NOF CORPORATION

If a natural disaster or pandemic exceeding assumptions occurs, business activities such as production, sales, and logistics may be disrupted, potentially having a material impact on business performance and financial condition. The Group has formulated a Business Continuity Plan (BCP) and conducts internal audits and drills to prepare for emergencies, but risks remain that cannot be fully addressed in the event of unforeseen occurrences.

If the Group violates various laws and regulations such as the Unfair Competition Prevention Act, the Antimonopoly Act, the Subcontract Act, the Foreign Exchange and Foreign Trade Act, the Chemical Substances Control Law, and the Pharmaceuticals and Medical Devices Act, administrative dispositions may result in the suspension of business activities or the payment of surcharges. The Group strives to prevent misconduct through the development of compliance manuals, the implementation of training, and the establishment of internal reporting channels, but complete elimination is difficult.

If governance is insufficient at overseas production and sales sites in North America, Europe, Asia, and elsewhere, and misconduct such as legal violations occurs, credibility may decline due to administrative dispositions or criminal or civil litigation, potentially affecting business performance and financial condition. The Group periodically requests reports on business execution and financial condition and conducts business audits, but there are limits to global management oversight.

Cyberattacks by computer viruses, unauthorized external access, or information system failures may result in the leakage of confidential or personal information or the disruption of business activities. The Group has implemented both hardware and software security measures, established information security management regulations, and built a defense system against unauthorized access, but risks remain due to increasingly sophisticated threats.

If a large-scale fire, explosion, or other accident occurs at a production plant in Japan or overseas, it may result in death or injury to employees or local residents, suspension of business activities, and damage compensation claims. The Group strives to prevent such incidents through regular equipment maintenance and inspection, appropriate management of hazardous materials, and the formulation and drilling of emergency response manuals, but the risk cannot be completely eliminated.

If a third party infringes on the Group's intellectual property rights, or if a Group employee infringes on a third party's intellectual property rights, this may result in damage compensation lawsuits or demands to halt manufacturing or shipment. The Group has established a global rights acquisition and management system and a patent infringement monitoring system, but complete prevention is difficult.

If confidential business information is leaked, competitors may offer similar products or technologies in the market, potentially reducing the Group's sales and profits. The Group strives to strengthen its management system and regulations regarding confidential business information, but the risk that information leakage cannot be completely prevented remains.

If quality misrepresentation, such as data falsification, occurs in processes such as research and development, production, testing and inspection, or shipment, the Group's credibility may decline or be lost. The Group strives to maintain appropriate quality control through thorough management of quality control data, the implementation of internal quality audits and quality investigations, and regular awareness-raising and training for employees.

If the mid- to long-term human resource development plan fails to function effectively, the development of personnel who contribute to the Group's growth may stagnate. The Group promotes training by level and by theme, the recruitment and development of international personnel, and appropriate personnel rotation, but responding to the demand for talent accompanying the expansion of global business remains a challenge.

If raw materials are procured from suppliers or their upstream sources involving human rights violations such as forced labor or child labor, or environmental destruction, the Group's social credibility may decline. The Group has established a CSR procurement policy and guidelines, stipulates compliance in sales contracts, and conducts ongoing supplier surveys, but there are limits to fully grasping the upstream supply chain.