Daido Steel Co., Ltd.

There is a risk that sales to major demand industries will decline significantly due to worsening economic conditions in Japan and overseas, and due to production cuts and accelerated electrification by automakers. In addition, there are concerns over impairment of business assets caused by changes in demand structure, as well as the materialization of risks from external shocks such as wars, infectious diseases, and natural disasters. In response, the company conducts economic environment monitoring by its corporate planning department, deliberates on investment validity through technology investment review committees, and strengthens new product businesses in anticipation of changes in the external environment.

There is a risk that price fluctuations in steel scrap, ferroalloys, rare earths, electricity, LNG, etc., and supply concerns stemming from geopolitical risks, will push up production costs and have a material impact on business performance. Power usage restrictions caused by supply-demand imbalances may also hinder production activities. In response, the company is implementing a raw material surcharge system for product pricing, diversifying procurement sources, and promoting contracts with flexible volume terms.

Large-scale natural disasters such as a Nankai Trough megaquake could cause severe damage to production facilities and infrastructure, making business continuity difficult. The concentrated location of specialty steel manufacturing sites could exacerbate the extent of damage. In response, the company is proceeding with seismic reinforcement of factory buildings, measures to prevent overhead crane falls, and consideration and implementation of capital investments aimed at production recovery.

Because large-scale major equipment related to specialty steel is operated under harsh conditions, there is a risk of serious equipment accidents or industrial accidents occurring. In the event of an accident, in addition to deteriorating business performance due to production stoppages, there is also a risk of loss of social credibility. In response, the company continues voluntary risk identification and fundamental equipment improvements at manufacturing sites, thorough hazard prediction meetings, and internal dissemination of other companies' improvement examples through safety training sessions.

There is a risk that the strengthening and tightening of laws and regulations concerning environmental protection will restrict business activities and increase compliance costs. Concerns include additional countermeasure costs arising from the detection of fluorine and other substances in steel slag products and soil at the Shibukawa Plant, as well as increasing costs for CO2 reduction measures and rising costs of procuring renewable energy. In response, the company is monitoring compliance with laws and regulations, continuing discussions with national and local governments, and implementing energy conservation and cost improvement measures.

There is a risk that securing and developing the necessary human resources will become difficult due to the declining birthrate and aging population. In addition, insufficient measures to prevent harassment and address diversity could lead to human rights violations and reduced employee retention due to lower engagement. In response, the company is expanding year-round and career-based recruitment, enhancing tiered and specialized education programs, and developing a human rights due diligence framework.

There is a risk of business disruption from cyberattacks such as ransomware, or information leakage from unauthorized access. There are also concerns about a decline in competitiveness due to delayed response to digital technology innovation, and system troubles caused by the black-boxing of core systems. In response, the company is strengthening its CSIRT framework, confirming backup and recovery of key systems, and formulating a medium- to long-term policy for legacy system upgrades.

There is a risk that large-scale product liability claims or recalls could result in significant costs and a decline in social credibility. If fraudulent inspection data is discovered, this could also adversely affect business performance and financial condition through customer compensation and decreased sales. In response, the company is pursuing quality stabilization, building a rigorous inspection and warranty management system, establishing a dedicated quality assurance department, and taking out liability insurance, among other measures.

There is a risk that turmoil in the political and economic situation overseas, unexpected changes in laws and regulations, or social unrest could disrupt overseas business activities. Amid heightened geopolitical risk, there is also a possibility of operational suspensions or asset impairment at overseas sites. In response, the company is conducting timely collection of local information and sharing it within the group, strengthening management of expatriate staff, and providing support for overseas subsidiaries through coordination among internal departments.

If fraudulent acts or improper accounting practices occur at affiliated companies, there is a risk of a material impact on the financial condition and social credibility of the entire group. Insufficient management systems at group companies could make early detection and correction of problems difficult. In response, the company is conducting audits by the head office audit department, holding meetings and training for group company auditors, and promoting awareness activities within the group using an e-learning system.