KAWAKAMI PAINT MFG.CO.,LTD.

If a claim arises due to a defect in product design or a discrepancy with customer requirements, it may affect business performance through the occurrence of compensation costs and damage to customer relationships. The Group is focused on preventing the occurrence of claims by improving the technical and theoretical precision of product design and strengthening cooperation with customers, but future risks cannot be completely eliminated.

The Group bears foreign exchange fluctuation risk in export transactions, and depending on trends in yen appreciation or depreciation, sales, profit levels, and financial condition may be affected. Depending on the export ratio and the composition of transaction currencies, sudden fluctuations in exchange rates may have a direct impact on business performance. The Annual Securities Report does not describe specific hedging measures.

If a large-scale natural disaster, factory accident, infectious disease pandemic, or similar event occurs, it may affect business performance and financial condition through the suspension of production activities and disruption of the supply network. The Group strives to minimize damage and prevent accidents on a regular basis, and prepares for potential losses by taking out property and casualty insurance.

If unforeseen amendments to laws and regulations, changes in the tax system, or social disruptions such as war or terrorism occur, they may adversely affect business activities and financial condition. In particular, environmental and safety regulations related to products and manufacturing processes have tended to be strengthened in recent years, increasing the risk of being forced to change the selection of raw materials used or production equipment. The Group strives to comply with relevant laws and regulations and to grasp information at an early stage, and responds appropriately.

The Group's raw materials are highly dependent on petroleum-related products, and trends in oil and naphtha prices have a significant impact on the procurement cost of paint raw materials. If the surge in raw material prices exceeds the pass-through to product prices, it may have a substantial impact on business performance through a decline in profit margins. The Annual Securities Report does not describe specific hedging measures or measures to switch to alternative raw materials.