RISKS AND OPPORTUNITIES
The following are the major risks associated with our corporate group’s business, etc. that may have a material impact on investors’ decisions.
Compliance risk
(1) General
A commitment to ensuring legal compliance as well as acting in good faith according to the highest ethical standard lies at the heart of our corporate principles. We do everything possible to make sure that none of our board members or employees deviate from laws and regulations as well as our code of conduct. However, in the event that we are faced with a compliance issue as a result of any such deviation, our business results may be negatively affected due to actions taken by regulatory authorities, the filing of lawsuits, and the loss of social credibility.
(2) Intellectual property rights
We have implemented measures for protecting intellectual property rights so that we do not infringe on the intellectual property rights of any third party or that our intellectual property rights are not violated by any third party. However, it is impossible to eliminate the possibility that a third party may file a lawsuit against us on the grounds of infringement of its intellectual property rights, or that our intellectual property rights may be violated by a third party. Therefore, should such an instance occur, our business results may be negatively affected.
(3) Product liability, premiums, and representations
We have implemented a control system in accordance with the established quality management standards and are also covered by product liability insurance. However, it is impossible to eliminate the possibilities that a lawsuit may be filed against us regarding a product defect or improper labeling of product packages, that a large-scale product recall may be necessary, or that a situation may develop where compensation for damages not covered by insurance is demanded. Therefore, should such an event occur, our business results may be negatively affected.
Risk of global business expansion
Some of our products are made overseas. For this reason, changes in the political or economic situation overseas, international turmoil due to war, terrorism, or the like, or the occurrence of a natural disaster may impair our ability to provide a stable supply of products, and our business results may be negatively affected.
Credit risk
Trade receivables in our business are generated from sales made to customers on credit. Even though we perform stringent credit control checks, there is no guarantee that we will be able to collect our trade receivables in full. For this reason, the unexpected deterioration of a customer’s credit standing or a customer’s bankruptcy may negatively affect our business results.
Competitive risk
The products sold by our corporate group are facing increasingly fiercer price competition with low-priced products from China, etc. both in Japan and the rest of Asia. Although we are working to strengthen our overseas production capacity and implementing a strategy to increase the proportion of local procurement to enhance cost competitiveness, our business results may be negatively affected by a reduction in sales prices or a decline in sales volumes as a result of competition with overseas products.
Commodity price
fluctuation risk
The purchase prices of products sold by our corporate group are affected by changes in the prices of raw materials. If price increases are passed on to purchase prices, our business results may be negatively affected.
Market risk
Our financial position and business results have fluctuated due to changes in the market value of the assets we hold. There is no guarantee that we will not record a loss in the future due to a change in the market value of the assets we hold.
Cybersecurity risk
In order to ensure the secure operation of our information systems, we are working to address risks by building firewalls and taking other measures designed to prevent outside intrusions.
However, it is impossible to completely eliminate the possibility that our information systems may become inoperative due to the leakage of confidential corporate information or private information as a result of unexpected unauthorized access from outside or by infection with a computer virus. The information systems could also become inoperative due to equipment damage caused by a natural disaster, accident, etc. or a problem in the communication lines.
Should such an event occur, it could lead to a decline of operational efficiency, or negatively affect our business results depending on the severity of the damage.
Foreign exchange risk
In order to manage the risk of exchange rate fluctuations on imports and exports, we enter into a foreign exchange contract based on the principle of real demand when closing a deal. However, a change in the exchange rate that exceeds the range of our initial estimation may negatively affect our business results or financial position.
Risk of natural disasters
and infectious diseases
In the event that our business locations or our customers are affected by a natural disaster, such as an earthquake, or spread of infectious diseases, such as COVID-19, our sales and procurement activities may be directly or indirectly affected. Should such an event occur, our business results or financial position may be negatively affected.
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