Of the factors affecting Sysmex's business and financial conditions, those having the greatest potential to affect investors’ judgments are described below.
Future-related information contained in the text below is based on the Sysmex Group's judgment as of the end of the fiscal year under review.
1. Overseas Sales
The Sysmex Group's principal operations are in the healthcare business, involving products and services related to in vitro diagnostics. In addition, the Sysmex Group sells to overseas customers through its overseas affiliates and distributors. The proportion of consolidated net sales contributed by overseas sales is rising each year, from 72.4% in the fiscal year ended March 31, 2013, to 78.2% in the fiscal year ended March 31, 2014, and 81.7% in the fiscal year ended March 31, 2015. For this reason, the Sysmex Group hedges against the risk of currency fluctuations through exchange contracts and other means. Nevertheless, the Group's operating results and financial position are affected by foreign exchange fluctuations.
2. The Impact of Healthcare System Reform
Against a backdrop of a sharp decline in the birthrate and rapid aging of the population, advances in medical technology, increased demand from patients for a higher-quality healthcare and other changes in the healthcare environment, Japanese healthcare system reform continues. Such reforms are designed to optimize healthcare costs and efficiently provide high-quality healthcare services. The Sysmex Group’s earnings and financial position could be affected by such healthcare system reforms.
Amid ongoing healthcare cost optimization measures and demands for greater efficiency in hospital management, more advanced medical care and new clinical testing procedures, the Sysmex Group will promote its life science business, including definitive diagnostic tests for cancer. We will also strive to meticulously respond to diversifying needs by providing total solutions that combine in vitro diagnostic instruments and reagents, information technology and after-sales support.
3. Product Quality
The in vitro diagnostic instruments and reagents that Sysmex supplies must be extremely reliable, so the Sysmex Group has introduced a comprehensive quality management system. However, earnings could be affected if problems with product quality were to arise nevertheless.
To avoid this situation, the Sysmex Group works to maintain product quality in accordance with international standards and local laws and ordinances. The Sysmex Group studies and analyzes information related to reliability and safety from Japanese and overseas markets, as well as from within the Company; collates technical information that may improve design quality; and implements rigorous quality checks at the start of product mass production and prior to product launch to reinforce its quality guarantees.
4. Stable Product Supply
The Sysmex Group markets its in vitro diagnostic instrument and reagent products to customers in more than 190 countries and works to ensure the stable supply of these products to customers.
The Sysmex Group might experience difficulties with procurement if, for example, business operations were suspended at suppliers, interrupting the supply of raw materials. If production facilities sustained damage due to large-scale natural disasters, fires or other major calamities, our ability to supply products to the market could be impaired.
For these reasons, the Sysmex Group hedges this risk by sourcing raw materials from multiple companies. We are also enhancing initiatives to prevent damage to production bases and to restore facilities in the event damage is incurred.
5. Measures to Counter Risks Associated with the Use of Information Systems
The Sysmex Group employs information technology in its decision-making procedures, such as transmitting information, supporting core businesses and completing approval documents via the Sysmex Group’s internal network.
The Company has therefore introduced countermeasures to minimize the potential operational impacts of network or information system disruption, computer viruses or unauthorized external access to information systems. The Sysmex Group has in place secondary, alternate network routes; implements daily system administration procedures; runs security measures including virus gateways; and works to reinforce its internal controls, for example by controlling access through strict user management procedures and fingerprint authorization.