Sojitz Corporation

The Group operates diversified businesses globally, and its performance is directly affected by trends in the global economy and changes in the political, economic, and social conditions of specific regions. Heightened geopolitical risk may expose management resources such as employees, materials, capital, and information to danger, or impede trade and investment activities. While the Group has established a flexible response framework centered on the Security Trade Control Committee to address diplomatic policy, sanctions, armed conflict, and other issues, it is difficult to avoid all geopolitical risks.

The Group is exposed to foreign exchange fluctuation risk arising from foreign currency-denominated transactions and the yen conversion of profits and losses of overseas subsidiaries. A ¥1 fluctuation in the US dollar exchange rate is estimated to have an annual impact of approximately ¥8 million × 1,000 (equivalent to ¥800 million) on gross profit and approximately ¥300 million on net income. Interest-bearing debt outstanding amounted to ¥1,295,617 million (as of the end of March 2026), and there is a risk of increased funding costs due to a sharp rise in interest rates. Position and loss management as well as stop-loss rules have been established to address commodity price fluctuation risk, but there is no guarantee that unexpected market fluctuations can be completely avoided.

The Group makes business investments across a variety of business areas, giving rise to risks that profits may not be earned as planned, that invested capital may not be recovered, and that losses may occur upon withdrawal. For executed projects, the Group measures annually whether ROIC and CROIC exceed the cost of capital in order to identify issues early and pursue timely improvement or withdrawal; however, if businesses do not progress as expected, impairment losses on goodwill or fixed assets may occur. Risk assets stood at 0.6 times equity capital (as of the end of March 2026), within the target of no more than 1.0 times, but this ratio could deteriorate due to sudden changes in the business environment.

Extending credit to a diverse range of domestic and overseas business partners entails the risk of being unable to collect receivables due to poor performance or bankruptcy of customers. The Group manages this risk through an 11-tier credit rating system, transaction limit setting, use of collateral, guarantees, and insurance, and timely recognition of allowances for doubtful accounts through a receivables assessment system; however, if a counterparty bankruptcy or similar event occurs, it may adversely affect operating results and financial condition. There is also a risk that supply of goods may become impossible due to poor performance of suppliers, potentially exposing the Group to liability for failing to fulfill contractual obligations to customers.

To avoid excessive concentration of exposure in specific countries or regions, the Group manages this risk through a nine-tier country rating system and net exposure ceilings; however, changes in the political, economic, legal, or social conditions of countries where business partners are located or where business activities are conducted may prevent business activities from proceeding as planned. Although country risk hedging measures such as trade insurance are implemented on a case-by-case basis, the possibility of incurring losses cannot be entirely eliminated. As business expands in emerging markets and politically unstable regions, the significance of this risk remains consistently high.

Both stricter regulations aimed at curbing climate change (transition risk) and physical risks such as flooding arising from progressing global warming may affect the Group's earnings and asset value. The occurrence of environmental problems in the supply chain could result in risks such as reputational damage, business suspension or discontinuation, litigation and damages claims, and exclusion from supply chains. Although the Group promotes efforts toward realizing a decarbonized society under its long-term vision, the "Sustainability Challenge," depending on the pace of regulatory tightening or the scale of physical damage, adverse effects on business performance may occur.

If information leakage, tampering, or destruction occurs due to cyberattacks, unauthorized access, or mismanagement of information assets, losses and reputational damage may result. The Group has implemented comprehensive measures centered on the Information and IT System Security Committee, chaired by the CISO, including firewalls, antivirus measures, encryption, and early detection software; however, the possibility that critical information assets could be leaked or damaged due to recently surging cyberattacks cannot be ruled out. Depending on the scale of damage, losses not fully covered by insurance may occur, potentially adversely affecting operating results and financial condition.

The Group is required to comply with a wide range of domestic and international laws and regulations, including corporate law, tax law, anti-corruption laws, antitrust law, foreign exchange laws, trade-related laws, and chemical substance regulations, and violations may result in sanctions, penalties, or business suspension. Although the Group has established a Compliance Committee, formulated a compliance program, and developed and operates an implementation framework through the Security Trade Control Committee, it cannot completely eliminate the possibility of major changes in laws and regulations or unexpected interpretations being applied. As global operations expand, the cost of responding to changing regulatory environments in each country also tends to increase.

If the Group is slow to respond to digital transformation, including advanced use of AI, as well as technological innovation and business model transformation, the functions and added value provided to business partners may decline, resulting in lost growth opportunities. There is also a risk of information leakage or rights infringement arising from inadequate AI governance. The Group has established a DX Promotion Committee and an AI Governance Subcommittee and is promoting "Digital-in-All," but rapid AI evolution, business structure transformation, or delayed or insufficient responses to laws and regulations could adversely affect operating results.

Due to the declining working-age population resulting from an aging society and increasing labor mobility, if the Group is unable to sufficiently secure and develop highly specialized talent in areas such as M&A, digital, and legal affairs, progress on business plans may be delayed. The Group is promoting recruitment with awareness of its talent portfolio, including diversity promotion, career-track hiring, and setting targets for the proportion of women among new graduate hires, as well as strengthening talent development based on key themes; however, if it is unable to secure the necessary talent in an increasingly competitive labor market, this may hinder the realization of its business strategy. A framework has been established to set human capital KPIs and quantitatively monitor progress.