OSAKA SODA CO., LTD.

Business performance may be significantly affected by market price fluctuations resulting from economic trends and competition with other companies, as well as by fluctuations in exchange rates and interest rates. In particular, Chlor-Alkali Products and Epichlorohydrin in the Basic Chemicals business are susceptible to fluctuations in selling prices and raw material procurement prices, and there are concerns that an adverse impact on performance could occur if supply-demand conditions ease due to large-scale plant construction by other companies. Given a business structure centered on market-linked products, high sensitivity to changes in the external environment is a characteristic risk.

If a supply interruption occurs due to an accident at a raw material manufacturer, or if a supply stoppage occurs due to quality defects or bankruptcy, the Group's production activities may be halted, adversely affecting performance. Although the Group strives for stable procurement by securing multiple suppliers, the structure cannot completely eliminate the risk of dependence on a single supplier. As a chemical manufacturer, securing a stable supply of raw materials is fundamental to business continuity, and any supply disruption would directly lead to lost business opportunities.

In sales activities in Asia, Europe, and North America, unforeseen changes in laws and regulations, deterioration of political and economic conditions, or social disruption caused by terrorism or war may adversely affect operating results and financial condition. Each group company works to gather information and strives for early risk recognition and implementation of countermeasures to prevent or avoid such risks, but there are concerns that the scope of impact could expand against the backdrop of heightened geopolitical risk.

An increase in regulatory compliance costs, such as carbon pricing, and rising offset credit prices associated with climate change may affect performance. The company plans to respond by introducing high-efficiency equipment and streamlining production processes, and has established a Sustainability Committee under the Board of Directors to formulate response policies, strategies, and measures, and to report regularly to the Board of Directors. As a chemical manufacturer with an energy-intensive business structure, the company is susceptible to the effects of tightening regulations.

Amid a rapid increase and growing sophistication of cyberattacks, insufficient security measures could make business continuity difficult due to system outages. The company implements information security measures such as strengthening tools for detecting and responding to cyberattacks and improving employee security awareness through email drills and other training, but continued responses are required to address increasingly sophisticated attack methods. Attacks on control systems of manufacturing equipment carry a risk that could directly lead to production stoppages.

If an accident occurs due to equipment trouble or human error, production activities may be interrupted or manufacturing equipment may be damaged, adversely affecting performance. The company thoroughly implements safe and stable operations and conducts regular inspections of all manufacturing equipment, while also working on equipment modifications including expansion of backup machinery and spare parts and duplication of lines. Given the nature of chemical manufacturing processes, the impact of an accident may extend beyond a production stoppage to broader environmental and safety-related damage.

The occurrence of a natural disaster may interrupt production activities or damage manufacturing equipment, affecting performance. In addition to regular disaster prevention drills and insurance coverage, the company has formulated a Business Continuity Plan (BCP) and established a cooperative framework with the supply chain and related companies to ensure stable supply and business continuity. In the event of a large-scale disaster, ensuring the safety of employees and local residents is also an important response issue.

If the initially expected results are not achieved in a merger, acquisition, or strategic business or capital alliance, performance and financial condition may be affected. In addition, business restructuring such as withdrawal from unprofitable businesses or reorganization of affiliated companies may also affect performance and financial condition. When executing M&A or business restructuring, goodwill impairment risk and the incurrence of integration costs are also potential risk factors.

The company promotes Responsible Care activities aimed at ensuring environmental, safety, and health protection throughout the entire lifecycle of chemical substances, from development to disposal. However, if an event occurs that affects the surrounding environment, costs for countermeasures including compensation and lost business opportunities due to production stoppages may arise, affecting performance. The company has established a system to confirm the development and compliance status of quality and environment-related rules through Responsible Care audits conducted twice a year.

If a product quality problem occurs, it may adversely affect performance, financial condition, and social reputation. In addition to maintaining product liability insurance, the company strives for quality control through confirming the development and compliance status of quality-related rules via Responsible Care audits conducted twice a year, and through regular quality compliance education for employees. Since defects in chemical product quality can have a chain-reaction impact on customers' manufacturing processes, the risk of damage to reliability is significant.