Risk Management
The AOC Holdings (AOCHD) group's business and operations are exposed to the following risks that may have a significant influence on investors' decisions.
We recognize the following risks and make every effort to minimize their potential occurrence and take all appropriate measures in the event any should become material.
All forward-looking statements on this Web page are based on our projections as of March 31, 2008. There may be other potential unforeseen risks in addition to those risks stated below that could impact our performance.
1. Changes in laws and regulations
Our group's business activities are subject to laws and regulations currently in effect in Japan and overseas countries where we operate. Any future revisions to these laws and regulations may affect our group's operations and performance.
2. Exchange rate fluctuations
Our oil and gas development/sales business transactions are conducted mainly in US dollars due to the nature of the business. The bulk of our assets and liabilities are also held in US dollars. The business results in Japanese Yen of our oil and gas development/sales business are therefore subject to fluctuations in US dollar - Japanese Yen exchange rates.
3. Market trends
Our group's business results are subject to changes in market trends for crude oil and oil products since such changes affect purchasing and material costs as well as inventory valuation. Our group's business results are also subject to changes in tanker market trends.
4. Interest rate fluctuations
Our group holds deposits and other assets as well as long-term and short-term interest-bearing debts. Our financial conditions are therefore subject to fluctuations in interest rates.
5. Technical risks associated with the oil and gas development/sales business
Our oil and gas development/sales business involves the risk of facing unexpected declines in oil and gas reserves and yields due to the very nature of dealing with subterranean natural resources. Should such a risk become material, it may have an adverse impact on financial performance.
Despite technological advancements in oil and gas exploration, the chances of actually discovering reserves that are large enough for commercial production are very low, and our engagement in any exploration project could affect the performance of our oil and gas development/sales business.
6. Overseas operations
Our oil and gas development/sales business operations are mainly conducted overseas due to the nature of the business. Business results are therefore subject to any political and economic disorder as well as changes to government policies and tax systems in countries where we do business.
7. Natural disasters and accidents
The AOCHD group operates offices and production facilities around the world and our business performance may be subject to natural disasters or other incidents anywhere they may occur. Production activities and other operations could be affected in the event that information systems or production facilities are impacted by a natural disaster or other incident.
