OSAKA ORGANIC CHEMICAL INDUSTRY LTD.

There is a risk that suppliers or outsourced production partners of raw materials may experience delays in product supply or production interruptions due to natural disasters, accidents, bankruptcy, etc. In addition, significant fluctuations in crude oil and naphtha prices directly affect business performance. The Group addresses this through risk diversification via procurement from multiple suppliers, linking to product prices, and cost reduction measures.

In the event of a large-scale natural disaster, fire accident, chemical substance leakage outside the company, pandemic, or similar occurrence, business performance may be affected through the suspension of production activities, disruption of logistics, and personnel shortages. The Group addresses this through periodic inspection of manufacturing facilities, disaster prevention drills, formulation of a BCP (Business Continuity Plan), and development of infectious disease response manuals.

If domestic and overseas laws and regulations related to chemical substances, the Poisonous and Deleterious Substances Control Act, the Industrial Safety and Health Act, the Fire Service Act, etc., are tightened further in the future, business activities may be restricted. If a compliance violation occurs, there are concerns about a decline in social credibility and the occurrence of liability for damages or fines. The Group addresses this through continuous investigation and monitoring of legal and regulatory revision trends, review of business processes, and strengthening of compliance education.

In conducting business overseas, there are latent risks such as deterioration of political and economic conditions, worsening public security, unexpected changes in laws and regulations, war, terrorism, and infectious diseases. If these risks materialize, business activities may be disrupted, potentially affecting business performance. The Group addresses this through securing and developing excellent local talent, establishing a system for rapid information gathering, and strengthening internal controls.

The Group's products are used in a wide range of fields and are significantly affected by demand fluctuations in each industry. If product prices decline due to exchange rate fluctuations, market condition changes, the influx of low-priced products, the emergence of substitute products, etc., this could lead to a decline in profitability. The Group is working to build a profit structure less susceptible to demand fluctuations by expanding its lineup of high-function, high-value-added products and promoting product turnover.

With respect to fixed assets such as machinery, equipment, and buildings, if earnings do not materialize as planned in the investment plan and recovery of the invested amount is not expected, an impairment loss may be recognized. In addition, a significant decline in product market conditions may result in a write-down of inventory valuation. The Group addresses this through continuous monitoring of business performance and indications of impairment, and appropriate inventory management.

In corporate acquisitions, business acquisitions, and capital alliances, business performance may be affected if the initially expected synergies or benefits are not obtained, or if unexpected problems arise or are discovered. The Group addresses this through detailed due diligence on investment targets, continuous verification of any divergence between actual performance and the initial plan, and implementation of countermeasures as necessary.

Due to the increasing sophistication and diversification of cyber attacks, the Group is exposed to risks such as ransomware infection, information leakage, suspension of business systems, and exploitation of vulnerabilities in cloud services, with concerns also arising over phishing utilizing generative AI and ripple effects across the entire supply chain. If such events occur, they could lead to the suspension of business activities or a decline in social credibility. The Group addresses this through regular updates to its information security policy, introduction of security systems and strengthening of backup systems, employee education and training, and development of incident response procedures.

The Group continuously invests a certain level of resources in research and development to secure technological competitive advantage, but business performance may be affected if the expected results are not achieved. The Group has established a system for the timely provision of products leveraging its proprietary technology related to Special Acrylic Acid Esters, and is promoting market expansion and technological innovation through proactive external communication of developed products.

Due to the declining working population associated with the falling birthrate, as well as diversification of work styles and changes in values, if the Group is unable to secure necessary personnel or acquire and retain excellent talent as planned, this may affect business operations and performance. The Group addresses this through timely review of recruitment methods, promotion of skills development through employee education and training, appropriate management of working hours, and improvement of the workplace environment through enhanced work-life balance.