HARIMA CHEMICALS GROUP,INC.

If an accident such as an explosion or leakage of hazardous substances occurs during production activities, it may incur costs for ensuring safety and restoring operations, and may also lead to a decline in production capacity and loss of trust; the impact level is assessed at the highest level (4). The Group works to prevent such incidents through periodic inspection and maintenance of critical equipment, the introduction of continuous monitoring systems for wastewater treatment facilities, and the acquisition of qualifications and implementation of training for supervisors and employees.

Economic downturns, political instability, trade friction, and similar developments in major markets such as Japan, North America, South America, Asia, and Europe may reduce demand for products, potentially affecting business performance and financial condition. The Group responds by researching global macroeconomic, regulatory, and market trends and setting realistic performance targets.

In businesses involving overseas production and sales, converting financial statements denominated in local currencies into yen may affect yen-converted performance and financial condition even if the underlying foreign-currency figures do not change. The Group strives to avoid this risk through means such as forward exchange contracts, taking financial market trends into account.

If large-scale claims or product liability damages arising from product defects exceed the scope of insurance coverage, this may lead to a decline in sales and adversely affect business performance and financial condition. The Group continues to operate and improve its quality management system under the Group Quality Policy, and maintains a framework for providing products that comply with customer requirements and laws and regulations.

If confidential information such as financial, personnel, customer, strategic, or technical information is damaged or leaked, it may disrupt business activities, and increased investment and expenses associated with strengthening information infrastructure may affect business performance and financial condition. The Group strives to protect confidential information by implementing various security measures and improving security awareness through employee training.

The Group is subject to a wide range of government regulations in each country where it operates, including licensing, export restrictions, tariffs, antitrust rules, and environmental regulations, and amendments to these regulations may affect business performance and financial condition. The Group works to ensure compliance with and timely response to the laws and regulations of each country by developing global codes of conduct and internal regulations, providing employee training, and establishing an audit system.

Significant changes in the market value of land and other assets or in the business environment may result in impairment losses on fixed assets, potentially affecting business performance and financial condition. The Group applies accounting standards related to impairment of fixed assets and continuously monitors changes in the business environment.

Raw materials such as rosin, crude tall oil, and petrochemical products carry price fluctuation risk due to market conditions, and procurement may also be restricted by wars, natural disasters, infectious disease outbreaks, or supply chain disruptions. The Group works to minimize this risk by diversifying suppliers and building redundancy into the supply chain.

If operations are suspended due to a large-scale natural disaster or an infectious disease outbreak exceeding expectations in regions where the Group conducts business, production capacity may decline significantly, potentially affecting business performance and financial condition. The Group addresses this by advancing the establishment of a mutual, wide-area backup system among its domestic and overseas production sites.

Although the Group holds patents and trademarks, if a dispute concerning intellectual property arises, it may affect product sales and incur litigation-related costs, thereby impacting business performance. However, since specific product know-how has been accumulated within the Group, the likelihood of a material impact is assessed as low. The Group works to reduce this risk by establishing an appropriate intellectual property management organization.