide a platform geared to supporting workers who are transitioning under human resources mobilization schemes. The Group accordingly aims to establish and expand that platform as a new pillar of business that is not associated with recruitment. It is the Group’s opinion that after creating and putting these systems into operation, it will have created a path to become the world’s top human resources company. Thus, the Group is investing in growth to create this system.