Kanro Inc.

There is a risk that product quality defects, labeling errors, non-compliance with quality standards in export destinations, and reputational damage via social media could lead to declining customer trust and impairment of corporate value. The company addresses this through quality improvement across the entire supply chain based on the Kanro Quality Policy, enhancement of food safety management through FSSC22000 operation, establishment of a CS Improvement Committee, and continuous monitoring of social media. In the Annual Securities Report, this is rated as "high" impact and "medium" likelihood, and classified as "extremely important."

There is a risk that corporate activities could be disrupted or halted by large-scale earthquakes, river flooding, and other natural disasters, as well as the spread of infectious diseases. The company aims for early recovery through operation of disaster and infectious disease BCPs and implementation of flood countermeasures at its factories. In the Annual Securities Report, this is rated as "high" impact and "medium" likelihood, and classified as "extremely important."

There is a risk of business disruption or suspension and information leakage due to system failures, cyberterrorism, or unauthorized access. The company responds through compliance with its information security policy, establishment of cyber incident response regulations and manuals, regular employee education and training, and strengthening of internal control systems related to SaaS usage. In the Annual Securities Report, this is rated as "high" impact and "medium" likelihood, and classified as "extremely important."

There are concerns about impairment of corporate value due to insufficient human rights initiatives, difficulty securing diverse talent, and declining competitiveness due to delays in improving the working environment. The company addresses this through formulation and operation of the Kanro Human Rights Policy, promotion of human capital management, strengthening of Kanro Farm initiatives, and regular implementation of employee education on diversity. In the Annual Securities Report, this is rated as "high" impact and "medium" likelihood, and classified as "extremely important."

There is a risk that corporate value could be impaired due to malfunction of corporate governance or internal controls, compliance violations, and leakage or misuse of personal information. The company responds through establishment of a Governance Committee and Compliance Committee, regular employee training, compliance with personal information protection regulations, and improved engagement with institutional and individual investors. In the Annual Securities Report, this is rated as "high" impact and "medium" likelihood, and classified as "extremely important."

Diversifying consumer needs and intensifying competition with other companies raise concerns about declining sales of core brand products and reduced profitability due to increased rebates. As countermeasures, the company is expanding sales of core brands, launching higher-value products, promoting digital marketing, and building new revenue models through the digital platform "Kanro POCKeT." In the Annual Securities Report, this is rated as "medium" impact and "high" likelihood, and classified as "extremely important."

There are concerns about lost opportunities from stockouts, occurrence of long-term excess inventory due to demand forecasting errors, and profit pressure from rising transportation costs. The company addresses this by improving the accuracy of supply-demand forecasting and building a stable supply system through reviewing delivery schedules and order lot sizes. In the Annual Securities Report, this is rated as "medium" impact and "high" likelihood, and classified as "extremely important."

There is a risk that the shrinking domestic candy market due to the declining birthrate, aging population, and population decline, combined with the spread of negative perceptions about sugar, could adversely affect the business. The company is responding by strengthening its core business through expanding domestic candy market share and through activities to create value around sugar. In the Annual Securities Report, this is rated as "medium" impact and "medium" likelihood, and classified as "important."

There is a risk that cost increases due to fluctuations in raw material procurement prices, and supply instability caused by bankruptcies of suppliers etc., could affect profitability. The company responds through cost reduction via planned purchasing, multiple sourcing of the same raw materials, consideration of alternative raw materials, and improved engagement with suppliers. In the Annual Securities Report, this is rated as "medium" impact and "medium" likelihood, and classified as "important."

There is a risk that tariff reductions under the TPP and the Japan-EU Economic Partnership Agreement, among others, could intensify price competition with imported products. The company responds through strategically increasing export sales, expanding overseas sales and marketing activities through Kanro America Inc., and developing products exclusively for overseas markets as well as products with unified specifications for domestic and overseas markets. In the Annual Securities Report, this is rated as "low" impact and "medium" likelihood, and classified as "to monitor."