YAMAZAKI BAKING CO., LTD.

If quality issues arise across the food industry as a whole—such as inadequate expiration date management for raw materials and products, false labeling of origin, or safety problems with imported foods—this could affect business performance. The Group has established a Food Safety and Hygiene Management Headquarters within its head office, and thoroughly implements HACCP-based hygiene management and JFS-B standard certification, AIB (American Institute of Baking) "International Inspection Consolidated Standards" audits to prevent foreign object contamination, and management through a labeling verification and decision system across all plants and affiliated companies. However, if events occur that exceed the scope of the above measures, such as broader societal quality issues, this could affect business performance.

Key raw materials such as wheat flour, sugar, fats and oils, eggs, raisins, and strawberries are exposed to risks including reduced harvests due to abnormal weather from global warming, disruption of international prices due to inflows of speculative capital, and import suspension risks from conflicts or infectious diseases. Rising crude oil prices may also lead to increases in the prices of fuel, packaging materials, and containers. The Group works to diversify risk through multiple supplier sourcing, diversification of countries and production regions, consideration of alternative raw materials, and utilization of economic partnership agreements. However, difficulty in stable procurement or a sharp rise in purchase prices due to unforeseen circumstances could affect business performance.

The Group operates numerous production sites both domestically and overseas, and if a plant is forced to halt operations due to a large-scale natural disaster such as an earthquake or typhoon, this could affect business performance and financial condition. The Group has established a business continuity framework utilizing increased production at other plants and its own logistics network, and has implemented measures such as immediate establishment of an emergency response headquarters, deployment of emergency power generators, and dual-site information systems. However, if a large-scale disaster exceeding the scope anticipated by crisis management measures occurs, these measures may not function sufficiently.

Since transaction amounts with wide-area business partners such as mass retailers and convenience store chains are substantial, if any of them were to go bankrupt and accounts receivable became uncollectible, this could have a material effect on business performance and financial condition. The Group works to prevent uncollectible accounts receivable through early detection of payment delays via a receivables management system, periodic credit investigations, and negotiations to shorten payment terms or obtain deposits as guarantees. The Group also thoroughly manages credit based on information gathered from research institutions and industry sources.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate and the long-term expected rate of return on pension assets. If actuarial differences arise due to changes in these assumptions, or if the investment performance of the corporate pension fund deteriorates significantly, this could affect business performance and financial condition. The Group obtains detailed information from pension asset management trustees and works to improve investment performance.

The Group operates in 10 overseas countries/regions with 19 local subsidiaries, 17 plants, and 257 bakery stores. Unexpected changes in legal regulations such as foreign investment restrictions, business licensing systems, and tariffs, or infringement of intellectual property rights (such as use of similar trademarks or signage), could affect business performance. The Group works to prevent and avoid such risks by gathering information from relevant governments, financial institutions, audit firms, and lawyers, and has established a framework for early response in the event a risk materializes.

To reduce interest burdens in financing for overseas subsidiaries, the parent company may extend direct loans to them, and exchange rate fluctuations could affect business performance as a result. In addition, interest rate fluctuations could also be a disadvantageous factor for business operations in the 10 overseas countries/regions where the Group operates. The Group works to prevent and avoid these risks by gathering information from local governments, financial institutions, and other sources.

In business operations spanning 10 overseas countries/regions, the occurrence of natural disasters, conflicts, or terrorism could affect business continuity. In the event of conflict, terrorism, or similar incidents, the Group prioritizes the safety of employees and their families above all else, and has established a framework to implement measures such as temporary evacuation of expatriates and their families depending on the situation. The Group has also established a framework to consider and implement early response measures with business continuity in mind when a risk materializes.

If IT systems are shut down or important information is leaked or lost due to cyberattacks or system operation troubles, this could affect business operations and financial condition through business interruption, damage claims, and increased security countermeasure costs. The Group manages its core systems in highly robust data centers, maintains multilayered defense and monitoring on a 24-hour, 365-day basis, has established dual redundancy and backup switchover systems for IT systems, and has taken out cyber insurance to prepare for the risk of damage claims.