Sanyo Trading Co., Ltd.

A large proportion of the Group's sales are derived from the automotive, home appliance, and information equipment-related sectors, and a deterioration in market conditions in these industries directly affects business performance and financial condition. Because of the high degree of dependence on specific industries, the structure is such that economic downturns or declining demand in these markets can significantly affect earnings. The annual securities report does not describe specific countermeasures such as diversification.

Purchase prices of handled products fluctuate significantly depending on the supply-demand balance, and if price pass-through is insufficient or inventory valuation losses must be recorded, this affects business performance and financial condition. The Company strives to set appropriate selling prices and manage inventory levels properly, but there is a risk that such measures may become difficult to implement depending on market conditions.

As of the end of the consolidated fiscal year, trade receivables stood at a high level of 32.4% of total assets (¥26,409 million), and there is a risk of uncollectibility due to deterioration in customers' creditworthiness. Although the Company manages this risk through credit management and the recording of allowances for doubtful accounts, if actual uncollectible amounts exceed the allowances, this could affect business performance and financial condition.

The Company engages in numerous foreign currency-denominated transactions in import/export dealings centered on Europe, the United States, and Asia, and sudden exchange rate fluctuations may affect business performance through price negotiations, among other factors. Although hedging is conducted through forward foreign exchange contracts and other means, complete avoidance is difficult, and there is also a risk of a decrease in net assets through foreign currency translation adjustments arising from the yen conversion of the financial statements of overseas consolidated subsidiaries.

The Company conducts import/export transactions and operates local business sites mainly in the United States and Asia, and intends to further expand overseas activities going forward. If country risks materialize, such as unexpected deterioration in the political or economic situation in the relevant countries or regions, this may hinder the continuation of transactions or the execution of business activities as planned, potentially affecting business performance and financial condition.

The Company procures products from numerous domestic and overseas suppliers, but there is a risk of losing or reducing business rights due to suppliers' business restructuring, deteriorating performance, or revisions to distributorship policies. Although the Company strives to maintain and strengthen good relationships with suppliers to secure a stable supply of products, if such business rights are lost, this could affect business performance and financial condition.

The Company is actively pursuing M&A and other initiatives to develop new businesses, conducting financial, legal, and other due diligence to mitigate risk. However, if the value of an investee company or business declines, this may result in goodwill impairment or similar charges, potentially affecting business performance and financial condition.

Due to the increasing sophistication and complexity of cyberattacks in recent years, there is a risk of leakage of confidential and personal information, as well as suspension of information systems, resulting from unauthorized external access or computer virus intrusion. Although the Group is working to centrally manage its security infrastructure and information systems and to strengthen its organizational framework across the Group, if a serious system failure or information leak occurs, this could affect business performance and financial condition.

The Company conducts business activities in Japan and various other countries, and the related legal regulations are extensive. Although a Compliance Committee has been established to strengthen the relevant framework, if there are significant changes in legal regulations or unexpected interpretations are applied, this could affect business performance and financial condition.

With the progress of labor market fluidity and changes in business models, the environment for securing human resources may change significantly, including a concentration of demand for personnel with advanced knowledge and experience in specific fields. Although the Company is working to secure diverse talent and to continuously develop capabilities, if a shortage of human resources occurs, the Company may not be able to adequately respond to opportunities for creating new businesses or expanding existing ones, potentially affecting business performance and financial condition.