artience Co., Ltd.

The Group holds substantial fixed assets such as manufacturing facilities, and if impairment occurs due to changes in economic conditions or business reviews, this could have a material adverse effect on the Group's financial position and business results. Significant capital expenditures undergo prior review at the Investment Management Meeting and deliberation at the Group Management Meeting and the Board of Directors, and when signs of impairment are observed, prompt measures are taken to improve profitability.

Violations of competition law including the Antimonopoly Act, inadequate responses to amendments to the PRTR system and the Foreign Exchange and Foreign Trade Act, quality fraud, changes in domestic and international laws and regulations, and litigation related to environmental issues and product liability could have a material impact on the Group's financial position and business results. As countermeasures, the Group has established the ESG Promotion Subcommittee, Compliance Subcommittee, and Risk Management Subcommittee under the Sustainability Committee, and is engaged in verifying and reviewing business processes, developing internal regulations, and providing education to related parties.

Human rights issues within the Group and its supply chain carry the risk of declining social trust, suspension of business transactions, and litigation, while corrupt acts such as bribery, breach of trust, and conflicts of interest by officers and employees carry risks of fines, criminal liability, and brand damage, which could adversely affect the Group's financial position and business results. As countermeasures, the Group has formulated and disseminated the

Due to the nature of its business in the manufacturing and processing of chemical products, the Group carries the risk of serious occupational accidents, which, if they occur, could lead to fines, criminal liability, damages claims, and a decline in social trust due to violations of the Industrial Safety and Health Act. There is also a risk of losing competitive advantage due to infringement of third-party intellectual property rights resulting in injunctions or damages claims, or due to misappropriation of the Group's own intellectual property or the circulation of counterfeit products. As countermeasures, the Group is building and operating occupational health and safety management systems at each business site, and promoting intellectual property activities in conjunction with business and development strategies.

Changes in laws, regulations and tax systems, rapid inflation, social disruption such as terrorism and war, and unforeseeable rapid changes in labor environments are among the diverse risks associated with overseas business expansion that could adversely affect the Group's financial position and business results. As countermeasures, the Group is working to promote business expansion in countries worldwide, improve the balance of business fields, build an SCM capable of flexibly responding to risks, and reduce fixed and variable costs.

As the Group operates businesses in countries around the world, rapid fluctuations in foreign exchange rates could affect the Group's financial position and business results through the yen conversion of financial statement items of overseas consolidated subsidiaries and foreign-currency-denominated transactions such as imports and exports. As countermeasures, the Group works to suppress exchange rate fluctuation risk through forward exchange contracts, shortening the collection period of foreign-currency-denominated receivables, and balancing foreign-currency-denominated receivables and payables.

Tightening of environmental laws and regulations in Japan and overseas, and delayed responses to social demands such as plastic reduction, recycling promotion, and carbon neutrality could necessitate additional investment or changes in business format, and delays in addressing CO2 emission reductions carry the risk of damaging evaluation and credibility. As countermeasures, the Group is promoting company-wide activities in line with TCFD recommendations, and is working on measures such as reducing energy use and CO2 emissions through review of manufacturing processes, strengthening chemical substance management, reducing VOCs in products, and reducing waste.

Since the main raw materials are petrochemical products, the Group is susceptible to fluctuations in crude oil and naphtha market prices, natural disasters, accidents, and policy impacts. The prolonged Russia/Ukraine conflict and disruptions to passage through the Panama and Suez Canals have manifested as procurement difficulties, price surges, and delivery delays. Because it takes time to pass on rising procurement costs to selling prices, net sales and profit have been affected, and there is also a risk of liability for damages due to failure to supply customers when raw materials become difficult to obtain. As countermeasures, the Group is formulating multifaceted purchasing strategies, securing inventory, developing new suppliers, and strengthening relationships with suppliers.

In the network connection environment among domestic and overseas sites, business partners, and cloud service providers, the risk of information leakage, loss, or damage is increasing due to malware attacks including ransomware, sophisticated cyberattacks exploiting generative AI, and misconfiguration of cloud environments, which could lead to a decline in competitiveness, brand damage, and reduced corporate value. As countermeasures, the Group has established artience-CSIRT to build a security response framework with management involvement, and is advancing redundancy of critical systems, regular backups, employee training, and the rebuilding of system BCP measures.

In the Mobility & Battery business, a slowdown in the growth of the electric vehicle (EV) market poses a risk of delaying the expansion of demand for CNT dispersions, which are used as lithium-ion battery materials for vehicles. The Display Materials business is significantly affected by fluctuations in the display and semiconductor-related markets, and also faces risks related to procurement and price surges of certain raw materials, with intensifying competition in the Chinese market being a challenge. As countermeasures, the Group is working to quickly grasp market changes, develop products in a timely manner, make phased capital investments, and strengthen the development and expanded sales of differentiated products.