Oenon Holdings, Inc.

In addition to declining overall demand and intensifying sales competition due to population decline and the falling birthrate combined with an aging population, there is a growing polarization between low-price, cost-conscious preferences and high-value-added preferences, as well as diversifying tastes. The majority of the Group's alcoholic beverages business sales depend on domestic sales, and delays in responding to these changes may adversely affect business performance and financial condition. As countermeasures, the Group is promoting the concentrated allocation of management resources to fields of strength and growth fields, and strengthening its product development framework from a customer perspective.

The WHO is considering regulations on alcoholic beverage sales on a global scale, and if regulatory tightening far exceeding expectations is implemented, it may adversely affect business performance and financial condition through a decline in alcohol consumption. As a manufacturer and seller of alcoholic beverages, the Group fulfills its social responsibility by conducting sales and advertising activities in compliance with relevant laws and regulations, while actively promoting awareness activities for responsible drinking.

In the dairy enzyme market, to which the mainstay product Lactase belongs, the Group faces intense competition domestically and internationally, including with major global corporations, and technological innovation is progressing rapidly. If the business environment changes beyond expectations due to delays in developing new technologies and products or technological innovation by competitors, it may adversely affect business performance and financial condition. As countermeasures, the Group is promoting research and development with a view to future market and technology trends, and establishing an information-gathering framework through building good relationships with customers.

Prices of key raw materials such as crude alcohol and heavy fuel oil fluctuate due to weather, economic conditions, global affairs, and the spread of infectious diseases in the countries of procurement, and a surge in prices would lead to higher manufacturing costs. In particular, there are concerns that crude alcohol, a raw material for alcohol for sale, may see rising purchase prices and increased procurement difficulty due to worsening global conditions or the prolonged spread of infectious diseases. As countermeasures, the Group strives for stable procurement through purchasing from multiple companies, planned purchasing, diversification of suppliers, and review of contract periods.

Tightening of laws and regulations related to climate change measures and increased costs to address the marine plastics issue may adversely affect business performance and financial condition. There is also a risk that physical risks stemming from climate change—such as depletion of water resources, impacts on raw materials, and damage to manufacturing facilities from large-scale natural disasters—could materialize across the entire supply chain. As countermeasures, the Group promotes activities to address SDGs issues centered on the CSR and Compliance Committee chaired by the Representative Director and President, and works to reduce environmental impact through CO2 emission reductions and waste reduction, among other measures.

If unexpected quality problems or product labeling issues occur, they may affect business performance and financial condition, and business activities may be disrupted in the event that product recalls or damages arising from product defects cannot be covered by insurance. As countermeasures, the Group is strengthening its quality assurance framework centered on the Group Production Department Meeting and the Quality and Safety Assurance Office, and has obtained international certifications for ISO9001 and FSSC22000. Important matters are deliberated by the CSR and Compliance Committee, which formulates countermeasures.

The Group holds important management information and confidential information concerning numerous individuals, and if information is lost or leaked due to unforeseen events such as power outages, disasters, or computer viruses, it may adversely affect business performance and financial condition. As countermeasures, the Group has established a Group-wide information security framework centered on the System Center within the Management Strategy Planning Office, and implements security measures through thorough employee education and training as well as the introduction of software and equipment.

Labor shortages due to demographic changes in Japan are becoming more severe, and if it becomes difficult to continuously hire suitable personnel due to changes in social conditions and the employment environment, it may hinder the promotion of growth strategies for existing businesses and adversely affect business performance and financial condition. As countermeasures, the Group is working to create a workplace environment where diverse personnel can thrive, through initiatives such as launching a project to promote women's participation, planned promotion of women, developing an environment supportive of childcare and caregiving, promoting work-life balance through hourly paid leave and allowing side jobs and dual employment, and awareness activities regarding LGBT issues.

The Group holds various fixed assets for business use, and if there is a sharp decline in the market value of idle fixed assets or a significant deterioration in the business environment, additional impairment losses may occur, adversely affecting business performance and financial condition. The Group has applied the 'Accounting Standard for Impairment of Fixed Assets' since fiscal 2006, and as a countermeasure, works to reduce risk by continuously verifying the presence or absence of indications of impairment every fiscal period.

The Company plans to pursue business expansion over the medium to long term based on Group-wide policy, including the acquisition of subsidiaries where appropriate, and in the acquisition of new subsidiaries, temporary or additional losses may arise due to factors such as changes in the environment, or the expected effects may not be sufficiently realized. As countermeasures, the Board of Directors makes appropriate decisions regarding investment and M&A plans and conducts appropriate monitoring after implementation.