ASAHI KASEI CORPORATION

If environmental accidents, safety accidents, industrial accidents, etc. occur at domestic and overseas production sites, there is a possibility of significant impact on business continuity, such as suspension of business activities and decline in social trust. The Group is working to eliminate serious disasters and thoroughly comply with laws and regulations through the promotion of LSA activities, machine risk assessment, safety and disaster prevention knowledge transfer activities, and improvement of fire prevention and extinguishing technology.

If deficiencies occur in product design/inspection or in compliance with laws, regulations, and standards related to quality assurance, there is a possibility of impact on business performance due to recalls, loss of social trust in the brand, and suspension of product production/distribution. The Group conducts quality assurance activity inspections at each site, quality management seminars for management, town hall meetings, and quality education both domestically and internationally, and also operates a chemical substance regulation management system.

Against the backdrop of heightened geopolitical tensions such as US-China relations, the situation in Russia and Ukraine, and the situation in Iran, tightening of economic sanctions, export control regulations, and foreign direct investment regulations continues, posing a risk of impact on business performance due to stagnation or interruption of transactions and delays or impossibility of conducting business. The Group addresses this by sharing information with management and each department to raise sensitivity across the Group, clarifying responsible departments, and conducting careful transaction screening using an external customer screening system.

There is a possibility that malfunctions at business partners due to natural disasters, safety accidents, human rights issues, geopolitical issues, business failure, etc. could disrupt the supply chain for raw materials, parts, logistics, and other elements. The Group is working on risk assessment and audits when selecting suppliers, diversification of procurement routes and securing appropriate inventory for key products, and strengthening SCRM (Supply Chain Risk Management) across the Group.

As cyberattacks increase and become more sophisticated, insufficient countermeasures could make business continuity difficult due to system outages. In addition to strengthening attack detection and response tools, building information flows for incident occurrence, and establishing business continuity/recovery systems, the Group is implementing measures to raise employee security awareness through e-learning and email drills.

For the Group, which relies on proprietary technical information and know-how as a source of competitiveness, if technical information is leaked due to cyberattacks, unauthorized access, or improper handling by employees or business partner personnel, there is a possibility of impact on business performance and corporate value through decline in competitive advantage, obstacles to executing business strategy, and damage to brand value. The Group is advancing the development of classification and management rules for technical information, tightening access control, building a centralized monitoring system, and enhancing monitoring of access to and removal of confidential information.

If large-scale earthquakes, wind and flood damage, or other natural disasters, or a global pandemic occur, business activities could be interrupted due to employee health damage, equipment damage at manufacturing sites, logistics disruption, and shortage of human resources. The Group is advancing the formulation and drilling of disaster mitigation plans and emergency response plans at each manufacturing site, developing response policies based on lessons learned from COVID-19 response, stockpiling epidemic prevention supplies, and diversifying communication means through the establishment of satellite phones, etc.

The Group has continuously carried out large-scale acquisitions such as ZOLL Medical, Polypore, Calliditas Therapeutics, and Aicuris Anti-infective Cures, and the balance of goodwill and intangible fixed assets is on an increasing trend. If the investment effects initially expected do not materialize, or if business integration with the acquired company is delayed, there is a possibility of significant impact on business performance due to impairment of goodwill and intangible fixed assets, and the Group strives to reduce this risk through careful due diligence and thorough verification of business integration plans.

While much of the Group's revenue is denominated in foreign currencies, the reporting currency is yen, so a strengthening yen has a negative impact on business performance. According to the Company's estimates, a fluctuation of 1 yen in the US dollar/yen rate results in a fluctuation of ¥1,500 million (in units of ¥15 million) in annual consolidated operating profit, and the Group aims for stable and efficient use of funds through hedging measures such as forward foreign exchange contracts and the use of CMS (Cash Management System).

Catch-up by competing companies, new entrants, changes in industrial structure due to rapid technological innovation such as digital technology and decarbonization technology, and fluctuations in crude oil/naphtha prices and supply-demand balance may affect the competitiveness and profitability of each business. In particular, the acrylonitrile business is significantly affected by market condition fluctuations, and the Group responds through stabilizing profitability by reviewing sales price formulas, differentiating products and services, building a business model that is difficult to imitate, and establishing entry barriers through intellectual property.