Nippon Chemical Industrial Co.,Ltd.

The Group offers a wide range of products globally, from basic chemicals to specialty chemicals, and if there is a significant change in the economic conditions of the countries or regions where its products are sold, this could impact its financial position and operating results. In particular, the Group handles many products whose end uses are automobiles and electronic components, and there is a risk that changes in production trends in these industries directly affect business performance. As countermeasures, the Group continuously gathers market information, engages in dialogue with customers, adjusts production and inventory, and shares information among related departments.

In Japan, natural disasters such as earthquakes and typhoons, fires, staff shortages due to infectious diseases, and disruptions to logistics and information systems may hinder production and shipment. Overseas, at global sites including local subsidiaries in the United States, China, Thailand, and Taiwan, international conflicts, geopolitical risks, port strikes, disruptions to logistics networks, and delayed responses to regulations in each country may affect supply constraints and business operations. As countermeasures, the Group is securing multiple procurement sources and alternative transportation routes, developing BCPs, securing inventory, and strengthening training and systems in preparation for disasters, infectious diseases, and geopolitical risks.

As the Group operates globally, fluctuations in foreign exchange rates may affect procurement costs and selling prices, causing changes in business performance and financial position. As countermeasures, the Group mitigates the impact of fluctuations through forward exchange contracts and price revisions, while strengthening profit management through periodic review of profit levels and reconsideration of sales conditions.

Business suspension or procurement difficulties at raw material suppliers, as well as price fluctuations, may hinder stable procurement and cost management, thereby affecting production activities, business performance, and financial position. As a chemical manufacturer, raw material costs are directly linked to earnings, so the materialization of procurement risk has a significant impact on business performance. As countermeasures, the Group is securing multiple procurement sources, reviewing transaction terms, appropriately managing inventory levels, and considering alternative raw materials.

If future profitability deteriorates due to changes in the business environment or a decline in equipment utilization rates, the Group may recognize impairment losses on fixed assets, affecting business performance and financial position. As countermeasures, the Group verifies profitability and recoverability from the capital investment planning stage, regularly checks operating conditions and signs of impairment, and strengthens investment management systems and reviews plans.

Inadequate response to laws and various regulations, delayed response to regulatory amendments, or accidents and defects may result in administrative sanctions, litigation, product recalls, or suspension of operations. This may lead to additional costs and an impact on business performance, as well as a decline in social credibility and loss of trust from business partners. As countermeasures, the Group continuously gathers information on relevant laws and regulatory trends, disseminates this information internally, conducts education and audits, and strengthens its compliance system through the development of procedures.

Cyberattacks, unauthorized access, virus infections, and human error may cause information system outages or leaks of confidential and personal information. If these risks materialize, they may cause business disruption and increased recovery costs, as well as a decline in trust from business partners and customers and damage to social reputation, affecting business performance, financial position, and business operations. As countermeasures, the Group is developing security equipment and monitoring systems, thoroughly managing access and devices, and advancing vulnerability response, system updates, and cloud migration.

The intensification and increased frequency of natural disasters associated with climate change, delays in reducing GHG emissions, and the strengthening of environmental regulations and carbon taxes may cause business disruptions and increased costs. If the response is inadequate, this may lead to a decline in social reputation and loss of trust from customers and investors, affecting business performance, financial position, and medium- to long-term business continuity. As countermeasures, the Group is calculating and managing GHG emissions, formulating and implementing reduction plans, considering energy-saving measures and the use of renewable energy, developing BCPs, and understanding impacts including across the supply chain.

Inadequate response to laws, various regulations, and corporate ethics may result in compliance violations, potentially leading to legal liability such as administrative sanctions, litigation, or claims for damages. If such an event materializes, it may restrict business activities and incur additional costs, as well as damage social credibility and brand value, having a material impact on business performance and financial position. As countermeasures, the Group continuously gathers legal information, disseminates it internally, conducts education and training, operates an internal reporting system, develops audit systems, and strengthens management systems including at overseas sites.

If the securing and development of personnel necessary for the continuous growth of the business does not proceed as planned, this may hinder stable business operations and the smooth execution of work. In addition, delays in sustainability initiatives, inadequate information disclosure, and deterioration of relationships with stakeholders may lead to a decline in external evaluation and damage to corporate value, affecting the execution of growth strategies and the maintenance of the medium- to long-term business foundation. As countermeasures, the Group promotes human resource development, recruitment, and engagement improvement measures, clarifies its sustainability policy, enhances information disclosure, and engages in dialogue with ESG rating agencies and stakeholders.