Mitsuboshi Belting Ltd.

There is a risk that demand for products such as power transmission belts may decline due to reduced demand or capital investment in industries related to automobiles, general industry, agricultural machinery, and information equipment. Approximately 71% of the Company's main products are produced overseas, resulting in a structure directly affected by overseas economic conditions. Although measures such as reviewing the global production system are being taken in response to sudden economic shocks caused by war, terrorism, disasters, infectious diseases, and the like, it is not always possible to avoid all such risks.

If an infectious disease that spreads globally, such as the novel coronavirus (COVID-19), becomes widespread, the Company's financial position and business results may be affected by the resulting stagnation of socioeconomic activity. As countermeasures, the Company is working on reviewing work systems, promoting telework, standardizing infection prevention manuals through the Risk Management Committee, and formulating a BCP. The Company also aims to strengthen information exchange systems with business partners to minimize business risk.

Sales to the automotive industry account for approximately 47% of the Group's sales, and business results may be affected by factors beyond the Company's control, such as a downturn in the automotive industry, poor performance of customer companies, changes in parts procurement policies, and large-scale natural disasters. The Company also recognizes the risk that demand for belts for internal combustion engines may decline over the medium to long term due to the progress of electrification, and is proceeding with the development of electrification-compatible products. Although the Company is not affiliated with any specific automaker group, its business structure is significantly influenced by trends in the industry as a whole.

If risks such as cyberattacks or information leaks materialize, they could have a material impact on business continuity. As countermeasures, the Company has formulated an information security policy and established a company-wide "Information Security Committee" to identify and analyze risks and consider and implement countermeasures. In addition to system-level defensive measures, the Company strives to minimize impact through employee training, management of outsourcing partners, and the establishment of a system for rapid response in the event of an incident.

For major raw materials such as rubber, canvas, fiber, and resin, market prices may rise substantially during periods of surging resource prices, including crude oil, potentially leading to a significant increase in manufacturing costs. In addition, changes in import/export regulations could hinder the procurement of raw materials from overseas or the supply to overseas sites. Although measures such as establishing a multi-supplier procurement system and requesting business partners to formulate BCPs are being implemented through the Risk Management Committee, a significant rise in procurement costs may affect business performance.

In production and sales activities in Japan, Asia, the United States, Europe, and other regions, export transactions and foreign-currency-denominated assets (such as foreign currency deposits, accounts receivable, and loans) may be affected by exchange rate fluctuations. There is also a translation risk in the yen conversion process when preparing consolidated financial statements, whereby the value after conversion into yen may be affected even without any change in the value of the local currency itself. Although measures are in place to mitigate exchange rate risk, some short-term impacts cannot be fully addressed, and this may affect business performance and asset values.

In each country where the Company operates, it is subject to a wide range of legal regulations, including import/export controls, tariffs, business investment restrictions, antitrust laws, patents, taxation, and environmental laws and regulations. If the Company is unable to respond flexibly to these business environments, it may face increased costs or be forced to withdraw from business in the countries where it has expanded overseas. Delays in responding to regulatory changes are recognized as a risk that could directly affect business performance.

The Company has taken out insurance to minimize losses in the event of defective products or customer complaints; however, in cases not covered by insurance, business performance and financial condition may be affected. Although the Company maintains a rigorous quality control system based on customer requirement standards and its own Group standards, the risk of quality problems occurring cannot be completely eliminated.

If a production site suffers catastrophic damage due to a natural disaster such as an earthquake or flood, it may become difficult to supply products to customers, potentially resulting in decreased sales and significant temporary costs associated with restoration. Although the Company is working to strengthen its domestic and overseas production systems and enhance its response framework through the Risk Management Committee, business performance may be affected by temporary operational suspensions, delivery delays, and substantial restoration costs. In addition, even if the Company's own production sites are unaffected, there is also a risk that production stoppages or output reductions caused by disasters affecting major customers or the supply chain could lead to a decline in sales.