Oji Holdings Corporation

Risks related to climate change are described in detail in the business overview and sustainability sections, and may have a material impact on the Group's financial position, business results, and cash flows. The Oji Group has implemented countermeasures based on its sustainability policy, but both physical risks and transition risks could affect business continuity.

The acceleration of digital transformation (DX) is changing people's lifestyles and corporate activities, and structural changes in demand, such as the shrinking market for paper products, may progress at a faster pace than before. A decline in demand may not only reduce profitability but also affect the entire business portfolio, including lengthening investment payback periods, inefficient raw material procurement, and the shutdown of surplus facilities. As countermeasures, the medium-term management plan sets forth "improvement of capital efficiency" and "portfolio transformation" as key initiatives, promoting structural reform of low-profitability businesses and expansion of promising new businesses.

Fluctuations in the domestic economy and the continued decline in population may affect product demand, potentially leading to decreased sales volume and lower selling prices. The Group has established a cross-group sales organization and aims to build a business foundation that can withstand market fluctuations through a shift to high-value-added products and thorough cost reduction.

Procurement prices of raw materials and fuel such as wood chips and heavy oil fluctuate due to demand trends, trade policies of various countries, wars, and other factors, and the selling prices of various pulp products are also linked to international market conditions, which may affect the Group's financial position and business results. The Group has established a cross-functional procurement strategy department and strives for stable procurement and mitigation of cost fluctuations by securing diverse procurement sources, promoting advantageous procurement, and maintaining a waste paper recycling system.

While the Group is expanding into economically developing regions such as Southeast Asia, China, India, and Brazil, geopolitical risks such as war, political and social instability, regulatory changes, financial market instability, and human rights issues may affect current projects and future plans. The Group manages these risks through information gathering by regional headquarters companies, diversified expansion across a wide range of countries, risk reduction through joint ventures with leading local companies, foreign exchange risk hedging using derivatives, and the establishment and dissemination of the "Oji Group Human Rights Policy."

Unforeseen events such as natural disasters, wars, fires, industrial accidents, and environmental accidents may directly or indirectly affect numerous production sites and the supply chain both domestically and internationally, potentially causing business activities to stall or halt. The Group strives to minimize damage through BCP formulation, regular disaster prevention education and drills, a permanent Group disaster prevention office, securing diverse procurement sources, setting voluntary environmental management targets, and establishing a health and safety management system.

The Group is subject to a wide range of domestic and international laws and regulations, including environmental, intellectual property, quality and safety, competition, labor, and tax laws, and the scope of applicable regulations is expanding as globalization progresses. Violations of laws and regulations or changes and amendments thereto may affect the Group's financial position and business results. The Group works to prevent legal violations through multilingual deployment and training on the "Oji Group Charter of Corporate Behavior and Code of Conduct" and the establishment of the "Oji Group Tax Policy."

The Group sells products and procures raw materials in various regions around the world, including Southeast Asia, China, India, Brazil, New Zealand, and Europe, and fluctuations in exchange rates may affect business income and expenses as well as the translated amounts in the yen-denominated consolidated financial statements. The Group hedges risk using derivatives such as forward foreign exchange contracts, currency options, and currency swaps, and monitors the impact on business results as appropriate.

The Group raises funds mainly through yen-denominated borrowings from financial institutions and bond issuances, and a rise in yen interest rates may increase funding costs. As interest-bearing debt may increase with the promotion of the medium-term management plan, the impact could be greater than before, and a downgrade in credit rating could also raise funding costs. The Group strives to ensure financial soundness by appropriately adjusting the allocation between variable and fixed interest rates and maintaining a target net D/E ratio of within 1.0x.

The Group widely utilizes information systems in business activities such as sales management and operations management, and if confidential information is leaked due to external cyberattacks, unauthorized access, negligence, or other causes, it may affect the Group's financial position and business results. The Group has established a cross-group risk management system based on the "Group Information System Usage and Risk Management Regulations," tightened the handling of confidential information, and implemented measures to prevent unauthorized access, data theft, impersonation, and other threats.