ISHIHARA CHEMICAL CO.,LTD.

The core businesses of metal surface treatment agents and electronic materials are both oriented toward electronics-related fields, and if new technology development, adoption of new methods, the rise of competitors, or fluctuations in the supply-demand cycle cause rapid obsolescence of handled products, decline in marketability, or significant production adjustments among demand sources, this could have a material impact on management. As a countermeasure, the company is developing business in a well-balanced manner across three fields, including the automotive products field and industrial chemicals field in addition to electronics-related fields, aiming to improve profitability and stabilize business performance.

Continuous introduction of new and improved products is essential for maintaining and expanding the business, and while the company invests roughly 10% of product sales in research and development expenses each period, there is a risk that substantial spending does not necessarily lead to results. If the uncertainty of R&D outcomes materializes, it may become difficult to maintain or expand sales, potentially adversely affecting business results. As a countermeasure, the company reviews customers, product mix, and development themes for each type of business, focusing on developing products with high added value and profit margins.

The company's growth is highly dependent on R&D personnel with high technical skills, and failure to secure and develop capable personnel could adversely affect corporate growth, business results, and financial condition. In particular, establishing a proper system for evaluating research outcomes is considered important. As a countermeasure, the company conducts active recruitment activities using its website, recruitment tools, and recruiters, while also working on personnel development through training after joining the company.

The company is actively pursuing overseas market development, particularly in China and Southeast Asia, but unforeseen changes in laws and regulations, unfavorable changes in tax systems, inadequate infrastructure, and social disruption due to political instability, terrorism, war, infectious diseases, etc., could adversely affect business results and financial condition. As a countermeasure, the company works to understand local conditions through close communication with overseas subsidiaries, utilizes advice from local experts, and implements appropriate regional diversification to avoid concentration in specific regions.

The Group manufactures and sells chemicals subject to the "Poisonous and Deleterious Substances Control Act" and is regulated under this law, so future significant revisions or tightening of regulations could affect business results. Legal regulations related to chemical substances, occupational health and safety, etc., could also affect business activities. As a countermeasure, the company strives for legal compliance through obtaining manufacturing and sales business registrations and establishing a thorough internal management system.

Wastewater discharged during the manufacturing process contains trace amounts of phosphorus, nitrogen, etc., and is subject to regulations such as the "Water Pollution Control Act" and the "Shiga Prefecture Pollution Prevention Ordinance," so the occurrence of any environmental issue could affect business results. Given the geographical characteristic that the Shiga Plant is adjacent to Lake Biwa, responding to environmental risks is particularly important. As a countermeasure, the company strives for legal compliance by enhancing environmental conservation equipment, strengthening conservation activities, and establishing a thorough internal management system.

The company holds securities for the purpose of managing surplus funds and for strategic holding purposes to maintain stable relationships with business partners, and a sharp decline in prices due to fluctuations in stock prices, exchange rates, interest rates, etc., could affect business results and financial condition. Risks recognized as anticipated include issuer credit risk, stock price fluctuation risk, exchange rate fluctuation risk, interest rate fluctuation risk, and country risk. As a countermeasure, the company gives thorough consideration to each risk and, in principle, manages investments in a manner that avoids risk to principal as much as possible.

As the company conducts business activities domestically and overseas, large-scale natural disasters such as earthquakes and typhoons, or infectious diseases such as novel viruses, causing damage to facilities or human casualties, could affect business results. There is particular concern about business continuity risk in the event that production or business sites are affected by disaster. As a countermeasure, the company aims to minimize the impact on business activities through diversification of production and business sites and support for working from home.