COTA CO., LTD.

If the company's unique "retail sales strategy centered on toiletries sold through salons" and "consulting and sales centered on the Junpoten System (Consulting & Sales)" cannot be thoroughly implemented and expanded for some reason, this may lead to a decline in the performance of beauty salons and distributors, and may affect the company's business performance. There is a risk that changes in the competitive environment of the beauty industry and changes in customer needs may impair the effectiveness of the business model. The company is working on the continuous expansion and strengthening of its unique business model.

If the company is slow to respond to changes in industry trends and the competitive environment, or to changes in customer needs, and its product development technical capability declines, this may disrupt the supply system for high-value-added products and affect the company's business performance. The company operates its R&D division with a structure comprising product development, basic research, regulatory affairs, and intellectual property, and strives to improve its technical capabilities. If the response is insufficient, there is a risk that the company will lose its competitive advantage as a manufacturer.

As a company engaged in the manufacturing and sale of hair cosmetics and quasi-drugs, the company may face restrictions on its business activities due to the establishment or amendment of related laws and regulations. In addition, if regulations related to the global environment are rapidly strengthened, or if the company's response is delayed, there is a risk of restrictions on business activities or a decline in credibility. The company has established a regulatory affairs and intellectual property division and is working to develop a compliance framework.

If intellectual property rights related to the company's products are infringed upon by a third party, or if the company infringes upon the intellectual property rights of a third party, this may disrupt the system for supplying products that are safe, secure, and of high quality, and may affect business performance. The company has established a specialized intellectual property function within its R&D division and strives to protect its rights.

If it becomes difficult to procure raw materials and secure inventory in a stable manner, this may disrupt the stable supply of products and affect the company's business performance. A shortage of manufacturing sites and a decline in product supply capacity are also recognized as similar risk factors, and consideration of manufacturing sites, among other things, remains an ongoing issue. The company is working to thoroughly manage quality and establish a stable procurement system.

If the company's products, which are sold exclusively through beauty salons, come to be sold in large quantities via the internet or retail stores, this may lead to a decline in product brand strength and credibility as well as a decline in the performance of beauty salons, and may affect the company's business performance. The company has established an Unauthorized Sales Countermeasures Committee and a dedicated department, and takes firm measures such as monitoring and investigation, as well as consulting with administrative authorities in cases where a violation of laws and regulations is suspected. However, it is difficult to completely eliminate unauthorized sales, and continuous monitoring remains necessary.

If the company is unable to secure the human resources it needs due to changes in the recruitment environment, or if sharing of the "COTA Vision" does not deepen and the company is unable to develop excellent human resources, this may reduce the company's business execution capability and affect its business performance. The company is working to secure human resources through new graduate and experienced hire recruitment, and to develop human resources through in-house training conducted by a dedicated education department. Intensifying competition for recruitment and insufficient penetration of the corporate culture are recognized as risk factors.

If sharing of the "COTA Vision" does not deepen, the likelihood of unforeseen events such as misconduct or scandals by officers or employees increases, posing a risk to the company's business performance and corporate credibility. The company has established "Corporate Governance Guidelines" and strives to ensure the soundness and transparency of its management. Maintaining the effectiveness of the governance framework is positioned as an ongoing issue.

If misunderstandings arise with investors for some reason, resulting in insufficient communication, this may lead to a decline in confidence in the company and affect its business performance. The company strives to build trusting relationships with stakeholders and engage in responsible dialogue through the "COTA Vision." The quality and quantity of IR activities are recognized as a risk directly linked to corporate value assessment.

If regulations related to the global environment are rapidly strengthened or newly established, or if the company's response is delayed, this may lead to restrictions on business activities or a decline in social credibility, and may affect the company's business performance. The company is working company-wide to reduce its environmental impact and protect the environment, but there is a risk that the speed of regulatory change may outpace its response. Delays in environmental response could also spill over into reputational risk.