nms Holdings Corporation

In the electronics field (semiconductors, electronic components, etc.) and the automotive-related field, which are the Group's principal business sectors, there is a risk that customers' production levels may fluctuate significantly due to global economic trends, US-China trade friction, the situation in Ukraine, and changes in production locations driven by economic security considerations. Because the Group adopts a contracting/outsourcing model that supports customers in converting fixed costs into variable costs, large-scale and abrupt fluctuations in customer production directly affect the Group's financial position and operating results. The Group is working to establish an operating structure across the entire Group that can respond flexibly and swiftly, but complete avoidance of this risk remains difficult.

The Group has overseas consolidated subsidiaries in North and Central America, China, and ASEAN countries, and faces foreign exchange risk arising from translating local-currency financial statements into yen, as well as foreign-currency transaction risk spanning the procurement, manufacturing, and sales processes. The Group employs hedging measures such as intra-group foreign currency accommodation, conducting transactions in the same currency, and reducing foreign exchange exposure; however, sudden exchange rate fluctuations may affect the Group's financial position and operating results. As global operations expand, the importance of this risk remains consistently high.

Due to ongoing capital investment and business acquisitions at overseas consolidated subsidiaries in North and Central America, China, and ASEAN countries, the Group holds substantial fixed assets, and impairment losses may be recognized if recovery becomes unlikely due to changes in the external environment. In addition, as a holding company holding shares in each Group company, there is a risk of recognizing valuation losses if the substantial value of such shares declines significantly. Although the Group exercises careful investment judgment, the balance of fixed assets is expected to increase with continued future capital investment and M&A, and this risk will continue.

Following the disclosure on December 19, 2025 of a matter in which accounting treatment for losses related to a product defect at a subsidiary had not been performed, the Company established a special investigation committee and conducted an investigation, announcing the results on March 16, 2026. As recurrence prevention measures, the Group has implemented compliance training on accounting fraud, reviewed the executive structure of key subsidiaries, and established Group-wide internal and external whistleblowing hotlines; however, governance-related risks may not be completely eliminated. Should inappropriate handling occur, there are concerns regarding litigation and damages costs, decline in credibility and reputation, deterioration of relationships with financial institutions, and reduced order intake.

The temporary staffing business in the HS segment is subject to regulation under the Worker Dispatching Act and other related laws, and recent amendments have strengthened regulations aimed at protecting workers' rights. In addition, business activities in North and Central America, China, and ASEAN countries are subject to regulation under the laws of each country, and enactment or revision of laws poses a risk of restricting business activities or causing loss of business opportunities. Failure to comply with laws and regulations could result in sanctions such as operational suspension, loss of customers, or fines, and increased costs of responding to legal changes may also affect the Group's financial position and operating results.

Business development in North and Central America, China, and ASEAN countries requires substantial initial investment in manufacturing facilities and a long period before operations commence, and inherently involves the risk of disruption to business activities due to changes in legal and tax regulations, underdeveloped social systems and infrastructure, and economic, social, and political circumstances. Should these issues materialize, they may disrupt overseas business activities and affect the Group's financial position and operating results. Although the Group conducts thorough prior research and verification, uncertainty remains high amid heightened geopolitical risk.

Expansion of the contracting/outsourcing business requires securing and developing personnel with a certain level of skill, and if such initiatives do not proceed as planned, this could result in lost order opportunities and increased recruitment costs. In addition, the proportion of overseas personnel engaged in temporary staffing and manufacturing contracting in the HS segment is increasing, and delays in departure preparations due to political instability in sending countries/regions could result in standby costs and lost business opportunities. Amid growing diversification of the workforce, the importance of human resource risk management both domestically and internationally is increasing.

The Group holds and manages personal information of personnel engaged in temporary staffing and manufacturing contracting, as well as confidential information related to the Group's and customers' technology, research and development, manufacturing, sales, and marketing activities; in the event of an information leak, there is a risk of damages claims and litigation. Although the Group requires submission of confidentiality agreements and operates at the information management level required by business partners, an information management system may not function effectively in the event of unexpected circumstances. Information leaks are also directly linked to a decline in the Group's credibility and reputation and a reduction in order intake, making this a critical risk to business continuity.

Raw materials and components procured domestically and overseas carry the risk of sudden fluctuations in supply volume and price due to market conditions, and are also affected by resource policies in producing/manufacturing countries. Although the Group works to reflect price increases in selling prices, cost increases may affect the Group's financial position and operating results due to time lags in price revisions or the inability to fully pass on costs. In addition, if customers implement production adjustments due to difficulty in obtaining raw materials or components, there is a chain-reaction risk of reduced capacity utilization and sales decline for the Group.

The HS, EMS, and PS segments all presuppose work at sites with production functions, and in the event of a large-scale natural disaster, fire, explosion, war, terrorist act, or similar event, significant damage may occur to personnel and facilities at such sites, potentially halting production activities or making it difficult to continue operations. Prolonged movement restrictions due to the spread of infectious diseases could similarly cause disruption, potentially delaying the Group's business plans through effects on customers' production plans. Deterioration in earnings due to operational suspension or delayed production/shipment, incurrence of facility restoration costs, and revision of investment plans may affect the Group's financial position and operating results.