C. Uyemura & Co. , Ltd.

There is a risk that the weight of surface treatment may decrease due to the development of new technologies, adoption of new methods, or emergence of new products in demand industries, leading to a decline in demand for the Group's products. Given the business characteristics centered on surface treatment chemicals, the rise of alternative technologies could directly impact sales and earnings. There is no description of specific countermeasures in the Annual Securities Report.

There is a risk that rare raw materials, which are a source of competitive advantage, could become unavailable due to production suspension resulting from strategy changes by raw material manufacturers, legal regulations, or geopolitical risks such as Russia's invasion of Ukraine. If no appropriate substitute raw materials exist, product competitiveness may decline, adversely affecting business performance. Against the backdrop of heightened geopolitical risk, procurement risk remains an ongoing challenge.

There is a possibility that the raw materials or plating films used in the Group's products could become subject to regulation due to environmental laws or voluntary corporate regulations. If sales of the applicable products are restricted, this would have a direct impact on net sales. Regulatory tightening trends continue both domestically and internationally, and there is a risk of expansion in the scope of regulated substances.

Against the backdrop of instability in the Middle East and Russia's invasion of Ukraine, market prices for non-ferrous metals such as gold, palladium, and nickel, which are main raw materials for plating chemicals, have risen. There is a risk that if raw material costs for key products remain elevated and it is difficult to pass these costs on to selling prices, product profitability will deteriorate. With geopolitical risks continuing, upward cost pressure is expected to persist for the time being.

In the installation work for machinery and equipment, there is a risk that additional costs may arise if material prices or labor unit costs rise after the conclusion of a contract, or if construction delays occur, resulting in unprofitable projects. If it is difficult to pass on such costs to the contract amount, the profitability of the relevant project could decline significantly. Managing construction projects under an inflationary environment has become an important challenge.

The Group's transactions and assets/liabilities include items denominated in foreign currencies, and fluctuations in exchange rates may adversely affect business performance. While forward exchange contracts and other measures are used to mitigate this risk, it is explicitly stated that it is impossible to eliminate all such risk. Along with global business expansion, the impact of exchange rate fluctuations remains an ongoing risk factor.

The Group, which holds important information such as technical information, customer information, and personal information, is exposed to risks of data destruction, tampering, leakage, and system failures caused by cyber attacks. While measures such as establishing information handling management regulations, introducing backup systems to counter ransomware, strengthening network security, and providing employee training have been implemented, the Group recognizes that complete defense against daily evolving and diversifying cyber attacks is difficult. If confidential information is leaked or a large-scale system failure occurs, it could have a significant impact on business performance and corporate trust.