TOKYO ROPE MFG. CO., LTD.

If global and Japanese economic trends cause a decline in the activity levels of major demand industries such as the tire and construction industries, this could affect the Group's business performance. Demand industries have high sensitivity to economic cycles, creating a risk of direct impact on both sales and profit in macroeconomic downturns.

The Group depends on a small number of suppliers for key raw materials such as wire rod, zinc, and core wire, creating a risk of supply stoppages or delays due to supplier business difficulties or production halts. In addition, rises in steel prices caused by surging iron ore and coking coal prices could affect the Group's financial position and business performance. While the Group seeks to reduce this risk by diversifying its supplier base, supply constraints may still arise during periods of global supply-demand tightness.

The Group has overseas business locations in the United States, Vietnam, and other countries, and its business activities could be constrained by political or economic turmoil, epidemics or terrorism, or changes in legal regulations in those countries. Although the Group strives for early information gathering and response by utilizing local and domestic information networks, there are limits to its ability to respond to sudden disruptions.

The Group holds cross-shareholdings for the purpose of sharing medium- to long-term management strategies with business partners, and impairment may be required if market value declines. In addition, a decline in stock prices could reduce pension assets, creating a risk of increased retirement benefit expenses.

The Group holds substantial fixed assets, and if declining profitability due to changes in the business environment or deterioration in the real estate market causes real estate appraisal values to fall, it may become impossible to expect recovery of invested amounts, necessitating a reduction in the book value of fixed assets and recognition of a loss. This could have a material impact on the Group's financial position and business performance.

The Group extends credit to business partners in various forms and bears the risk of being unable to collect receivables. Although measures such as setting credit limits and obtaining collateral or guarantees are implemented, if a business partner's credit standing unexpectedly deteriorates or it becomes insolvent, resulting in uncollectible receivables, this could affect the Group's financial position and business performance.

The competitive environment in production and sales activities, both domestic and overseas, is becoming increasingly severe, and declines in market prices could affect the Group's financial position and business performance. Although the Group continues to pursue ongoing cost reductions, new product development, and expansion into new businesses, price pressure from intensifying competition remains a continuing risk factor.

The Group conducts foreign-currency-denominated transactions in the export and import of products and the import of raw materials, and also holds foreign-currency-denominated assets, making it susceptible to the effects of sudden exchange rate fluctuations. Although forward foreign exchange contracts are used as appropriate to hedge this risk, there are limits to the effectiveness of such hedging, and it may affect business performance.

If a large-scale disaster such as an earthquake or fire, an equipment accident, or a large-scale infectious disease outbreak occurs at a production site or elsewhere, it could disrupt production activities and affect the Group's financial position and business performance. Because damage to production sites directly leads to reduced product supply capacity, this is an important risk from the standpoint of business continuity planning (BCP).

The Group is subject to environmental laws and regulations concerning waste and hazardous substances, and stricter regulations could increase compliance costs. The Group has expressed its support for the TCFD recommendations and is advancing its response and disclosure regarding climate change risk in terms of both opportunities and risks across the categories of governance, strategy, risk management, and metrics and targets; however, physical risks and transition risks associated with climate change could affect business activities.