NIPPON KAYAKU CO.,LTD.

The risk that supply becomes unstable due to disruptions in raw material procurement, logistics disruptions, or dependence on specific suppliers. Supply disruptions could lead to the suspension of production activities or failure to fulfill supply obligations to customers, potentially having a material impact on business performance. The company aims to ensure supply stability through diversification of procurement sources, optimization of inventory, and enhanced supplier risk assessment.

The risk that profitability declines due to intensifying price and technological competition with domestic and overseas competitors. In particular, in product areas where differentiation is difficult, price pressure may intensify, leading to deteriorating profit margins. The company aims to establish competitive advantage through the development of differentiated products, strengthening cost competitiveness, and selecting and concentrating business focus.

The risk that R&D investment fails to generate expected results or that market launch is delayed. Development failures or delays could worsen the outlook for investment recovery and undermine the foundation for future growth. The company aims to improve development efficiency through selection and concentration of development themes, thorough stage-gate management, and promotion of external collaboration.

The risk that the competitiveness of existing products declines and demand decreases due to technological innovation or changes in customer needs. As technological transitions accelerate in major customer industries such as automotive, semiconductors, and electronics, the obsolescence of product lineups could affect business performance. The company aims to maintain and improve product competitiveness through enhanced development based on customers' latent needs and focused investment in environmental and high-performance materials fields.

The risk that fluctuations in foreign exchange rates affect business performance by changing the yen-denominated value of overseas sales and the cost of imported raw materials. In a weak yen environment, the cost of imported raw materials rises, while in a strong yen environment, overseas sales are reduced in yen terms, widening the volatility of earnings. The company aims to mitigate the impact through currency diversification, natural hedging via promotion of overseas local production, and price and cost management.

Fluctuations in the global economy or specific markets (such as automotive and semiconductors) may reduce demand, leading to lower sales and deteriorating profitability. If dependence on a specific end market is high, an economic downturn in that market could directly impact business performance. The company aims to strengthen resilience to economic fluctuations through diversification of its business portfolio, resource allocation to growth areas, and optimization of its fixed cost structure.

The risk that earthquakes, fires, accidents, etc. cause the suspension of operations at production sites or supply disruptions, affecting customer supply and profitability. Given the nature of the business, which is primarily chemical manufacturing, there is also an inherent risk of accidents such as fires and explosions, and concentration at a single site could be a factor that magnifies damage. The company aims to minimize the impact through the advancement of business continuity plans (BCP), establishment of a multi-site production system, strengthening of safety equipment, and regular training.

The risk that international conflicts, trade regulations, economic sanctions, etc. restrict the procurement of raw materials and the import/export of products. As the company operates globally, if dependence on a specific region is high, tightened regulations or the outbreak of conflict could seriously impact business continuity. The company aims to mitigate the impact through diversification of procurement and sales destinations, review of inventory strategy, and enhanced monitoring of regulations in each country.

The risk that patent infringement, litigation, or technology leakage could lead to a decline in competitive advantage. Patent infringement lawsuits from other companies could lead to substantial damages or the suspension of product sales, while the leakage of the company's own technology could result in the loss of differentiation advantages. The company aims to reduce this risk through strengthening its intellectual property portfolio, thorough investigation of other companies' patents, and advancing the management of confidential information.