Fujiya Co.,Ltd.

There is a risk that trouble in raw materials or manufacturing processes could reduce product safety and cause food safety incidents, potentially leading to product recalls or suspension of sales. As countermeasures, the Company has designated the 11th of every month as "Food Safety Day" for regular inspections, implemented management based on the AIB International Inspection Consolidated Standards at all plants, and introduced a food safety and hygiene management system based on FSSC22000 or JFS-B. As a food manufacturer, this is the most fundamental risk, with a significant direct impact on brand damage and business performance.

There is a risk of cost increases due to rising raw material and energy prices or procurement disruptions caused by a combination of factors such as abnormal weather, natural disasters, global supply-demand changes, exchange rate fluctuations, political instability in countries of origin, rising crude oil prices, and pandemics. The Company is addressing this through diversification of suppliers and sourcing regions, consideration of alternative raw materials, and promotion of production line efficiency, but the impact depends heavily on external factors and could become a factor pressuring profitability.

In addition to system failures and data tampering caused by unauthorized access or computer virus infection, there is a possibility of large-scale leakage of personal information or confidential information due to advanced cyberattacks such as ransomware. There is also a risk that system failures resulting from such attacks could cause business suspension or delays in service provision. The Company addresses this through the development and promotion of information security-related regulations, strengthening of monitoring and detection systems, isolated storage of backups and recovery drills, and collaboration with external experts and the parent company's information systems department.

There is a risk that the brand value could rapidly decline due to unexpected reputational damage to the Group's products and services occurring and spreading through social media and other channels. Given that the Company has previously experienced significant brand damage due to a food safety issue, reputation risk is of particularly high importance. The Company has established a monitoring system for related information on the internet and has adopted a policy of responding swiftly and appropriately, in accordance with laws and regulations, to false or inaccurate information.

There is a risk that business activities could be restricted due to changes or tightening of legal regulations, in addition to concerns that delayed responses to human rights issues could expand legal risk and reputational risk. The Company addresses this through timely and accurate information gathering and compliance education for officers and employees to raise awareness of laws and regulations, and details regarding respect for human rights are described in the sustainability-related section.

There is a risk of changes in purchasing trends due to excessive temperature rises, as well as supply chain disruption risk due to large-scale earthquakes, flood damage, and other natural disasters or pandemics. In the event of an emergency, the Company has established a system to respond on a company-wide basis by setting up a crisis response headquarters in accordance with its crisis management manual, and intends to ensure business continuity through disaster drills, development of hazard maps, and use of a safety confirmation system and satellite phones.

There is a risk that difficulty in securing human resources due to changes in the employment environment, along with a decline in the labor force due to the declining birthrate and aging population, could affect business operations. The Company has adopted extension of employment as a countermeasure, and details of specific human capital initiatives are described in the sustainability-related section. For the Company, whose core operations are manufacturing and store operations, securing on-site labor is an issue fundamental to business continuity.

There is a risk of unforeseen circumstances arising in overseas business locations, such as changes in political and social conditions, terrorist activities or riots, natural disasters, pandemics, and exchange rate fluctuations. The Company addresses this through the dispatch of core personnel from the Company, monitoring of local conditions by the Overseas Business Division, introduction of a safety confirmation system in the event of disasters or terrorism, and establishment of an information-gathering framework with local subsidiaries, but the impact may expand against the backdrop of rising geopolitical risk.

There is a risk that the number of Fujiya franchise stores could decline due to management difficulties stemming from the aging of franchise owners, lack of successors, and changes in trading areas. The Company addresses this through business handovers to other Fujiya store operators, conversion to directly-operated stores, surveys of potential successors, and proposals for sales measures and store relocation, but a shrinking store network directly affects sales and the degree of regional brand penetration.

There is a risk that intellectual property rights held or used by the Company could be invalidated or have their scope of rights restricted, a risk that brand value could decline due to unauthorized use through counterfeit or similar products imitating brands or trademarks, and a risk that intellectual property rights may not be sufficiently protected in overseas business operations. The Company addresses this through appropriate management of the filing, registration, and renewal of intellectual property rights, prior investigation and expert confirmation when developing new products, establishment of a counterfeit monitoring system, and implementation of internal education.