OK Yen, Ltd. is a Japanese electronics games and amusements company specialising in pachinko games. Pachinko parlours are a big industry in Japan, whose 18,000 pachinko parlours in 2012 accounted for a quarter of the country’s civil sector and are thought to produce Japanese Yen (¥)30 trillion per year in revenue – more than Japan’s auto industry. Customers who play pachinko buy a supply of pinballs costing around ¥4 and cash in the balls they win back for prizes equivalent to ¥2.5 each.

Although it is illegal to give cash to winners, the customers may go to nearby shops and sell their prizes for cash. Recently, a new form of pachinko has been developed that gives very large prizes to winners, but decreases the chances of winning. Although the number of players has decreased over the last four years, the gross sales have doubled. 

Locations of the stores are not crucial, so OK Yen can located in low rent areas. 

Government authorities have recently given much attention to pachinko gaming. Operations featuring the game have been associated with the yacuza, the Japanese criminal organisation. Some people in Japan are concerned that pachinko is really addictive gambling. There are complaints to authorities over children being left to play on busy streets or locked up in parked automobiles while their parents go to play pachinko. 

Required:

A. Following the five step procedure outlined in the chapter, identify the risks associated with OK Yen’s business.

The OK Yen, Ltd. can be evaluated using the ICAEW five step method.

1. Identify the essential resources of the business and determine which are at most risk.

2. Identify possible liabilities which may arise.

3. Review the risks that have arisen in the past.

4. Consider any additional risks imposed by new objectives or new external factors.

5. Seek to anticipate change by considering problems and opportunities on a continuing basis.