MANDOM CORPORATION

In the cosmetics markets of Asia, including Japan, competition is intensifying due to the entry of global companies and companies from other industries, and rapid changes in purchasing styles driven by demographic shifts and the rise of e-commerce are making it difficult to predict the business environment. Delays in responding to market conditions could directly affect operating results. The Group seeks to differentiate itself through value creation based on its corporate slogan and by addressing diversity, including LGBTQ considerations.

In capital expenditures, M&A, and new business investments aimed at realizing VISION2027, if expected cash flows are not achieved due to a deterioration in the business environment or other factors, impairment of fixed assets or goodwill recorded in connection with the acquisition of shares of ACG INTERNATIONAL SDN. BHD. may become necessary, potentially affecting operating results. In new businesses and new market entries, inherent risks such as market, legal and regulatory, financial, and human resource risks may also materialize. The Group manages these risks through pre- and post-investment evaluation processes formalized under its investment management regulations.

The overseas sales ratio in consolidated net sales for FY2025 (ended March 2025) reached 48.3%, and this ratio is expected to rise further, increasing the potential impact of significant foreign exchange fluctuations on operating results. As business expansion in Asia is a pillar of the Group's growth strategy, continuous management of foreign exchange risk across multiple currencies is essential. The Group regularly monitors exchange rate movements by month and by currency, and considers measures to mitigate the impact on its business.

In expanding business across various Asian countries, unexpected changes in laws and regulations, sudden political or economic shifts, or social disruptions such as terrorism or war could reduce purchasing appetite or restrict business activities, thereby affecting operating results. The Group also recognizes the risk that differences in business customs and communication styles across countries could develop into governance issues. The Group continuously works to collect political, economic, and regulatory information for each country on an ongoing basis, and to strengthen the head office's monitoring system for subsidiary management.

In procuring raw materials from multiple countries, global economic conditions, geopolitical risks, supply-demand balance, abnormal weather, and exchange rate fluctuations could affect operating results, and there are also risks related to stable procurement of certain scarce raw materials and supply chain disruption due to natural disasters. Such disruptions could result in an inability to fulfill product supply obligations. The Group seeks to reduce these risks by developing raw material BCP data, preparing alternative materials, considering multi-supplier and global procurement, and formulating its

The risk of leakage, loss, or damage of confidential information belonging to the Group and its business partners due to computer viruses or security breaches is increasing, and if such an event occurs, it could result in a loss of social trust, liability for damages due to breach of confidentiality agreements, and a decline in competitiveness. The increasing complexity of network environments in recent years is further heightening this risk. The Group is advancing information management measures on both the hardware and software sides of its systems.

As labor market fluidity increases across the countries in which the Group operates, competition to acquire talented personnel is intensifying and the risk of losing personnel to outside companies is increasing, potentially leading to a decline in business execution capability. Maintaining a talent base to support business expansion in Asian countries in particular remains a challenge. The Group works to acquire and retain talented personnel through the development of a competitive compensation structure and the creation of a fulfilling work environment.

The worsening of environmental issues such as climate change and ocean plastic pollution is recognized as a factor affecting the continuity of future business activities, and delays in responding to stricter regulations or societal expectations could become a business risk. Insufficient efforts toward environmental consideration could also lead to a decline in brand value and competitiveness. The Group has implemented measures such as obtaining ISO14001 certification, fully switching to alternatives to microplastic beads (completed at the end of 2019), and gradually transitioning to biomass plastics.

With the spread of social media, the risk of declining brand value and corporate trust due to the spread of critical evaluations and opinions regarding the Company's activities and communications is increasing. Negative impacts on the corporate brand and product brands could spill over into operating results. The Group addresses this through the establishment and adherence to a social media policy, the development of a monitoring system for the web and social media, and prompt disclosure of information when risks materialize.

Damage caused by unforeseen accidents, natural disasters, infectious diseases, and other events cannot be completely eliminated and could adversely affect operating results. Business continuity and early recovery in the event of a large-scale disaster are challenges to be addressed. The Group has established safety and health management through ISO45001 certification, strengthened business continuity measures for large-scale disasters, and set up a response system including the establishment of a task force and response based on a crisis management manual in the event of an infectious disease outbreak.