Carlit Co.,Ltd.

Disruptions in raw material procurement, price increases, or quality deterioration may reduce the stability of product supply and quality, potentially affecting business performance and financial condition. In recent years, reduced logistics capacity due to improvements in the labor environment of the transportation industry and uncertainty in energy supply due to worsening global conditions have been recognized as significant risk factors, with uncertainty arising from the Middle East situation being particularly high. As a countermeasure, the basic strategy of purchasing from multiple suppliers is adopted, diversifying risk through stable procurement by appropriately securing purchasing routes.

Since a portion of raw materials is procured from overseas, the company is affected by cost fluctuations due to exchange rate movements, and there is also a risk of sudden exchange rate fluctuations in overseas business and export-related transactions. Uncertainty arising from the Middle East situation is particularly high, and recent sharp yen depreciation phases are treated as an important monitoring item, with downside risk incorporated as a premise in earnings forecasts. Measures such as diversifying procurement risk through multiple purchasing and fixing purchase prices in advance through forward exchange contracts are being implemented.

In the Chemical Products segment, the company handles numerous hazardous materials such as explosives and chlorates, and in the event of a serious accident such as fire, explosion, or chemical leakage, there is a risk of danger to human life, physical damage, environmental destruction, and interruption of business activities. Although the likelihood of such serious accidents occurring is considered extremely low, the impact when they do occur would be significant. Risk is minimized through the establishment of safety standards at each production site, installation of appropriate equipment and protective devices, regular patrols, and formalized education programs such as fire extinguishing drills.

Confidential information of customers and business partners, as well as information assets related to development, production, sales, accounting, and corporate strategy, may be leaked, destroyed, tampered with, or subject to system outages due to unauthorized access, cyberattacks, or internal misconduct. This could result in loss of trust and reputation, as well as impact on business performance and financial condition. As an organizational measure, a cybersecurity management framework has been established, and as a technical measure, the introduction of technology in accordance with security policy is being promoted.

If unexpected quality problems occur in the wide range of businesses operated, this may lead to a decline in the credibility and customer satisfaction of the group as a whole, an impact on market share, and the incurrence of costs related to product recalls, rework, replacement product delivery, and manufacturing, potentially affecting business performance and financial condition. An integrated quality control system has been established and operated from raw material procurement through manufacturing and shipment, and meeting bodies have been set up for information sharing among quality personnel at the stage where signs of problems first emerge, before they become manifest, with horizontal deployment to group companies to improve the quality control system.

In some business fields, the speed of technological innovation and changes in market needs are extremely fast, and the emergence of new technologies and innovations may render existing products and services obsolete or less competitive, potentially affecting business performance and financial condition. Risk is managed through continuous information gathering on market research, competitor analysis, and technology trends, as well as through a system in which manufacturing, sales, and development regularly share information.

A decline in business capacity due to operating with a small workforce, as well as the disruption of the transfer of important technology and know-how due to the absence of successors, may affect the stability of product supply, competitiveness, and business performance. Risk is managed by implementing human resource activities such as improving employee engagement and strengthening recruitment activities, as well as by considering human capital investment within the medium- to long-term management strategy.

Legal restrictions or regulatory changes related to products, as well as compliance deficiencies, may affect manufacturing, sales, and trust and reputation, potentially affecting business performance and financial condition. The company continuously monitors regulatory revision trends related to environmental issues, chemical substances, and exports, with advice from external experts, and conducts appropriate business operations with thorough compliance.

At business sites distributed mainly within Japan, the occurrence of natural disasters such as major earthquakes, tsunamis, typhoons, and heavy rain may cause damage to production facilities and human resources, as well as significant changes in customer demand trends. Risk is managed by working to improve disaster resilience, including the formulation of a BCP, the introduction of an employee safety confirmation system, and the purchase of disaster insurance for production facilities.

The company maintains a sales base in Shanghai, and if it fails to adequately respond to differences in local laws, regulations, and social culture, this may result in legal violations, corruption, fraud, or erroneous management decisions, leading to a loss of trust and reputation and impacting business performance and financial condition. Risk is managed by establishing an appropriate organizational structure, implementing compliance programs, and utilizing advice from external experts to conduct highly transparent management adapted to the region.