Riken Vitamin Co., Ltd.

In the Domestic Food Business, the market is shrinking due to population decline and the falling birthrate combined with an aging population, and competition is intensifying due to competitors' introduction of new products and sales promotion activities. If unexpected fluctuations occur in economic conditions or industry demand trends, this may adversely affect business performance and financial position. As countermeasures, the Company is promoting product development that responds to market needs, diversification into improving agents, healthcare, chemical products, and Overseas Business, and differentiation through the development and expanded sales of high-value-added products.

Various safety risks exist in the food industry, including infectious diseases such as avian influenza, foot-and-mouth disease, and norovirus, as well as radioactive contamination. If circumstances arise that exceed the scope of the Group's efforts, this could result in product recalls and substantial product liability compensation, adversely affecting business performance and financial position. As countermeasures, the Company strives to strengthen its quality assurance system through the introduction of international quality control systems such as ISO, HACCP, and FSSC, and the establishment of an independent inspection system and traceability system.

The Company procures raw materials, primarily natural substances, broadly from both Japan and overseas, but rapid changes in market conditions, changes in weather, supply-demand balance, and social conditions, as well as natural disasters, may make it difficult to secure a stable price, quality, and volume of procurement. Instability in procurement adversely affects business performance and financial position through increased manufacturing costs and disruption to production plans. As countermeasures, the Company seeks to reduce risk by securing multiple safe and stable supply sources to avoid concentration on specific suppliers, and by maintaining planned inventory levels.

As the Company conducts business globally, fluctuations in foreign exchange rates affect product sales denominated in foreign currencies and raw material procurement as a transaction risk. There is also translation risk when converting the financial statements of overseas subsidiaries into Japanese yen, and sudden exchange rate fluctuations may affect business performance and financial condition. As a countermeasure, the Company seeks to reduce risk through foreign exchange forward contracts and other means, but may not be able to fully address sudden fluctuations.

If the Company's intellectual property rights are infringed by a third party, or if the Company unintentionally infringes on a third party's intellectual property rights, this may adversely affect business performance and financial position through a decline in brand value and the incurrence of litigation and compensation costs. As countermeasures, the Legal Department and related departments work together to promote the acquisition of intellectual property rights and the accumulation of know-how, while also promoting prevention and warning against infringement by third parties, and product development and sales activities that respect third-party rights.

If information systems become unusable for a certain period due to unforeseen circumstances such as large-scale disasters, equipment failures, unauthorized access, or virus intrusion, operations such as development, production, sales, and logistics may be halted, adversely affecting business performance and financial position. As countermeasures, the Company has established an appropriate management system for information systems and implements security measures to prevent the loss, misuse, or falsification of important information.

If large-scale natural disasters such as earthquakes or wind and flood damage occur at multiple manufacturing sites in Japan and overseas, significant damage to manufacturing facilities may cause operational shutdowns, reduced manufacturing capacity, decreased sales, and facility repair costs. There is also a risk that securing personnel may become difficult due to the spread of infectious diseases such as new strains of influenza. As countermeasures, the Company has formulated a Business Continuity Plan (BCP), and the Risk Management Committee has implemented a safety confirmation system, seismic reinforcement of facilities, enhanced stockpiling of supplies, and employee training.

The Company is subject to a variety of legal regulations both in Japan and overseas, including the Food Sanitation Act, the JAS Act, the Pharmaceuticals and Medical Devices Act, and environmental recycling-related laws and regulations, and changes to these or the introduction of unforeseen new regulations may adversely affect business performance and financial position. This includes the risk of changes to relevant laws and regulations in each country where the Company operates. As countermeasures, each responsible department places the highest priority on compliance and its strengthening, focusing on enhancing information-gathering capabilities and responding to legal regulations.

A slowdown in the global economy due to factors such as US-China trade friction and the spread of infectious diseases, various potential risks related to language, geography, legal systems, tax systems, and religion, intensifying competition with global competitors, sudden changes in regulations by foreign governments or international organizations, and credit risk including country risk may affect overseas business operations and business results. As countermeasures, the Company promotes information gathering before risks materialize, raising risk management awareness, activities and risk hedging based on internal regulations, and swift response through the establishment of a crisis management system.