MK SEIKO CO.,LTD.

Most of the Company's sales derive from the domestic market, which is centered on private-sector demand, and domestic economic conditions directly affect business performance. The Company seeks to diversify risk by extending its main business areas of "beauty, food, and living" across a wide range of related industries; however, a deterioration in earnings is unavoidable during economic downturns.

Surges in crude oil prices and the progression of yen depreciation put pressure on earnings through rising procurement prices for key raw materials and imported products, as well as increased fuel and transportation costs. Disruptions to the supply chain and logistics network due to geopolitical risks and business continuity risks at suppliers are also anticipated. The Company works to mitigate these impacts by reviewing suppliers, rationalizing production, reducing costs, and partially passing costs through to product prices.

Because the Company raises funds through borrowings from financial institutions, a rise in market interest rates could increase financial costs and adversely affect business performance. The Company is working to improve the efficient use of assets and enhance profitability while also striving to reduce interest-bearing debt.

The Group faces a severe competitive environment in every market in which it operates, and intensifying price competition could worsen business performance. The Company addresses this through the development of highly differentiated, high-value-added products, strengthening customer relationships through a nationwide maintenance network, and enhancing cost competitiveness through production rationalization.

For the Group, which aspires to be a development-oriented company, new product development is an absolute prerequisite for growth. However, the process of development and new product creation is complex and uncertain, and if the Group fails to deliver appealing new products that genuinely meet market needs, growth and profitability could decline. The Company addresses this by strengthening recruitment of talented personnel and continuing product development that leverages its core technologies.

If facilities such as manufacturing sites are damaged by natural disasters such as large-scale typhoons or earthquakes, or by fire accidents, operations could be disrupted, adversely affecting business performance, and substantial costs could arise for repairs or replacement. Because the risk of manufacturing sites being damaged directly affects business continuity, this is recognized as a significant operational risk.

If large-scale infectious disease outbreaks such as COVID-19 cause social disruption, business performance could be affected through supply chain stagnation and decreased demand. Infectious disease risk is recognized, alongside natural disaster risk, as an important issue for business continuity.

If system failures occur due to cyber attacks that are becoming increasingly sophisticated and elaborate year by year, business continuity could be disrupted, affecting business performance. Should information leaks or improper use of information occur, there is a risk of legal liability and loss of social credibility. The Company is working to strengthen its information management system through continuous system investment and employee education on information literacy.

The Company is required to develop new products and services utilizing IoT, AI, and big data, and to respond to the rapid changes in the IT environment; a delayed response could lead to a decline in competitiveness. The Group recognizes responding to these technology trends as an important issue and is pursuing continuous initiatives.