TAKACHIHO KOHEKI CO., LTD.

The Business Security segment's performance is highly susceptible to trends in new store openings and capital expenditure among customers in the retail, telecommunications, financial, and other industries. In the Electromechanics segment, the shift from general-purpose semiconductors to application-specific semiconductors has already been completed; however, if demand from manufacturing customers declines due to global trade friction or geopolitical risks, this could affect business performance and financial condition. Structural countermeasures against supply-demand fluctuations remain limited, and sensitivity to changes in the external environment continues to be high.

The Group secures advanced technologies and products that serve as a source of competitiveness through investments in overseas advanced venture manufacturers and others. However, there is a risk that deterioration in the business conditions of investees or delays in product development could make it difficult to recoup such investments. In markets where technological innovation moves rapidly, market development for acquired advanced products may not proceed as planned. If these factors overlap, there is a risk of simultaneous financial losses and a decline in competitiveness.

The Group procures products as a sales agent of overseas manufacturers under exclusive or non-exclusive sales agency agreements, and maintains long-standing business relationships with key suppliers. However, if contract terms are changed or contracts are not renewed, it may become difficult to secure alternative sources of supply, which could have a material impact on business performance. The structure of high dependence on specific suppliers also carries the risk of asymmetric bargaining power.

The Group is highly dependent on procurement of products from overseas manufacturers and is exposed to geopolitical risks such as changes in the international political and economic situation, trade friction, import/export regulations, sanctions, and wars/conflicts. If these factors lead to increases in procurement prices, difficulty in procurement, or delivery delays due to logistics disruptions, this could adversely affect business performance through lost sales opportunities and increased costs. Given the business structure's high dependence on overseas procurement, heightened geopolitical tensions are a direct risk factor.

While the Group strives to maintain close relationships with key customers, a high degree of dependence on specific customers could have a significant impact on business performance if such transactions cannot be maintained. Although the Group seeks to strengthen relationships through solution proposals, planning, and the supply of products and services, there is a risk that transactions could shrink or be lost due to the rise of competitors or changes in customers' procurement policies. The securities report does not disclose specific figures regarding customer concentration.

In FY2026 (ending March 2026), foreign currency-denominated transactions accounted for 53.8% of the Company's purchases, while accounting for only about 30% of net sales, creating a risk that in a yen-depreciation environment, increases in procurement costs could exceed increases in selling prices. Under the plan for FY2027 (ending March 2027), the ratio of foreign currency-denominated purchases is expected to rise to approximately 60%, indicating an expanding exposure to foreign exchange risk. Although hedging is conducted through forward foreign exchange contracts, foreign exchange gains/losses arising from settlement and revaluation at the fiscal year-end could significantly affect non-operating income/expenses.

With respect to investment securities and other holdings of the Group, if impairment in value occurs due to deterioration in the profitability of investees, additional impairment losses may need to be recognized, potentially affecting business performance. Although the Company states that necessary impairment losses have already been recognized as of the current time, given the business strategy of actively investing in overseas advanced venture manufacturers and others, impairment risk continues to exist going forward. Changes in the business environment or technological trends of investees could serve as major triggers for impairment.

In response to the increasing sophistication, diversification, and refinement of cyberattacks, the Company positions cybersecurity risk as one of its most critical risks, and implements measures such as software update management and multi-factor authentication, primarily led by the information systems department. However, despite these measures, if a cyberattack causes business disruption or the loss, damage, or external leakage of important data including customer information, this could significantly affect business results. As a company handling security-related products, the damage to its credibility could also be substantial.

If natural disasters such as earthquakes and typhoons, or the spread of infectious diseases, cause damage to the Group's facilities, suppliers, or logistics networks, business activities may be suspended or delayed. Although the Group is advancing the development of its business continuity plan (BCP), an impact on business performance cannot be avoided if events beyond expectations occur. Given the business structure's high dependence on overseas procurement, damage to overseas facilities or logistics networks carries the risk of causing a chain reaction affecting domestic operations as well.