The outlook for the global economy is beset by marked uncertainty due to increasing risk. This risk is associated with a series of continuing developments that are having a major impact on world affairs, including inflation, which remains high compared to the pre-pandemic period despite having eased slightly since peaking in the second half of 2022, heightening geopolitical risk caused by the prolonging of the situation in Ukraine and increasing instability in the Middle East, and rising global fuel costs.
Even in such an unpredictable operating environment, the Group aims to achieve sustained growth through the initiatives listed below.
(I) Strengthening the Corporate Governance System
The Company and its subsidiaries, which are expanding their business globally, must implement sound management, including at acquired companies. To continually achieve this, a priority objective will be to enhance the Group-wide corporate governance and compliance system. In addition to respecting the laws and regulations of each country, the internal control system must be applied to the Group as a whole, with common goals and methodology established from the viewpoint of global management.
The Company received a notice on request to submit a public announcement from Tokyo Stock Exchange, Inc. on December 20, 2023, and it submitted an improvement status report on January 15, 2024. The Company deeply apologizes again for causing considerable concern and inconvenience to all shareholders. Following the occurrence of a series of improper accounting treatments at the Company and its subsidiaries (hereinafter, the 2022 Correction Incident), the Company is working to create and operate internal controls through the execution of measures to prevent recurrence formulated by the Group and to strengthen the internal management systems. As a result, at the Company and its domestic subsidiaries, some level of results in reforming the corporate culture, fostering compliance awareness among employees, and improving accounting literacy, all areas that contributed to the aforementioned issues have been seen. On the other hand, at some overseas subsidiaries, there has been a weakening of management systems and a lack of thorough compliance awareness. In terms of the Company’s company-wide internal controls, the Company is aware that there is insufficient monitoring of overseas subsidiaries and significant defects in their internal controls.
In consideration of this situation, the Company transitioned into a company with a nominating committee, etc. with the aim of further strengthening corporate governance by making the separation of management supervisory and execution functions clearer and ensuring prompt and decisive decision-making while strengthening management supervisory function.
However, issues have arisen, such as suspicions of wrongful receipt of employment adjustment subsidies at the Company and its domestic subsidiaries and suspicions regarding business processes with some business partners at domestic subsidiaries. Accordingly, an external investigative committee identified that the measures to prevent recurrence taken following the 2022 Correction Incident have lost their efficacy and it advised the Company to sincerely engage in the implementation of measures to prevent recurrence, to establish effective functions for advancing the understanding, thorough promotion, and approval of these measures, and to reaffirm awareness regarding compliance. Following this, the Company decided on new measures to prevent recurrence. The main content of these measures continues on from the measures to prevent recurrence announced in January 2022 while also including revisions based on how thoroughly these measures have been implemented. Also, in order to cultivate and spread a new corporate culture that will facilitate the thorough implementation of these measures to prevent recurrence, the Company has established the OS Group Governance Committee, which is lead by an external Director, and tasked it with verifying and executing measures to prevent recurrence.
(Measures to prevent recurrence)
・Reforming the corporate culture
・Further cultivating consciousness about compliance and thoroughly implementing the measures to prevent recurrence
・Strengthening the management system
・Restructuring the corporate governance system and organizational structure
・Strengthening the 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
・Putting limits on transactions with business partners
In order to ensure that this kind of incident does not happen again, the entire Company will work as one to continuously implement and revise the measures to prevent recurrence that have been implemented to date and to maintain governance and compliance systems that are appropriate for a listed company. In this way, it will encourage the sustainable growth of the Company and enhancement of corporate value over the medium to long term, as well as strive to further win back the trust of all its stakeholders, including shareholders, clients, local communities, and employees.
(II) Enhancement of an SDGs Approach in Management
The Group is making efforts to contribute to a 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.
The Company will be working to strengthen its corporate structure through the global recruiting and training of qualified individuals, regardless of their nationality or gender, who 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. This is due to 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. The reason for this is that their hiring cannot keep up with demand when production grows during the subsequent economic expansion. These lost opportunities create serious issues.
It is important, therefore, for the Group to create a system in which the overall group can continue to be profitable even when there is a sudden, massive contraction in manufacturing activity and keep workers without letting them go. It is also important to generate the same level of earnings when manufacturing activity begins to pick up by immediately dispatching workers. To do so, 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. This will be done 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 strong future growth cannot be expected. On the other hand, the global population is expanding, and some people 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 on a business to support workers who are transitioning under human resources mobilization schemes. The Group accordingly aims to establish and expand it as a new pillar of business that is not associated with recruitment. It is the Group’s opinion that after establishing this global human resources network, 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.