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Risk related to the operationing environment of NEC Fielding
The nature of the NEC Fielding Group’s IT Support Service requires the Group to hold a variety of customer-related information. The Group has established rules governing the handling of information and has obtained the Privacy Mark certification as part of its commitment to privacy protection. In addition the Group obtained ISO/IEC 27001:2005 certification, an international standard for information security management systems (ISMS), with respect to the iSolution centers and help-desk operations, both of which are locally-oriented outsourcing services. All employees are required to undergo training to develop a full understanding of what to do to protect customer information in the course of customer-related duties and of measures to prevent information divulging from the Group. In the event of unauthorized disclosure of information despite such precautions, however, the Company may be held liable for damages, and the performance of the Group may be adversely affected.
The NEC Fielding Group upholds corporate conduct consistent with “good corporate citizenship.” In line with this, it has set forth the “NEC Fielding Rules of Conduct,” which essentially call for compliance with relevant laws, ordinances and regulations in the execution of corporate activities. In addition, the Group has conducted training and other activities to elevate the ethical awareness of its employees. However, these efforts in themselves are insufficient to completely preclude the likelihood of business-related conduct of an inappropriate or illegal nature by employees. In the event of such inappropriate or illegal conduct by employees, the business of the Group may be adversely affected if such conduct results in compensation claims by third parties or an order to suspend business activities and transactions.
The value that the NEC Fielding Group presents to its customers lies in its ability to ensure trouble-free management and the optimized utilization of customers’ IT systems in the IT service areas. To put it differently, the value of the Group is an intangible one and it surfaces, in the form of higher customer confidence and trust in the Group, if and only if the Group has been successful in delivering solutions in excess of customers’ expectations. The IT service industry where the Group operates is known for the extremely swift pace of technological innovations. Therefore, the Group constantly faces the risk of its services, technologies and technical skills becoming obsolete for reasons ranging from new additions, changes in specifications and new service launches with respect to the equipment which the Group is contracted to service. To keep abreast of technological innovations, the Group makes an ongoing organized effort to master new skills and technologies. Moreover, to respond to customers in an appropriate and timely manner, the Company has put in place a structure of company-wide call escalation, which helps it build a better and quicker understanding of customers’ requirements and wishes. Despite such measures, however, NEC Fielding may be subject to complaints from customers or NEC Group companies that have outsourced to NEC Fielding or may face contract termination in the event that the customer feels that the NEC Fielding Group’s handling has been inadequate, incomplete or the work has been flawed, and these factors in turn may adversely impact the performance of the NEC Fielding Group.
Japan’s IT support market, which is the principal business universe of the NEC Fielding Group, is projected for further growth, and for this very reason, competition among businesses is expected to intensify while customers will increasingly demand lower prices.
In these difficult situations, the Group, in order to make stronger commitment to the business model of generating profits from the Proactive Maintenance Operations and achieving growth driven by the Fielding Maintenance Operations, has embarked on management reform, which consists of personnel reform including efforts to strengthen points of contact with customers through human resource shifting, reductions in maintenance material costs and other costs through strict fault management, and business expansion in frontier areas such as IT/Network integration as well as in self-initiated and collaborative projects. However, the business performance of the Group may be adversely affected, should there be greater-than-expected erosion of service prices, due to an increasing shift to open architecture or fewer-than-expected opportunities to service equipment due to improved product quality.
The NEC Fielding Group operates its IT support service business in partnership with NEC Corporation and NEC Group companies.
NEC Corporation and its Group companies are currently concentrating their management resources on the global expansion of their integrated IT and network solutions business in line with the Group’s business strategy, by fusing together IT solution and network solution businesses. As part of such coordinated efforts, the NEC Fielding Group launched, in January 2004, the call-center service, the first point of contact for customers, which had been previously handled by the Network Solution business, as well as other services. However, the performance of the NEC Fielding Group may be impacted if its responsibilities and positions in the NEC Group change.
To deliver IT support services that precisely meet customers’ requirements, it is essential for the NEC Fielding Group to recruit and develop high-quality human resources with relevant technical skills on an ongoing basis. To this end, the Group has set forth a merit-and result-based personnel policy. It also recruits college graduates, mostly with technical degrees, on a regular basis and requires its technical employees to undergo over 20 days of training every year.
Despite the implementation of measures such as these, the quality of IT support services provided by the Group may be adversely affected if there are delays in administering employee training, losses of opportunities to recruit new members and the brain drain of existing members to non-Group companies, among other factors, all of which may cause the quality of IT support services by the Group to deteriorate.
The NEC Fielding Group’s places of business may suffer devastating damage in the event of an earthquake or other natural disasters. To be ready, the Group has established two call centers, which are customers’ first points of contact, in eastern and western Japan, each servicing as a back-up for the other. In addition, there are two computer centers, again in eastern and western Japan, where compatible information systems are running in parallel. The Company undertakes these and other measures to circumvent complete operational shutdowns. However, if devastating damage is inflicted, in particular, on the facilities of the Company’s logistics division, which supplies maintenance parts and materials, or the information system division, there may be a delay in operations with a corresponding drop in the quality of service provided to customers, as well as expenses to be incurred for the repair and replacement of offices and facilities of the Group.
The NEC Fielding Group has embarked on overseas business expansion as demonstrated by its formation of a subsidiary in China, among others. Overseas business expansion faces a number of unanticipated risks such as wars, terrorism and other politically induced turmoil, changes in economic conditions, prevailing laws and regulations, as well as health epidemics and more. Any of these could potentially hurt the business performance of the Group.
