KOSE Holdings Corporation

There is a risk that intensified price competition with competitors and erosion of brand value could lead to a decline in market share. New entrants from different industries and competitors' expansion into new channels also pose threats. As countermeasures, the Company implements product development and marketing that take market needs and customer orientation into account, and works to maintain and enhance competitive advantage through differentiation based on functional and emotional added value.

If a divergence from consumer needs occurs, there is a risk of decline in brand value. In particular, responding to changes in preferences in overseas markets and to new customer experiences enabled through digital utilization is required. The Company strives to appropriately obtain consumer information and pursue new customer experiences through regular market research (both domestic and overseas) and active use of digital technology.

Delays in research and development pose a risk of declining market competitiveness of brands and diminished innovation. The Company promotes basic and applied research using data science at its Advanced Research Laboratories, and cutting-edge dermatological research at its Lyon, France satellite office, while also actively pursuing open innovation utilizing external resources.

There are concerns that rising raw material prices could reduce profit margins, and that supply disruptions of raw materials could hinder stable product supply, affecting net sales and profit margins, as well as damaging the Company's credibility. The Company aims for timely procurement at appropriate prices through promoting global procurement, including overseas, and maintaining good relationships with suppliers, while also establishing the "Cost and Inventory Disposal Reduction Promotion Committee" to work on maintaining appropriate costs and securing inventory.

Changes in laws and regulations both domestically and overseas pose a risk of affecting demand fluctuations and product exports. In particular, changes in cosmetics-related regulations in overseas markets may require review of raw material specifications and securing of alternative raw materials. The Company continuously gathers information on business-related laws and regulations and utilizes domestic and international information networks to respond to regulatory changes in product development.

Sudden changes in the political situation in overseas countries and regions where the Company operates may impact sales through demand fluctuations and pose safety risks to employees. In particular, mainland China continues to experience real estate market adjustments and sluggish domestic demand, while the outlook for tariff policy in the United States remains uncertain. The Company strengthens cooperation with overseas subsidiaries and business partners, and works to gather timely information and take necessary measures regarding the economic, political, and social conditions in each country and region.

There is a risk that business activities such as production, logistics, and sales could stagnate or be interrupted due to natural disasters such as earthquakes, volcanic eruptions, and tsunamis, or the spread of highly virulent infectious diseases. In the event of a disaster, the Company promptly establishes a countermeasures headquarters and, based on its crisis management regulations, disaster prevention manual, and BCP (Business Continuity Plan), works to confirm workplace safety, correct deficiencies, and secure alternative means.

If it becomes difficult to secure talented personnel, there is a risk that this could lead to a decline in corporate competitiveness. The Company promotes the creation of an environment in which diverse personnel can thrive, and works to acquire talented personnel through job-specific recruitment to secure specialized talent and through revisions to the treatment system for Beauty Consultant positions.

If a serious product accident occurs, there is a risk of losing customer trust and diminishing corporate brand value. The Company has established a "Quality Policy," defining a quality policy message and five activity declarations, making the creation of safe and reliable products the foundation of its daily activities.

If confidential information or personal information is leaked, this could result in loss of trust and risk of damages claims. In addition to raising compliance awareness through the "Compliance Promotion Committee," establishing the "Personal Information Management Committee," and building a management structure through strengthened information security, the Company also thoroughly promotes risk sharing and prevention through regular in-house training.