IWABUCHI CORPORATION

In the electric power-related field, transformation of materials procurement and distribution due to the revenue cap system is required; in the information and communications field, the spread of 5G, IoT, and AI must be addressed; and in the disaster prevention and traffic signal-related field, responses to smart cities and autonomous driving are needed. If the Group fails to respond appropriately to regulatory changes, economic fluctuations, and changing needs in each market, this could have a material impact on medium- to long-term business performance. Although dependence on any specific demand or customer is low, a sudden and drastic change in the business environment common to customers could also have a material impact on business performance and financial condition.

If existing products become obsolete rapidly due to changes in market environment, competitive conditions, or needs, or due to new technologies or new products, there is a risk that valuation losses on inventories or impairment losses on business-use fixed assets may occur. The Group conducts appropriate inventory management and capital investment in response to demand trends, but it may not be able to respond in time to rapid environmental changes. This could have a material impact on business performance and financial condition.

There is a risk that raw materials such as steel and zinc, auxiliary materials, and logistics costs may rise unexpectedly due to fluctuations in exchange rates, tariffs, resource prices, and energy prices, as well as changes in the international situation, leading to increased manufacturing costs. If this cannot be offset through cost reductions or appropriate price pass-through, it could have a material impact on business performance. In addition, if the domestic and overseas supply chain, including the Chinese subsidiary (Haiyang Iwabuchi Metal Products Co., Ltd.), is disrupted due to geopolitical events or other factors, product supply may be delayed.

If defects are found in products or services due to design or manufacturing errors or construction defects, measures such as free repair, replacement, or recall may be required, which could result in significant costs and a loss of trust as a manufacturer. Although a quality control system based on the ISO management system has been established across the Group, including partner companies, sudden equipment failures or accidents that halt production could also delay product supply. These risks could have a material impact on business performance and financial condition.

If the prices of investment securities or defined benefit pension plan assets decline significantly due to interest rate fluctuations, stock market trends, or changes in the international situation, there is a risk that substantial valuation losses or contributions to make up shortfalls may occur. This could have a material impact on business performance and financial condition.

The Chinese subsidiary (Haiyang Iwabuchi Metal Products Co., Ltd.) conducts all transactions with the Company in yen, and therefore holds yen-denominated deposits and accounts receivable. If the yen depreciates significantly beyond expectations, the subsidiary may incur foreign exchange losses, which could have a material impact on business performance and financial condition.

If disasters that are becoming more severe and frequent, such as earthquakes, storms and floods, or the spread of infectious diseases, occur on a scale exceeding expectations, there is a risk that production and sales activities could be disrupted due to supply chain stagnation or disruption, damage to facilities, employee illness, or suspension of lifeline services. Countermeasures have been implemented at each business and manufacturing site, but responding to unforeseen events may be difficult in some cases. This could have a material impact on business performance and financial condition.

If increasingly sophisticated cyberattacks, such as ransomware or targeted attacks, result in the leakage of personal information or confidential information held by the Group, or the suspension of system use, this could lead to a decline in social trust and claims for damages from customers and others. Although security measures have been implemented on both the hardware and software fronts, system failures at cloud service providers or outsourcing partners also carry similar risks that could disrupt operations. These risks could have a material impact on business performance and financial condition.

If necessary personnel cannot be secured due to labor market fluidity or changes in employment conditions, this could hinder the execution of growth strategies and management plans, potentially having a material impact on medium- to long-term business performance and financial condition. In addition, if serious human rights issues such as workplace harassment or discrimination occur, this could lead to a decline in customer trust and social credibility, as well as litigation risk. Furthermore, a lack of employee capability or decreased motivation could also trigger other risks.

In addition to the risk of delays in production and shipment, or delays in receiving orders in affected areas, due to the intensification of storms and other severe weather events, there is a risk of rising costs and constraints on business activities due to the imposition of carbon taxes, stricter regulations, and increasing social demands. The Group promotes ESG management and is working to reduce CO₂ emissions, but insufficient response could also lead to a decline in social trust. These risks could have a material impact on business performance and financial condition.