NICHIREI CORPORATION

In the manufacturing and sale of food products, quality issues such as exceeding hygiene standards, contamination by foreign matter, inadequate allergen labeling, and PFAS contamination may occur. If a large-scale product recall occurs, there are concerns about damage to social credibility and a material impact on business performance. In response, the Group maintains and enhances a consistent quality assurance system through the introduction of a food safety management system, the establishment of a traceability system, and initiatives for food defense.

The Group handles raw materials such as livestock products (e.g., chicken) and marine products, whose prices fluctuate significantly depending on market conditions, harvest quality, and catch volume. If cost increases cannot be fully absorbed through cost reduction measures, or if price revisions do not proceed due to intensifying competition, this may have a material impact on business performance. In response, the Group strives to reduce manufacturing costs through improved formulation technology and production efficiency, develop value-added products, and procure and sell in line with the supply-demand balance.

As the transition to a decarbonized society accelerates, policy and regulatory tightening such as the imposition of carbon taxes is anticipated, posing a risk of increased CO2 emission reduction costs for the Group, which consumes large amounts of electricity based on freezing and refrigeration technologies. In addition, the increasing frequency of extreme weather events due to global warming may affect the supply chain for raw material procurement, production, and logistics. In response, the Group is actively promoting the conversion to renewable energy, including switching to natural refrigerants, expanding the installation of solar power generation equipment, introducing corporate PPAs, and utilizing green power certificates.

If a cyberattack or operational trouble causes a system outage or falsification of critical information, or if a computer virus or inadequate management of information devices results in the external leakage of critical information, this may have a material impact on business performance due to disruption to business operations, response costs, and damage to social credibility. In response, in addition to technical measures such as the establishment of firewalls, intrusion detection systems, and authentication systems, the Group has established information security regulations and conducts employee training through e-learning.

For the many logistics centers and production plants held both domestically and overseas, if deterioration of location conditions, aging facilities, or poor sales performance leads to a reorganization of business sites, or if goodwill or investment securities related to overseas business deviate from the business plan, this may result in impairment, write-downs, or disposal of fixed assets, having a material impact on business performance. In response, the Group has introduced a PDCA cycle for each investment project, clarifying and appropriately operating review items at the time of investment proposal and post-investment verification rules.

As social demands increase for consideration of human rights and working conditions in the supply chain, management of natural marine resources, reduction of food loss, and reduction of plastics, the risk to maintaining the supply network is also increasing due to the intensification of natural disasters and geopolitical risks. If the Group's initiatives are deemed insufficient, this may have a material impact on business performance due to disruption to the stable procurement of raw materials, damage to social credibility, and the incurrence of response costs. In response, the Group conducts ESG questionnaires and human rights due diligence based on the "Sustainable Procurement Policy" and "Supplier Code of Conduct," and is promoting the handling of MSC/ASC-certified products and initiatives for circular agriculture and livestock farming.

Due to overseas procurement of products and raw materials and the holding of overseas subsidiaries, the Group is affected by fluctuations in exchange rates such as the US dollar, Thai baht, and euro, and if unforeseen and sharp exchange rate fluctuations occur, this may have a material impact on business performance. In response, the Group conducts foreign exchange forward transactions to minimize the impact of exchange rate fluctuations on business performance.

If a massive earthquake, localized storm, or other event causes severe damage to the Group's business sites and surrounding infrastructure, business activities may be suspended for a long period due to market contraction, supply chain disruption, and restrictions on business operations, which may have a material impact on business performance. In response, the Group has implemented seismic reinforcement work, deployed emergency power generators, established an employee safety confirmation system, developed a BCP, and diversified data centers across multiple locations.

Against the backdrop of a domestic labor shortage due to the declining birthrate and aging population, if the Group is unable to secure and develop the necessary human resources as planned due to changes in the employment environment or increased labor mobility, this may affect business operations. In response, the Group is promoting the development of an environment where diverse human resources can work, through measures based on an employee engagement survey, the establishment of a group-wide female talent development program aimed at increasing the ratio of female managers, strengthening the development of overseas talent candidates, and increasing the number of annual holidays to 120 days.

Rapid advances in digital technology and food tech may cause unpredictable changes in the business environment, and if the competitiveness of the Group's technologies, products, and services declines as a result, this may have a material impact on business performance. In response, the Group has established and is operating an Innovation Management System (IMS) based on ISO56002, working to transform business processes through the use of digital technology and data, and to drive innovation in the food and health fields.