Furukawa Electric Co., Ltd.

There is a risk that if the business composition fails to respond to changes in economic trends and market conditions, profitability and growth may stagnate or deteriorate. If market conditions worsen after an M&A transaction or external partnership, returns may fall short of initially expected levels. In response, the company promotes regular review and reassessment of the business portfolio at Management Meetings and the Board of Directors, clarification of objectives and prior risk assessment at the time of acquisitions/partnerships, and early recovery of invested capital.

There is a risk that insufficient collaboration between theme exploration/technology development for new businesses and sales functions may create a gap with market needs, delaying the creation of new businesses. Continued dependence on existing businesses may result in the loss of medium- to long-term growth opportunities. In response, the company has built a structure that incorporates sales functions into the new business creation team, integrating theme exploration, technology development, and market validation.

There are concerns about rising manufacturing and procurement costs due to increased greenhouse gas emission reduction targets in various countries and higher carbon tax burdens, exclusion from supply chains and product/service markets due to insufficient climate change countermeasures, and plant operation suspensions due to flood and drought risks. In response, the company is implementing reductions based on the revised Environmental Vision 2050 and Environmental Targets 2030, formulating and disclosing a climate transition plan in line with TCFD recommendations, and promoting conversion to renewable energy.

There is a risk that a shortage of specialized personnel required for new business creation and business portfolio management, qualitative and quantitative talent shortages due to insufficient talent acquisition, retention, development, and diversity, and declining employee engagement may impede the company's sustainable growth. In response, the company is implementing measures to strengthen human resources and organizational execution capabilities based on the "Furukawa Electric Group People Vision," promoting diversity, and developing a job-based human resource management infrastructure.

There is a risk that supply chain disruptions due to international conflicts and economic sanctions, review of the global division of labor structure due to changes in tariff and economic security policies, and declining profitability due to economic downturn or intensified competition may affect the entire business. In response, the company is promoting stable procurement through diversified supply chains, appropriate inventory management, and long-term contracts, risk analysis and response planning anticipating political changes, and production of high value-added products along with optimization of the product portfolio.

There is a risk of violations of laws and regulations in Japan and overseas, extraterritorial application risk of export control regulations, improper accounting at overseas locations, and increased tax costs due to transfer pricing taxation, among other issues. Review by the Brazilian competition authority regarding an automotive parts cartel and class action lawsuits in the United States are ongoing, and there is a possibility of sanctions from regulatory authorities, damage claims, and reputational deterioration. In response, the company is building a compliance framework, conducting regular self-inspections and training, strengthening security trade control, and operating an internal reporting system.

There are risks related to fluctuations in yen conversion of import/export transactions and foreign currency-denominated receivables and payables; a 1 yen appreciation against the US dollar is expected to result in an annual profit decrease of approximately ¥500 million. In addition, interest-bearing debt at the end of the consolidated fiscal year stood at ¥316,700 million, and there is a risk of increased funding costs due to rising interest rates. In response, the company is utilizing forward foreign exchange contracts, balancing foreign currency-denominated transaction amounts, utilizing long-term fixed-rate financing, and improving fund efficiency through a cash management system.

There are concerns about information leaks, unauthorized use, and system failures due to external factors such as cyberattacks and unauthorized access, as well as human factors, and increased security risk due to the use of legacy systems. In response, the company is strengthening security governance across the group based on its basic information security policy, enhancing network security from a zero-trust perspective, and undertaking medium-term efforts to update legacy systems.

There is a risk that rapid price fluctuations in non-ferrous metals such as copper and aluminum, synthetic resins such as polyethylene, and fuels such as heavy oil, LPG, and LNG, driven by supply-demand changes, speculative trading, and global conditions, may push up manufacturing costs. In response, the company is passing on costs to product sales prices reflecting market conditions, hedging using futures transactions, promoting energy conservation and cost reduction in production activities, and diversifying price fluctuation risk through multiple sourcing.

There is a risk of unexpected cost increases due to design changes during construction, soaring construction material and labor costs, additional costs due to marine conditions and weather impacts, repair costs, damage claims and construction delays associated with major defects or accidents, and insufficient execution capability of consortium partners. In response, the company is conducting project-specific risk analysis and concluding contracts under reasonable terms, appropriately monitoring progress and profitability during the execution phase, and hedging risk through construction insurance and other coverage.