ASAHI RUBBER INC.

Since the Company's products are incorporated as rubber components into customers' final products, there is a risk that order volumes may fall short of plans due to customers' sales strategies or market trends. In particular, a decline in orders for Rubber Products for RFID Tags in the telecommunications business has become apparent, which is likely to lead to a decrease in net sales and profit. As countermeasures, the Company is building a flexible production staffing system across plants and exploring entry into new markets through enhanced added value, though the likelihood of occurrence is recognized as having somewhat increased.

Prices of rubber raw materials and additives are subject to fluctuations in global market conditions, and a sharp price surge could have a material impact on business performance through increased cost of sales. The risk of price surges and procurement difficulties for petroleum-derived materials against the backdrop of the situation in Iran remains uncertain, making quantitative assessment difficult. As countermeasures, the Company continues to promote cost improvement activities, negotiate price pass-through with customers, investigate alternative materials, and develop new suppliers.

Due to the declining number of students resulting from the falling birthrate and increasing competition among recruiting companies, there is a risk that the Company may fail to secure the planned number of hires, which could have a significant impact on the sustainable continuation of business. Both likelihood and impact are judged to have somewhat increased compared to the previous fiscal year, and this is positioned as a sustainability risk. As countermeasures, the Company is expanding internships and factory tours, utilizing external recruitment agency services, and strengthening information dissemination via social media.

In Japan, wages continue to trend upward due to the declining working population and rising prices, while at the local subsidiary in Dongguan, Guangdong Province, China, minimum wage increases are also proceeding, heightening the impact on profits. Both likelihood and impact are judged to have somewhat increased compared to the previous fiscal year, posing a risk that could also affect recruitment and employee retention. As countermeasures, the Company is implementing productivity improvement activities and enhancing work efficiency through digitalization, curbing overtime work, and raising base salaries through personnel evaluations.

New product development through deepening and combining proprietary technologies is essential for medium-term business expansion; however, delays in progress on high-difficulty themes or plan revisions in light of competitors' technology trends could lead to future order declines and reduced net sales. Both likelihood and impact are judged to remain at a high level. As countermeasures, the Company is clarifying development schedules and concentrating human resources by turning important projects into formal project structures, and working to improve the future order-win rate through factor analysis of lost orders.

If a defect occurs in delivered products, there is a risk of increased cost of sales due to returns and replacement shipments, as well as a risk of reduced future orders due to loss of customer trust. If a defective product reaches the market as part of a final product and product liability under the Product Liability Act arises, this could have a material impact on business performance. As countermeasures, the Company is strengthening internal sharing of customer requirements and working to eliminate the root causes of defects and prevent external shipment of defective products through QC circle activities, an improvement proposal system, and QC patrols.

All domestic production plants are concentrated in the southern part of Fukushima Prefecture, accounting for approximately 90% of the Group's production output, creating a risk that a major earthquake of seismic intensity 6 or higher could damage production equipment and injure employees, impairing continuous production activities. Building seismic resistance is designed only for seismic intensity 5 or below, resulting in high geographic concentration risk. As countermeasures, the Company appropriately reviews its BCP based on its BCM policy, has established an emergency response system, and conducts regular drills of its safety confirmation system.

As the pace of changes in the market environment and diversification of customer requirements accelerates, delays in implementing development plans could lead to a shortage of successors for top management and key executives, as well as the loss of talented personnel, potentially reducing corporate competitiveness and hindering medium- to long-term growth. The likelihood of occurrence is judged to have somewhat increased compared to the previous fiscal year, and this is positioned as a sustainability risk. As countermeasures, the Company is digitizing employee skills and career data, introducing training for managers and external training programs, and providing OJT and opportunities to acquire external knowledge.

When expanding new or existing products into new markets, insufficient investigation of relevant laws and regulations, intellectual property, and market-specific business customs could result in unexpected economic losses or lost opportunities. Both likelihood and impact are judged to be unchanged compared to the previous fiscal year. As countermeasures, the Company is building a multifaceted information-gathering network utilizing external organizations and conducting regular risk analysis.

In the manufacturing of rubber products at four domestic and one overseas site, there is a risk that rising electricity and water costs associated with the operation of clean rooms, hydraulic presses, water treatment processes, and other facilities could push up manufacturing costs. The impact of rising energy costs due to the situation in Iran remains uncertain, making quantitative assessment difficult. As countermeasures, the Company installed solar panels at the Shirakawa Plant in April 2025 and began power generation, in addition to pursuing energy-saving improvement activities and enhancing energy efficiency per unit of production, for which it received the Fukushima Zero Carbon Award 2025 Encouragement Prize.