HOKKAN HOLDINGS LIMITED

If domestic or overseas laws, regulations, or government permits and licenses are violated, there is a risk of administrative sanctions by regulatory authorities, litigation, business suspension, and damage to corporate brand value and social credibility. The establishment or tightening of public regulations, or unforeseen application or misinterpretation thereof, could unintentionally result in violations of regulations. As a countermeasure, the Company has established a "Compliance Committee" and formulated the "Hokkan Holdings Code of Conduct for Officers and Employees" to prevent legal violations.

Physical risks from the rapid increase in natural disasters and transition risks from the introduction of carbon pricing have been identified as urgent issues. In February 2022, the Company endorsed the recommendations of the TCFD and has identified and disclosed material risks and opportunities; however, if unexpected or unforeseen climate change risks materialize, they could affect business results and other outcomes. The Company is advancing initiatives such as formulating and strengthening business continuity plans, monitoring policies and regulations, and promoting renewable energy.

There is a risk of forced suspension of operations due to natural disasters such as earthquakes and typhoons, or the spread of infectious diseases such as viruses. If damage on a scale exceeding expectations causes the collapse or destruction of buildings and equipment, or if production is interrupted due to infectious disease, this could affect business results through delays in product supply to customers and other impacts. The Company is implementing measures such as risk diversification, ensuring employee safety, and preventing disasters and infectious diseases before they occur.

In business operations in Southeast Asia, the occurrence of terrorism, political instability, economic fluctuations, exchange rate fluctuations, or unforeseen changes to laws, regulations, or tax systems could affect business results and other outcomes. The Company has established an overseas crisis management manual to prepare for emergencies, but it is difficult to completely eliminate geopolitical risks or risks arising from institutional changes.

Purchased materials such as PET resin made from crude oil and steel materials, logistics costs, and energy costs account for a large proportion of costs. If these costs rise and it becomes difficult to pass them on to product prices, there is a risk that profitability will decline significantly. The Company is continuously working to reduce resource usage through measures such as lightweighting containers and promoting renewable energy, while also striving to pass on costs; however, the impact on performance is significant when cost pass-through is not possible.

In the core Containers Business, price competition with competitors and the expansion of in-house production by business partners continue. If price competition for existing products intensifies beyond expectations, this could have a material effect on business results and other outcomes. The Company seeks to differentiate itself through continuous research and development of new products with reduced environmental impact and added convenience features, but the risk of a deteriorating competitive environment remains an ongoing challenge.

The decline in the working population due to the falling birthrate and aging population creates a risk that it will become difficult to recruit and retain specialized engineers. If it becomes difficult to secure and retain personnel, maintaining the technological capabilities that underpin the core of the business may become difficult, which could affect business results and other outcomes. The Company is establishing appropriate personnel and training systems and making active investments to secure personnel who can contribute to value creation.

If large-scale claims or product liability compensation arise due to product defects, this could reduce profits through the burden of significant costs and material damage to corporate reputation, thereby affecting business results and other outcomes. The Company has product liability insurance, but there is no guarantee that it will sufficiently cover the final amount of compensation. The Company manufactures products in accordance with globally recognized quality control standards and strives to ensure quality.

If information is leaked due to cyberattacks, unauthorized access, or intrusion by computer viruses, or if important data is destroyed or falsified, or systems are shut down, this could affect business results and other outcomes. The Company is thoroughly implementing computer virus countermeasures and information management, but it is difficult to guarantee complete protection against increasingly sophisticated cyber threats.

If a decline in profitability or other factors is recognized with respect to owned fixed assets due to future business performance trends or declines in market value, an impairment loss will need to be recognized, which could affect business results and other outcomes. As a group operating numerous businesses, the scale of owned fixed assets is large, creating a structure in which impairment risk tends to materialize during periods of deteriorating business performance.