Sanwa Holdings Corporation

If quality defects occur in any of the manufacturing, construction, design, sales, or inspection processes, product reliability and brand value may be impaired, potentially adversely affecting business performance and financial condition. In particular, some fire shutters installed before October 2004 lack safety devices, creating a latent risk of accidents due to aging deterioration. As countermeasures, the Company is promoting the development of traceability systems, construction training and skill ranking, encouragement of fire prevention equipment inspector qualification acquisition, and databasing of existing products.

Prices of key materials such as steel plate, aluminum, and stainless steel may rise sharply depending on economic conditions, and increases in auxiliary materials and logistics costs further pressure profitability. Under a fiercely competitive pricing market, it is uncertain whether increases in raw material costs can be fully passed through to product prices, and there is also a risk that dependence on specific suppliers or shortages of key parts and components due to large-scale disasters could affect production and sales. As countermeasures, the Company is working to promote pass-through to product prices, establish multiple procurement channels, and verify the financial condition of suppliers.

In addition to policy and regulatory risks such as carbon tax imposition and greenhouse gas emission regulations, transition risks such as increased R&D expenses for environmentally friendly products and rising energy costs, acute physical risks such as larger typhoons and localized violent storms may adversely affect production activities and shipments. There is also a chronic risk of reduced productivity at production and construction sites due to significant summer temperature increases. The Company has expressed support for the TCFD recommendations and has set a target of reducing CO2 emissions (Scope 1+2) by 30% by FY2030 compared to FY2019 levels as a countermeasure.

While conducting business across the Americas, Europe, and Asia, risks exist such as unexpected changes in laws and regulations, policies unfavorable to foreign capital, social disruption caused by terrorism, war, or pandemics, and operational shutdowns due to energy or labor shortages. Should such geopolitical changes occur, they may adversely affect the Group's business performance and financial condition. As countermeasures, the Company is dispatching resident staff to overseas group companies, building a crisis management system, and pursuing BCP through diversification of overseas production sites and supply chains.

Economic slowdowns or recessions in various regions could reduce public works investment, private capital investment, and new housing starts, leading to decreased demand for products and services. Fluctuations in foreign exchange rates and interest rates also affect the valuation of financial assets and liabilities and the consolidated financial statements, and unexpected financial crises or credit rating downgrades could make it difficult to secure necessary funding. As countermeasures, the Company employs hedging measures such as currency swaps and forward exchange contracts, diversifies funding sources and maturities, and works to maintain and strengthen its financial position.

Risks exist related to the inability to collect receivables due to customer bankruptcy, accounting estimation risks such as retirement benefit obligations, fixed asset impairment, and recoverability of deferred tax assets, as well as risks of increased tax expenses due to tax system reforms in various countries. In addition, impairment losses on investment value may arise if previously unrecognized issues are discovered after a business acquisition or if business development does not proceed as planned. As countermeasures, the Company thoroughly manages credit, conducts business and legal due diligence in M&A transactions, and regularly reviews impairment risks of investees.

Natural disasters such as earthquakes, tsunamis, typhoons, and localized torrential rains occurring in Japan or overseas may significantly impact business activities, and it is not possible to eliminate such damage entirely. If business activities are significantly restricted due to the spread of an infectious disease such as COVID-19, this could have a material impact on business performance and financial condition. As countermeasures, the Company has formulated BCPs, built an employee safety confirmation system, implemented earthquake-resistance measures, and regularly conducts disaster prevention and BCP drills.

Amid intensifying competition for necessary talent, if the acquisition and development of human resources cannot be carried out as planned, a decline in operational capability may adversely affect business performance and financial condition over the long term. There are also risks arising from differences in labor practices across countries where the Company operates, including deterioration of labor relations, strikes, and labor disputes triggered by changes in the legal or economic environment. As countermeasures, the Company is promoting the use of diverse recruitment channels such as referral and alumni hiring, development plans based on skill maps, DX talent development, and the establishment of flexible working support systems.

If personal information or important confidential information is leaked due to computer viruses, information is lost or tampered with due to unauthorized access, or information systems experience unexpected outages, this may impact business performance and financial condition. Against a backdrop of increasingly sophisticated and diverse cyberattacks, managing security risk across the entire Group has become an important issue. As countermeasures, the Company established the Information Security Countermeasures Committee in 2019, and is advancing the formulation and implementation of IT-BCP drills, web literacy training and virus email drills for all employees, and strengthened security incident response at overseas group companies.

Risks exist related to the enactment or amendment of laws and regulations, infringement of intellectual property rights, and investigations or sanctions by litigation or regulatory authorities. If sanctions are imposed by supervisory authorities or litigation is filed, a loss of social trust could impact business performance and financial condition. In addition, compliance issues such as violations of anti-bribery laws and traffic accidents also exist as potential risks. As countermeasures, the Company distributes a compliance code of conduct to all employees and obtains pledges, has introduced an internal reporting system, has formulated anti-bribery guidelines, and implements various initiatives during Compliance Month held every November.