Risks from Delayed Responses to Technological Advances and Cybersecurity

「Unauthorized use, an industry-wide issue, has declined significantly as a result of various measures.」

「We are using generative AI, which is changing how work is performed, to improve operational efficiency and develop new business models, while also exploring business models that create new experiential value by combining physical and digital elements, including events using XR and VR at department stores and PARCO locations and avatar sales.」

「Unauthorized use, an industry-wide issue, has also declined as a result of various measures, and we will continue implementing countermeasures.」

「In spring 2024, our group introduced an original generative AI chatbot to improve operational efficiency and effectiveness. We are also exploring business models that create new experiential value by combining physical and digital elements, including events using XR and VR at department stores and PARCO locations and the launch of avatar sales.」

「We also introduced multifactor authentication and one-time passwords for online services as measures to address unauthorized use, an industry-wide issue.」

「We worked to create new customer experiences using digital technology, including the first exhibition and sale of 3D avatars in the department store industry.」

「As measures to address digitalization, we promoted the use of an integrated database to advance marketing and the development of new business models through technology. We have also actively pursued investments in companies related to the metaverse and WEB3.0, as well as NFT initiatives at PARCO, and intend to connect these efforts both to the response of the group’s existing businesses and to the creation of new businesses.」

「Among these, “1. advancing sustainability management,” “2. decline of existing business models,” “3. responding to accelerating digitalization,” and “4. changes in consumer behavior in the post-COVID era” are positioned in the medium-term management plan as the highest-priority risks requiring action, because they could have an extremely significant impact on group management.」

「The wave of digitalization, which was already becoming significant, is expanding at a pace far beyond our expectations as restrictions on activities such as going out have arisen amid the COVID-19 pandemic.」

「The technology sector is evolving at a remarkable pace, with the commercial launch of 5G, the expanding use of big data, and improvements in AI analytical accuracy. This evolution has brought a succession of disruptors that break down industry boundaries, while consumers' lifestyles and spending behavior are also undergoing major changes. The prolonged spread of COVID-19 is expected to accelerate this trend, and existing businesses of our group, including retail, are expected to face an increasingly significant impact over the next several years.」

「The pace of technological advancement and the business transformation it brings is accelerating, and the already apparent “risk related to technological advancement” is expected to have a very significant medium-term impact on our group, whose core business is retailing through physical stores, as digital disruptors that break down industry boundaries gain momentum and services using smartphones to connect consumers directly with products and services make rapid advances.」

「The pace of technological advancement is accelerating, and the frequent occurrence of incidents of concern, such as cyberterrorism, means that failure to steadily strengthen digital security measures in line with technological progress will become a threat. Similarly, failure to keep pace with productivity gains from the use of technologies such as RPA (Robotic Process Automation) will become a threat.」