Morinaga & Co.,Ltd.

Risk that environmental changes such as climate change, demographic shifts, political instability, and exchange rate fluctuations lead to raw material shortages and procurement difficulties, forcing the procurement of raw materials and supplies at elevated prices, which increases procurement costs and, if pass-through to sales prices is difficult, pressures business performance over the medium to long term. The Company addresses this risk through gathering market information from suppliers, hedging through forward exchange contracts, diversifying and expanding procurement locations, considering substitution with raw materials that can be stably procured, and promoting sustainability of key raw materials.

Risk that a cyberattack on core systems causes leakage of personal information and confidential information, or halts production lines and logistics functions, leading to loss of social trust and decreased sales and deteriorating business performance. The Company addresses this risk through establishing a group-wide security management framework, phased introduction of network design incorporating zero trust, development and operation of an incident response plan, and continued enrollment in cyber insurance.

Risk that if products failing to meet specified quality standards are shipped to the market due to foreign matter contamination or other causes, this results in damages and recall costs, as well as a significant decline in sales due to loss of social trust. The Company addresses this risk through building a systematic quality assurance framework based on quality assurance rules, confirming safety via a quality assessment system at the product development stage, obtaining certifications such as FSSC22000 and JFS at domestic and overseas plants, and establishing crisis response procedures.

Risk that accidents during manufacturing operations or traffic accidents threaten the lives and physical safety of employees. The Company addresses this risk through establishing and disseminating an occupational health and safety policy, holding labor-management safety meetings, conducting safe driving and hazard prediction training in the sales division, and implementing simulated occupational accident experience training, training for senior employees, and physical fitness assessments in the production division.

Risk that fixed asset impairment occurs due to declining business profitability when the results initially anticipated or planned at the time of investment are not achieved. In accordance with investment management regulations, investments above a certain level require board of directors resolution and are subject to multifaceted evaluation including qualitative, quantitative, and risk assessments. The Company addresses this risk through continuous monitoring of investment recovery status and execution of appropriate recovery plans.

Risk that confidential and important information, including customers' personal information, is leaked due to unauthorized removal by officers or employees, resulting in loss of social trust. The Company addresses this risk through establishing and operating personal information handling regulations, detailed rules, and operational manuals.

Risk that failure to appropriately develop and operate a succession plan prevents continuous production of management personnel capable of driving the business, making it difficult to achieve medium- to long-term management goals and ensure business continuity. The Company addresses this risk through selecting and annually reviewing candidates for officer, general manager, and manager positions, implementing selective development and planned placement, and securing talent through external career hiring as needed.

Risk that tightening of greenhouse gas emission regulations results in additional energy-related costs. The Company addresses this risk through transitioning to a highly efficient production system via smart factory conversion, introducing energy-saving equipment when replacing aging facilities, commencing receipt of solar power generated electricity via an on-site PPA at Takasaki Morinaga Co., Ltd., and promoting the introduction of renewable energy.

Risk that plants, warehouses, and employees are affected by major earthquakes, tsunamis, volcanic eruptions, storms and floods, or other disasters, halting procurement, production, logistics, and sales activities, resulting in opportunity losses and disaster-related losses on fixed assets and inventory. The Company addresses this risk through hazard map confirmation and disaster drills, formulating response procedures for Nankai Trough earthquake related information, and periodic review of business continuity management (BCM).

Risk that employees contracting infectious diseases causes supply chain functions such as production lines and logistics to halt, reducing sales, while increased inefficiency in indirect operations raises costs. The Company addresses this risk through updating its infectious disease response policy to ensure thorough dissemination and preparedness during pre-outbreak and early stages, as well as stockpiling hygiene supplies.