FUJIX Ltd.

Environmental pollution laws and regulations are rapidly tightening across Asian countries, and it is recognized that trends in permits and approvals related to the large volumes of dyeing water used in the dyeing process and related wastewater treatment could significantly affect the Group's production system. The Group is responding by complying with each country's laws, regulations, and authorities' guidance while reducing water usage and enhancing wastewater treatment facilities.

As efforts to reduce environmental impact progress in the domestic apparel and fashion industry, there is a risk that the availability of environmentally friendly sewing thread products and the Group's stance as a company will affect customer and consumer evaluation and business continuity. At present, recycled raw materials and plant-derived raw materials are unstable in supply and expensive, presenting a challenge that conflicts with strengthening cost competitiveness; however, the Group is progressing with a gradual shift to recycled raw materials and materials.

Environmentally friendly raw materials such as recycled raw materials and plant-derived materials are more unstable to procure compared to conventional raw materials, posing a risk that maintaining a stable production system will become difficult. Unstable procurement could lead to delays in product supply and variation in quality, and the Group is promoting a gradual transition while striving to control manufacturing costs.

Environmentally friendly raw materials and supplies are more expensive than conventional raw materials, and as the shift to recycled raw materials and others progresses, there is a risk that manufacturing costs will rise and cost competitiveness will decline. The Group is required to address the conflicting challenges of reducing manufacturing costs and responding to sustainability, and is working toward a gradual transition while striving to control costs.

Changes in economic trends and international conditions are recognized as a general business risk that broadly affects demand for sewing thread, raw material prices, and the supply chain. This risk is not unique to the Group; all companies face similar risks, and flexible responses to changes in the business environment are required.

The spread of epidemics is recognized as a risk affecting production activities, logistics, customer demand, and business overall. This risk is not unique to the Group; all companies face similar risks. While no detailed specific countermeasures are described in the securities report, it is positioned as one of the important risks affecting business continuity.

Weather conditions, natural disasters, and accidents pose a risk of damaging production facilities or causing operational shutdowns, disrupting product supply. In particular, since manufacturing sites including dyeing processes are dispersed across various Asian countries, addressing natural disaster risks specific to each region is important.

General business risks related to corporate compliance are recognized as potentially affecting the Group's business performance. In particular, in businesses operating across multiple countries, appropriate compliance with the laws and regulations of each country is required.