KANSAI PAINT CO.,LTD.

The raw materials used by the Group in its production activities are affected by the global economic supply-demand balance and exchange rate fluctuations, and sharp price increases may adversely affect business performance through higher production costs. For certain specialty raw materials, procurement sources are limited, and there is a risk that alternative procurement may be difficult. As a countermeasure, the Group is examining substitutes for high-risk raw materials and consolidating them into other raw materials.

The Group has extensive business operations overseas, and fluctuations in exchange rates, interest rates, and other market rates affect its business performance and financial condition. When preparing consolidated financial statements, the financial statements of overseas group companies are translated from foreign currencies into yen, so even if there is no change in the foreign currency-denominated figures, fluctuations in exchange rates affect the consolidated financial statements after conversion into yen. The Group conducts hedging transactions for a portion of its exposure and has established a monitoring system in which derivative transaction results and balances are regularly reported to the Management Committee and the Board of Directors.

Employees' retirement benefit obligations and retirement benefit expenses are calculated based on actuarial assumptions such as the discount rate and the expected rate of return on pension assets. If these assumptions change or if there is a significant divergence from actual results, an underfunded status or other factors may arise, potentially affecting business performance and financial condition. The Group seeks to mitigate this impact by outsourcing investment support to external institutions.

Unexpected changes in laws and tax systems, political factors, war, or terrorism in the countries and regions where the Group operates may affect its business activities and performance. Since the Group has numerous locations globally, political instability or regulatory changes in specific regions could directly impact earnings. The Group is diversifying and optimizing its business locations while working to gather information on the international situation, including verification of country risk.

The Group is subject to various laws and regulations both in Japan and overseas, and violations of laws or actions contrary to societal expectations could lead to penalties, litigation, social sanctions, or loss of stakeholder trust, potentially adversely affecting business performance and financial condition. Although the Group upholds a code of conduct based on "Profit and Fairness" as the foundation of its corporate activities, a serious compliance violation by the Group or related parties could affect its credibility and performance. The Group promotes organized in-house education and awareness activities centered on the "Compliance Promotion Committee."

If the Group's response to societal challenges aimed at curbing global temperature increases due to climate change is insufficient, or if unexpected environmental pollution or similar events cause damage to third parties or a decline in social trust, this may adversely affect business performance and financial condition. The Group has expressed its support for the TCFD and has formulated scenarios in line with its guidelines, while the Sustainability Promotion Committee works to identify, assess, and consider countermeasures for risks and opportunities in each business division.

If accidents or disasters occur, including natural disasters not covered by insurance, this may adversely affect the Group's business performance and financial condition. Since the Group has numerous production sites both in Japan and overseas, there are concerns about the impact on the entire supply chain in the event of a large-scale disaster. The Group has established a "Disaster Countermeasures Committee" and is working to formulate BCP documents, conduct drills, diversify production sites, and optimize insurance coverage through external evaluation.

As dependence on IT systems increases, there are risks of business interruption and damage caused by cyberattacks or equipment/software failures, as well as leakage of confidential information including personal information. If such risks materialize, they could disrupt business activities and affect business performance and financial condition. The Group has established a cross-departmental "Information Security Committee" and is promoting measures such as education and awareness activities related to accident prevention and attack defense, as well as the introduction of monitoring systems.

Sustainable growth requires the planned acquisition and development of specialized personnel and personnel with the execution and conceptual capabilities to operate from a global perspective. If the Group fails to secure or retain such talent, this may disrupt business activities and affect business performance and financial condition. The Group is addressing this through revisions to its personnel systems, activities to enhance employee engagement, and fostering an environment where diverse talent can thrive.

The Group engages in joint activities with other companies through technical alliances, joint ventures, and other arrangements, and if misalignment arises between the parties involved in such joint activities, this may adversely affect business performance and financial condition. The Group has clarified oversight of group companies based on its business division system, and strives to promote business activities under appropriate relationships, including by dispatching officers from the Company to joint ventures.