ASAHI YUKIZAI CORPORATION

Since the Group relies mainly on petrochemical-based raw materials such as vinyl chloride resin and phenolic resin, market fluctuations and geopolitical risks (conflicts and political instability in the Middle East, etc.) could cause raw material price surges or supply shortages, adversely affecting production activities and business results. There is also a risk that procurement could become difficult if human rights, labor, or environmental issues are discovered at specific suppliers. As countermeasures, the Group implements diversified procurement from multiple suppliers, formulates purchasing policies, and reflects raw material price surges in product prices in a timely manner.

Tightening regulations in various countries associated with the transition to a decarbonized society, fluctuations in energy costs, and changes in customer needs may affect business activities and performance. The Group recognizes climate change as a critical risk factor, conducts analysis and assessment of its impact on the business, and has received evaluation of its initiatives through the CDP response process. The Group also contributes to risk reduction through energy-saving activities such as effective use of water resources and high-performance on-site foam insulation materials.

If accidents such as fires, explosions, or leaks occur at domestic (Miyazaki, Aichi, Tochigi, Hiroshima) or overseas (United States, China, India, Mexico) production plants due to equipment failure or poor maintenance, this could adversely affect reliability and business results through industrial accidents, inability to supply customers, and compensation to local disaster victims. The scope of risk exposure has been expanding with recent new plant construction and expansions, and the Group is implementing measures such as verification from the design stage, regular inspections, safety training, and enrollment in casualty insurance.

If systems become unusable due to cyberattacks or unauthorized access, or if personal information is leaked externally, this could result in delays to sales activities and business processing, loss of credibility, decreased sales, and the incurrence of damages. In addition, risks of information leakage and copyright infringement are becoming apparent as the use of generative AI services expands. As countermeasures, the Group conducts cyber risk assessments by external parties, has introduced monitoring systems to detect suspicious behavior, and has formulated generative AI service guidelines while restricting use to closed environments.

With production and sales bases both in Japan and overseas, unexpected legal or regulatory changes in investment markets, or political and social turmoil such as war or conflict, could disrupt overseas business activities and adversely affect production activities and business results. The Group has established an overseas crisis response manual, continues to gather information from local consultants and consulates, and has established a system to ensure the safety of employees stationed or traveling overseas and to minimize damage when risks materialize.

Although the Group has established a quality control system based on ISO9001, if a product defect occurs, this could result in liability for direct and indirect damages and substantial remediation costs, as well as damage to brand image and loss of customers, adversely affecting the business, results of operations, and financial condition. The Group is strengthening its quality control system to prevent nonconforming products, continuously improving process control, pursuing root causes and preventing recurrence when complaints arise, and maintaining insurance to cover losses.

As existing businesses rapidly expand, personnel shortages are becoming more severe, and if personnel turnover occurs, this could hinder the transfer of skills and know-how, reducing the company's growth potential. The Group strives for planned recruitment utilizing both new graduate and career hires, while also working to promote dialogue with management and organizational development through town hall meetings (Mirai Talk) and coaching projects.

As the Group conducts business globally, violations of laws and regulations in various countries and regions could result in fines, sanctions restricting business continuity, and loss of social trust, significantly affecting business activities. The Group's Code of Conduct upholds legal compliance, requires thorough adherence by all officers and employees, and strives to reduce risk through employee training, gathering information on legal amendments, and regular internal audits.

In the event of a large-scale disaster, employee safety hazards, plant damage, disruption of warehouse logistics functions, and inability to procure raw materials could significantly impact business continuity. The Group is developing emergency response plans, conducting disaster drills, and establishing initial response and recovery manuals within its BCP at domestic business sites and manufacturing bases, striving to ensure the safety of human life and minimize business impact.

Since many of the Group's products and services are sold on credit or through promissory note transactions, if a major customer becomes insolvent, receivables may become uncollectible, adversely affecting business results and financial condition. The Group strives to avoid receivables collection risk through regular credit investigations and by setting transaction limits according to creditworthiness.