MARUDAI FOOD CO.,LTD.

There is a risk that outbreaks of livestock diseases, restrictions on procurement volumes and price increases due to safeguard measures, changes in international supply-demand conditions, and crude oil price fluctuations could have a material impact on raw material costs and procurement stability. As a food manufacturer with high dependence on raw materials, there is a risk that rising costs could directly squeeze profitability. As countermeasures, the company is working to diversify raw material procurement routes and develop high value-added products.

There is a risk that the occurrence of quality problems, unpredictable accidents or social disruption, reputational damage, and quality complaints could reduce social trust. In the food industry, quality problems are directly linked to corporate brand and sales, so the impact can be extensive. The company is responding by expanding the acquisition of external certification for food safety management systems and building a thorough quality control system through its quality assurance department.

There is a risk that delays in reducing greenhouse gas emissions could lead to higher production costs, and that delays in addressing global warming could lead to a decline in social trust. Carbon neutrality across the entire product lifecycle is being demanded, and response costs are expected to increase. The company is addressing this through the introduction of solar power generation facilities, switching to CO₂-free electricity, promoting energy conservation, and disclosing TCFD-related information.

There is a risk that a weak governance structure could increase corporate management risk, that unstable political, economic, and social conditions such as financial crises and trade friction could reduce business profitability, that delayed response to digital technology innovation could reduce competitiveness, and that intellectual property risks could jointly affect business continuity. The company is responding by establishing a Crisis Management Committee, Corporate Ethics Committee, Compliance Committee, and Nomination and Compensation Committee, establishing the Maruha Hotline (internal reporting system), and strengthening its IT management framework.

There is a risk that a large-scale system failure could have a significant impact on business continuity. As digitalization advances, the threat of cyberattacks is increasing, and impacts on core systems could spread across all operations. The company is responding by strengthening cybersecurity measures, providing security education for employees, and establishing data backup and incident response procedures.

There is a risk that fluctuations in exchange rates against local currencies in various countries could affect the costs of foreign-currency-denominated import transactions. For a food manufacturer with a high proportion of raw materials sourced overseas, a weaker yen significantly raises procurement costs and squeezes profitability. The company mitigates this risk by conducting some import transactions in yen and by utilizing forward foreign exchange contracts for foreign-currency-denominated import transactions.

There is a risk that impairment losses on held fixed assets could arise due to declining profitability from significant deterioration in the business environment, failure of subsidiaries to achieve business plans, or fluctuations in the fair value of assets such as real estate and securities. Recognizing impairment losses directly erodes net income for the period and could have a material impact on financial condition. The company is responding by formulating and implementing sufficient measures to improve future cash flow, monitoring subsidiaries' progress in achieving their business plans, and utilizing and selling idle assets.

There is a risk that delayed responses to social and environmental issues at each stage of the supply chain, as well as climate change and geopolitical risks, could make stable procurement of raw materials difficult. In the food manufacturing industry, stable procurement of raw materials is fundamental to business continuity, and procurement disruptions directly affect production and sales. The company is responding by strengthening collaboration with suppliers, building a responsible procurement system through human rights due diligence, and giving consideration to animal welfare.

There is a risk that a shortage of human resources and rising costs due to the diversification and intensification of recruitment activities could hinder business operations. Against the backdrop of a declining birthrate and aging population, competition in the labor market is intensifying, and securing specialized personnel may become difficult. The company is responding by strengthening educational management to develop human resources with diverse values and expertise, promoting work-style reforms, promoting diversity, and obtaining Kurumin certification.

There is a risk that changes in the fair value of pension assets or in the assumptions used to calculate retirement benefit obligations, such as expected rate of return and discount rate, could increase retirement benefit expenses and obligations, affecting financial condition. Changes in the interest rate environment and deterioration in the asset management environment have a direct impact. The company mitigates this risk through appropriate personnel assignment to the corporate pension fund and monitoring of investment status, as well as by transferring part of its defined benefit corporate pension plan to a defined contribution pension plan in fiscal 2016.