SEIREN CO.,LTD.

The Company has established subsidiaries in the United States, Brazil, Thailand, China, India, Indonesia, Mexico, and Hungary to conduct manufacturing and sales activities, but business activities may be affected by changes in laws and tax systems in each country, trends in trade and tariff policies, and the materialization of geopolitical risks. The Company strives to prevent and avoid such risks through information gathering both within and outside the Group, but the possibility that events may occur beyond the Company's expectations cannot be ruled out.

Since the Company operates globally, fluctuations in exchange rates when translating local currency-denominated financial statements into yen may affect its financial position and business performance. In addition, this may also affect the relative pricing of products and procurement costs. As a countermeasure, the Company is working to mitigate risk by implementing optimal-location production and optimal-location procurement through the global allocation of production sites.

Rising prices of crude oil, gas, and electricity, which are the Company's main energy sources (including increases in the renewable energy power promotion surcharge), may affect business performance. In addition, since many of the Company's products use petrochemical products as raw materials, there is an inherent risk of rising procurement prices due to fluctuations in crude oil prices. The Company is working to reduce costs by promoting energy conversion and rationalization investments and through functional collaboration among planning, manufacturing, and sales.

Technological innovation is progressing rapidly, particularly in the Electronics field, and advances in AI technology, including generative AI, may bring changes to existing business models and the competitive environment. The Company is implementing research and development, manufacturing, and sales measures to maintain competitiveness, but if these do not progress as planned, the Company may not be able to maintain its competitiveness. While this also presents potential business opportunities, delayed response could lead to deteriorating business performance.

The Company handles a large amount of confidential information, including personal information, through its BtoC business and other operations, and increasingly sophisticated threats such as cyberattacks and ransomware may result in information leakage or system failures. Should this occur, it would have a significant impact on corporate reputation and result in damage compensation costs, causing a substantial adverse effect on business performance and financial position. The Company is implementing countermeasures through internal regulations, system enhancements, introduction of security software, and employee training.

Although the Company makes every effort to ensure thorough quality control, the possibility of unforeseen serious quality problems occurring cannot be ruled out. Should a product defect occur that leads to a large-scale recall or product liability compensation claims, it would have a significant impact on corporate reputation and incur substantial additional costs, causing a significant adverse effect on business performance and financial position. The Company has taken out insurance to prepare for such risks.

In the event of a large-scale accident, earthquake, flood, typhoon, or outbreak of an infectious disease, business activities may be delayed or interrupted due to impacts on production capacity or supply chain dysfunction. The Company actively promotes safety and health measures, disaster prevention education, disaster prevention drills, and inspection of fire prevention equipment, but it is difficult to completely avoid the impact of large-scale disasters.

Against the backdrop of a declining working-age population due to the falling birthrate and aging population, there are concerns about a shortage of specialized human resources needed to create high-value-added new businesses and expand global operations. If the Company is unable to secure and develop personnel with the necessary expertise, this could lead to a decline in competitiveness and stagnation of business activities. In addition to hiring new graduates, the Company is working to secure diverse talent through active mid-career hiring and the use of external channels.

Insufficient response to institutional changes related to climate change could lead to a loss of social trust, causing a significant adverse effect on business performance and financial position. In addition, insufficient response to human rights issues, including within the supply chain, also carries the risk of business relationships with customers being terminated. The Company is addressing these issues through energy conservation activities, development of environmentally friendly products, and conducting ESG surveys of business partners.

The Company is working to strengthen collaboration and optimize operations among Group companies, including NB Seiren Co., Ltd., but if structural reforms and business model transformation do not proceed as planned, or if the anticipated synergy effects are not sufficiently realized, this may affect business performance and financial position. Managing the progress of initiatives aimed at maximizing Group synergies has become an important management issue.