Taki Chemical Co.,Ltd.

If a large-scale earthquake, heavy rain, storm surge, or other natural disaster exceeding BCP assumptions, or an unknown infectious disease, were to occur, product supply could be disrupted for an extended period due to manufacturing interruptions or the severing of logistics routes. Although measures against natural disasters and infectious diseases have been established, unforeseen events cannot be completely prevented. Both impact and probability are rated at the highest level (5 each), positioning this as the top-ranked risk of material impact on business performance.

The main customers for functional materials operate in industries with rapid technological innovation, and if new technology development causes rapid changes in market structure, the competitiveness of the Company's products could decline significantly. For other products such as water treatment chemicals, the emergence of highly competitive alternative products poses a similar risk. This is rated with an impact score of 5 and a probability score of 4, and is addressed through the development of functional materials required for next-generation technologies.

If oil and gas prices rise sharply due to conditions in the Middle East or fluctuations in the global economy, delays in passing on costs to product prices could cause energy costs to materially affect business performance. Over the medium to long term, there is also a risk of rising energy costs due to strengthened environmental regulations such as carbon taxes. With a probability score of 5 and an impact score of 4, this is addressed through thorough and enhanced energy management and efforts toward an optimal energy mix, though the impact may not be fully avoidable.

Fluctuations in domestic and international economic conditions and industry restructuring could materially affect business performance. Since functional materials in the Chemicals business are intermediate raw materials, they are susceptible to changes in end-product market conditions, and in the Real Estate business there is also a risk of declining rental income from tenants. With an impact score of 4 and a probability score of 4, this is addressed through information sharing on industry, market, and user trends, and through renewal and renovation of commercial facilities.

Many of the raw materials, supplies, and fuel purchased are affected by overseas supply-demand balances, and supply shortages due to policy changes, deteriorating conditions, or export restrictions in various countries, or supply disruptions due to war, natural disasters, infectious diseases, or climate change, could materially affect business performance. With an impact score of 4 and a probability score of 4, the Company strives for stable procurement through purchasing from multiple domestic and overseas suppliers and maintaining a certain level of inventory, but complete avoidance is difficult.

As dependence on information systems and networks increases year by year, network failures or information leaks could occur due to power outages caused by natural disasters, computer virus infections, hacking, and similar events. If such events materialize, they are expected to disrupt business activities, affect social credibility, and incur significant costs. With an impact score of 4 and a probability score of 3, this is addressed through security enhancements such as thin-client adoption and cloud utilization, but for portions outsourced to third parties, the Company Group alone may not be able to fully address the issue.

Research and development, including the creation of new businesses, may span long periods, and if the results of R&D activities deviate significantly from targets, competitiveness could decline and materially affect business performance. With an impact score of 4 and a probability score of 3, this is addressed through thorough research management, strictly managing progress and outlook for each project, and making decisions on whether to continue or adjust direction.

Unforeseen events such as serious industrial accidents or major fires, explosions, or leaks could lead to temporary or prolonged operational suspension. Since alternative production is difficult for some products, this could result in supply disruptions that materially affect business performance. With an impact score of 5, the highest level, this is addressed through the establishment and operation of occupational health and safety systems and safety/disaster prevention management systems, as well as equipment maintenance and upkeep.

Since many major raw materials are imported, if a significant depreciation of the yen continues, the Company may not be able to fully absorb the resulting cost increases, and being unable to pass them on to prices amid intensifying competition could materially affect business performance. With an impact score of 3 and a probability score of 4, fluctuation risk is mitigated through adjustments to purchase timing and volume and forward exchange contracts for a portion of raw material purchases, but complete avoidance is not guaranteed.

Significant changes to relevant laws and regulations or tightening of regulations may occur both domestically and internationally, and in particular, strengthened greenhouse gas emission regulations or the introduction of new laws and policies such as carbon taxes could hinder business activities. If grounds for revocation of licenses or permits arise, restrictions on business activities and new costs could occur, materially affecting business performance. With an impact score of 3 and a probability score of 3, a system has been established for rapid response through the collection of the latest information by relevant departments and regular confirmation of licensing status.