BRIDGESTONE CORPORATION

The Group's revenue is geographically diversified, with the Americas accounting for 51%, Europe, Middle East & Africa 20%, Asia, Oceania, India & China 15%, and Japan 14%. Fluctuations in interest rates, foreign exchange rates, and stock markets, as well as economic deterioration in each region, directly affect business performance. Due to the close relationship with the automotive industry, a slowdown in automotive demand, fuel price fluctuations, and tariff measures on tires and raw materials also pose risks of depressing demand. In addition, large tires for mining and construction vehicles and hydraulic hoses are affected by the business conditions of the resource and construction industries, and demand for winter tires may decline due to reduced snowfall.

The Group conducts multi-currency transactions globally and seeks to minimize the impact of short-term fluctuations by utilizing forward exchange contracts for foreign currency-denominated operating receivables and payables and currency swaps for foreign currency-denominated loans and borrowings; however, complete hedging is difficult. Translation of overseas revenue, expenses, assets, and liabilities into yen is also affected by exchange rate fluctuations, with yen appreciation generally having an adverse effect on business performance and yen depreciation generally having a favorable effect. Given the Group's high proportion of global sales, the impact of exchange rate fluctuations on business performance and financial position is significant.

There is a risk that stable procurement of natural rubber will become difficult due to disasters, political turmoil, or poor harvests in Southeast Asian countries, which are major production areas for natural rubber. Major raw materials other than natural rubber may also experience tight supply-demand conditions or supply capacity constraints, and dependence on specific suppliers within and outside the Group means that a production halt at such a supplier could significantly and adversely affect production. Furthermore, if sharp increases in raw material prices due to tight supply-demand conditions or speculative trading cannot be absorbed through productivity improvements or price pass-through, this could adversely affect business performance and financial position.

In addition to price competition with numerous competitors, rising costs of raw materials, energy, and labor are pushing up production costs, creating a challenging business environment. The Group is responding through proposing new product value and improving productivity and expense management, but if these efforts cannot absorb the decline in profit, business performance may be adversely affected. In addition, under a strategy centered on technological innovation, the Group is actively bringing products equipped with new technologies to market; however, if these do not translate into sufficient business results amid intense competition, the substantial investment in technology development could adversely affect business performance and financial position.

As the Group's core products, such as tires, are related to human life, if a product defect or large-scale recall occurs due to unforeseeable causes, costs for collection, damage to social credibility, customer compensation, litigation costs, and damages could arise, adversely affecting business performance and financial position. In particular, product liability lawsuits and class action lawsuits in the United States could have a more serious adverse impact. The Group strives to enhance its quality assurance system and build early warning systems, but it is difficult to reduce this risk to zero.

The Group is subject to laws and regulations in various countries, including investment, trade, foreign exchange control, transfer pricing taxation, antitrust, environmental protection, and personal information protection, and the enactment and introduction of new regulations, such as tire performance labeling systems and chemical substance regulations, may constrain business activities and increase costs. In addition, the Group's business activities in Japan and overseas may become subject to litigation or investigations by authorities in various countries, and if significant litigation is filed or an investigation by authorities is initiated, this could adversely affect business performance and financial position.

Various risks, including natural disasters such as earthquakes and storm/flood damage, wars, terrorism, riots, infectious diseases, and energy supply disruptions, may threaten the continuity of global business activities. A production halt at a site that concentrates production of specific products or raw materials could lead to loss of customer trust due to failure to fulfill supply obligations and liability for damages. The Group is systematically promoting seismic reinforcement work and formulating and continuously improving its business continuity plan (BCP), but if an actual event occurs, it could result in business interruption, facility damage, and substantial restoration costs.

As dependence on information systems in business activities increases, if a system failure occurs due to external or human factors such as disasters or cyberattacks, this could result in the suspension of important business operations and services, or the theft or leakage of confidential and personal information. The Group strives to protect systems and data, including through enhanced security, but in the event of an incident, this could lead to a decline in brand image and social credibility, and adversely affect business performance and financial position.

The Group recognizes both transition risks (such as stricter regulations and market changes) associated with the shift toward a decarbonized society and a nature-positive society, and physical risks arising from climate change and natural capital loss (such as extreme weather and ecosystem degradation). These risks may affect a wide range of business areas, including raw material procurement, production sites, and product demand. At the same time, the Group views changes in societal and customer needs as new growth opportunities and is working to integrate them into its business strategy.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate, and if significant changes occur in these assumptions due to fluctuations in the fair value of pension plan assets or changes in interest rates, retirement benefit expenses and obligations may increase, adversely affecting business performance and financial position. For the Group, which employs a large number of employees globally, changes in the interest rate environment directly affect the scale of retirement benefit obligations.