IMURA & Co., Ltd.

The Group faces risks of system failures and information leaks caused by external factors such as virus infections and cyberattacks. While the Group has obtained Privacy Mark and Information Security Management System certifications and taken countermeasures, an unforeseen information leak could adversely affect business performance through a decline in social credibility.

With the diversification of information means due to advancing digitalization, demand for envelope shipping may structurally decline. In addition, depending on the content of revisions to the postal rate system or other regulatory changes, there is a risk of impact on business performance, and the contraction of the market for the core business could become a factor pressuring profitability over the medium to long term.

The Group strives to secure stable supply and maintain optimal prices by procuring envelope base paper, film, and other auxiliary materials from multiple manufacturers. However, if raw material procurement becomes extremely difficult or purchase prices rise sharply, business performance and financial condition could be affected. If it is difficult to pass on increases in raw material costs to product prices, profitability would be directly pressured.

Although products are manufactured under thorough quality control, defects arising from design or manufacturing process deficiencies could affect business performance through the occurrence of damage compensation claims or a decline in sales. Quality issues could also lead to a loss of customer trust, adversely affecting medium- to long-term business relationships.

Most of the investment securities held consist of shares of financial institutions, sales partners, and suppliers, and stock market conditions could affect business performance and financial condition. In addition, the occurrence of impairment losses on the book value of held machinery and equipment could also be a factor affecting business performance and financial condition.

The Group uses both defined benefit and defined contribution corporate pension plans. Retirement benefit expenses and obligations under the defined benefit plan are calculated based on actuarial assumptions such as the discount rate and the expected rate of return on pension assets. If the investment performance of pension assets deteriorates or the discount rate declines further, business performance and financial condition could be adversely affected.

While the Group has established a response system for anticipated disasters through the diversification of production sites and the formulation of disaster countermeasure and recovery plans, the occurrence of unpredictable events such as large-scale natural disasters or infectious disease outbreaks could make it difficult to secure the product supply system, potentially resulting in a sharp decline in sales and significant restoration costs.

The Group has a consolidated subsidiary in Vietnam and is exposed to local political and economic conditions, changes in laws and regulations, and international tax risks such as transfer pricing taxation. Changes in these factors could affect the Group's business performance, and there is a risk that stable operation of overseas business could be impaired.

Since consolidated financial statements are prepared by translating the sales, expenses, assets, liabilities, etc. of the consolidated subsidiary in Vietnam into yen, fluctuations in exchange rates could directly affect business performance. In particular, during periods of yen appreciation, the yen-translated amount of the local subsidiary's performance would shrink, which could be a factor depressing consolidated results.

The Group is subject to various laws and regulations, including environmental regulations and intellectual property laws, and works to ensure legal compliance through compliance training for officers and employees. Nevertheless, there is a risk of exposure to unexpected troubles or litigation, and depending on the outcome of litigation, business performance could be affected.