SEIRYO ELECTRIC CORPORATION

In the business for private-sector customers, economic fluctuations, and in the business for government agencies, changes in budgetary conditions, may affect the financial position and operating results of the Group. The structure has sensitivity to economic conditions in both of the two demand pillars—private sector and government agencies—creating a risk that multiple sales segments could be affected simultaneously during an economic downturn.

In mobile terminal sales, revisions to telecommunications carriers' sales incentive programs and changes in store support measures by sales agencies affect performance, while in mobile terminal repair and refurbishment, fluctuations in the number of repair requests and repair unit prices affect performance. Structural environmental changes, such as the expansion of the MVNO market and the used terminal market, add further pressure, potentially squeezing overall profitability of the Information & Communications Terminal Equipment Business.

In the Information & Communications Terminal Equipment Business, the opening of competing stores in the vicinity and the expansion of the MVNO and used terminal markets could undermine the premises of the store opening strategy based on location surveys. In the Information & Communications System Business as well, price competition with peers and competition from alternative equipment pose a risk of performance falling below forecasts.

Cloud services and related businesses depend on communication networks, and if a server connection failure occurs due to a disaster, accident, cyberattack, software defect, or other cause, this could result in loss of service trust and give rise to risks of damage claims or litigation. Failures attributable to the Company could also affect its social credibility as an enterprise.

If issues arise regarding product performance, delivery times, or safety, there is a risk that contractual counterparties or third parties may file damage claims or lawsuits. There is no guarantee that product liability insurance or similar coverage will fully cover the final amount of damages, which could result in financial losses.

A sharp rise in raw material prices due to heightened geopolitical risk or exchange rate fluctuations may affect operating results and financial position. If procurement becomes difficult or lead times are extended due to supply-demand tightness caused by prolonged natural disasters, conflicts, or political instability, there is also a risk of delivery delays to customers. Although the Group continues to work on strengthening cost competitiveness, there are limits to its ability to respond to sudden fluctuations.

The Company has entered into sales agency agreements and other arrangements with major suppliers such as the Mitsubishi Electric Group and Kanematsu Communications Co., Ltd. If these suppliers change their business strategies or if procurement of goods from them becomes difficult, this could have a material impact on the Group's operating results and financial position. Although transactions have remained stable, this represents a structural risk arising from a high degree of dependence on specific suppliers.

Most of the securities held by the Group consist of shares of financial institutions and companies with which it has business relationships. Deterioration in the performance of investee companies or declines in securities markets could result in valuation losses, affecting operating results and financial position. In the event of a sudden change in market conditions, there is a risk that unrealized losses on held shares could materialize.

The Group holds a large amount of confidential information, including information on business partners, sales information, and technical information. If an unforeseen event leads to the leakage of such information, this could affect operating results and financial position. Although the Group strives to thoroughly manage confidential information, it is difficult to completely eliminate risks such as cyberattacks or internal misconduct.

If a natural disaster such as an earthquake or typhoon, or an accident such as a fire, causes significant damage to the Group's facilities or those of its suppliers, business continuity could become difficult, affecting operating results and financial position. A halt in procurement due to damage suffered by suppliers could also become a factor contributing to a chain reaction of performance deterioration.