Risks Related to Business

Risks that may affect the Group’s business performance and financial standing include the following.
Note that all forward-looking statements including estimates, prospects, policies and intentions described in this section are based on judgements in light of the information available to the Group as of the submission of its securities report and include inherent uncertainties or known or unknown risks that may cause the actual results to differ materially from those discussed in the forward-looking statements. Also note that there are various risks inherent in the Group’s business activities and that the risks listed below are only some of them.

1. Economic situation

The Group’s global operations include Japan, the Americas, Asia and Oceania, China, and Europe. Therefore, economic fluctuations in the countries and regions where the Group sells its products may affect the Group’s performance and financial standing.

2. Effects of fluctuating exchange rates, etc.

The Group’s main businesses are the manufacturing and sale of automotive equipment, electronic components, and applied electronic products, as well as services related to each of these businesses. Since the Group’s products are sold in Japan, the Americas and other regions, exchange rate movements and other factors in these regions may affect the Group’s performance and financial standing.

3. Product defects

Although the Group carries out manufacturing at bases worldwide under globally recognized quality control standards, there is no guarantee that all products will be free of defects or recalls in the future. A product defect that leads to a major recall may adversely impact on the Group’s performance and financial standing.

4. Procurement of raw materials, parts and other purchases, as well as fluctuating prices

In the procurement of resin and other raw materials, and parts such as semiconductors, the Group may be affected by cost increases due to undersupply or higher purchase prices. Although the Group is committed to improving productivity through production innovation activities and other various risk workarounds, a sudden deterioration in supply or price hikes that exceed these measures may have an adverse impact on the Group's performance and financial standing.

5. Effects of trends in the automobile industry

Since automotive equipment accounts for approximately 80% of the Group’s consolidated sales, fluctuations in trends in the automobile industry may affect the Group’s performance and financial standing.

6. Competitive environment

Price competition in the automotive equipment industry and the electronic equipment industry, which are the main markets for the Group’s business, has been extremely severe. These product markets in which we compete are expected to grow more competitive. Although the Group keeps releasing products of high quality and high added value into the market to maintain the upper hand over the competition, there is no guarantee that the Group will be able to maintain its superior competitive position in the future in cases such as when other companies drastically improve their productivity, achieve technological advances that win the support of the market, or acquire patents. The results of this competition such as a decline in the Group’s market share may have an adverse impact on the Group's performance and financial standing.

7. Natural disasters, etc.

In preparation for the possible reduction in production capability due to natural disasters such as earthquakes and fires, the Group strives to minimize risks by implementing facility inspections and other safety measures necessary for business continuity.
However, since it is impossible to completely prevent the impacts of natural disasters, such as fires and power outages, the following risks that are inherent in the event of a natural disaster, may have an adverse impact on the Group’s performance and financial standing.

8. Effects of movements in stock markets

The movements of domestic/overseas stock markets have a significant impact on the valuation of the investment securities held by the Group and the management status of its pension assets. Possible stock market slumps may cause losses to the valuation of investment securities held by the Group and its pension assets and may thereby increase the economic burden on the Group.

9. Risks related to lawsuits and other legal proceedings

Although the Group’s technological developments have accumulated technologies and know-how that differentiate its products from those of other companies, it may not be completely possible to prevent third parties from using the Group’s intellectual property rights to manufacture similar products.
Moreover, if the Group’s business activities are subject to various lawsuits, regulatory actions by authorities, or other legal proceedings that result in claims for damages, monetary impositions by authorities, or restrictions on business activities, the Group’s performance and financial standing may be adversely affected.
The Group complies with all applicable laws and regulations and will cooperate with law firms or such in the event of lawsuits.

10. Effects of climate change

The Group has identified the “Creation of new value in harmony with the environment” as one of its material issues in pursuing sustainable growth and considers decarbonization to be one of the most urgent challenges. In the inhouse manufacturing realm in relation to achieving carbon neutrality, the Group aims to offer environmental value and increase profits at the same time by linking the cost reduction activity strategy, which is one of the Group’s strengths, to the reduction of CO2 emissions, instead of relying so much on renewable energy.
However, from a medium term perspective, a significant increase in procurement cost, tax burden or other expenses as well as additional investment costs or such may arise and adversely affect the Group’s performance and financial standing.

11. Information security environment

With the utilization of IT systems to ensure the smooth and efficient execution of business, the Group benefits from the increased convenience enabled by these sophisticated and complex systems. To counteract security risks, the Group improves the security level of IT systems and promotes activities for early containment in the unlikely event of any incident as well as proactive prevention by operating a computer security incident response team and information security secretariat to oversee information security activities.
However, the possible failure, malfunction or interruption of such core systems as production and sales systems due to IT infrastructure system shutdown, unauthorized access, computer virus infection, etc., may have an adverse impact on the Group’s performance and financial standing.

12. Risks related to laws and regulations, etc.

The Group operates in Japan, the Americas, Asia and Oceania, China, Europe and other regions. The following risks, for example, are inherent in business development and expansion in these markets, and if any of these events occurs, the Group's performance and financial standing may be adversely affected.

Moreover, the Group has established the “risk management committee” that predicts specific risks surrounding the entire Group and defines measures for preventing the losses caused by those risks, and in the event of a crisis, the Group ensures business continuity and stable development by effectively and efficiently taking measures for dealing with the aftermath to ensure safety, minimize losses, and prevent recurrence.
In preparation for unforeseen circumstances such as a global pandemic of infectious diseases, the Group is committed to fulfilling its responsibilities to all stakeholders including local communities, customers, suppliers and employees to ensure the stable development of society and the continuity of the Group’s business.

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