TOMOEGAWA CORPORATION

Products offered by the Group face the risk of rapid demand decline due to changes in the industries and markets to which customers belong, as well as price competition with competitors. In addition, obsolescence of existing products and market contraction resulting from technological innovation may affect business performance. As countermeasures, the Group is implementing assessment of market trends and promotion of structural reforms, differentiation from competitors, promotion of new product development, and promotion of joint development projects with other companies.

As the Group uses petrochemical products such as plastic film, base paper, pulp, etc. as raw materials, and mainly LNG as fuel, sharp fluctuations in purchase prices due to international conflicts and other factors may affect business performance. In addition, there is a risk that supply or production stoppages in upstream or downstream processes of the supply chain could have a significant impact on the Group. The Group is responding through diversification of energy supply resources, energy conservation, and exploration of second sources.

If a massive earthquake such as the Tonankai earthquake or wind and flood damage caused by linear rain bands or large typhoons occurs, depending on its scale, duration, and location, production and business activities may be affected for a considerable period. The Group is responding through revision of its BCP and enrollment in earthquake insurance, seismic reinforcement work and new construction at production facilities and offices, promotion of investment aimed at early recovery, and improvement of preventive measures against tsunamis and wind/flood damage.

If the Group's IT environment is subject to a cyber attack, production and business activities may be affected for a considerable period. The Group is promoting strengthening of defense capability, detection capability, response capability at the time of occurrence, and recovery capability after occurrence, through the development of a countermeasure framework.

As the Group promotes global business development in North America, Europe, and Asia, occurrences such as terrorism, deteriorating security conditions, conflicts, wars, or changes in laws, tax systems, tariffs, and environmental regulations may affect business performance. The Group is responding through the establishment and operation of manuals for responding to terrorism and deteriorating security conditions to ensure employee safety, provision of safety information to overseas offices, and monitoring of overseas legal and tax system trends.

The Group conducts its business activities advantageously through the establishment of valid intellectual property rights; however, if disputes over intellectual property rights or issues such as patent infringement arise with other companies in the future, this may affect business performance. At present, no litigation that would affect business performance has occurred, but risk management is being conducted through intellectual property risk management.

The Group secures stable fund procurement through commitment line agreements with multiple financial institutions, but if procurement costs rise due to future increases in interest rates, this may affect business performance. The Group addresses this through maintaining and strengthening its financial structure, appropriately diversifying funding sources and institutions, and timely analysis of and response to various risk factors.

The Group conducts foreign-currency-denominated transactions in the purchase of raw materials and sale of products, and as export transactions currently show a slight bias, fluctuations in exchange rates may adversely affect business performance and financial condition. In addition, the value after conversion into yen of foreign-currency-denominated financial statement items of overseas subsidiaries is affected by the exchange rate at the time of translation. The Group responds through foreign currency position management by base and region, strengthened monitoring by head office departments, and forward exchange contracts.

If an unexpected sudden failure or similar event occurs at a business partner, this may affect the Group's business performance. The Group is working to reduce this risk through credit management of business partners, information gathering, and efforts to secure receivables.

Under the basic policy on internal control, the Group has established codes of conduct for each Group company and is promoting thorough compliance; however, if a serious violation of laws or regulations occurs, this may affect business performance due to a decline in social credibility and other factors. The Group addresses this through strengthening the compliance promotion framework, improving education, focusing on preventive measures, and strengthening its ability to respond to international regulations.