OSG Corporation

The Group's products are supplied to a wide range of manufacturing industries, including automobiles, aircraft, and IT-related sectors, and may be affected by declining demand in these related industries or economic downturns in Japan and various regions worldwide. Although the Group seeks to diversify risk by not concentrating sales destinations in specific industries, countries, or regions, sudden economic fluctuations or demand declines could affect its business performance and financial position.

The Group operates local subsidiaries for manufacturing and sales in countries around the world, and since local currency-denominated items must be translated into yen when preparing consolidated financial statements, fluctuations in exchange rates affect business performance even without changes in the value of local currencies. In addition, exchange rate movements may affect sales and manufacturing costs in foreign currency-denominated sales and material procurement transactions. Although the Group implements hedging through the use of forward exchange contracts and foreign currency deposit accounts, it is difficult to eliminate all risks.

Raw materials for the Group's main products, tools, including cemented carbide, high-speed tool steel, and die steel, use rare metals such as cobalt, vanadium, molybdenum, and tungsten. Because production sites and suppliers are limited, prices may fluctuate sharply depending on market conditions. When raw material prices surge, the Group seeks to reflect this in selling prices; however, there are cases where a time lag occurs before price revisions take effect or where passing on costs is difficult, which could affect business performance and financial position.

The Group has established overseas bases in the Americas, Europe, Asia, and other regions to respond to major users' overseas expansion and to establish optimal production and sales systems in the most suitable locations. However, changes in laws and tax regulations in various countries, as well as fluctuations in social and political conditions, could impede business activities. While the Group manages risk through regular information gathering in cooperation with Group companies, if such risks materialize, they could affect business performance and financial position.

The Company's head office, production, and R&D facilities are concentrated in the Higashi-Mikawa region of Aichi Prefecture. If a large-scale earthquake or other natural disaster were to occur in this area, it could have a significant impact on overall business activities, including production operations. Although measures have been implemented, such as developing business continuity plans (BCP, initial response manuals, and business recovery procedures), conducting seismic reinforcement work on buildings, holding emergency drills, and introducing safety confirmation systems, it is difficult to completely avoid risk if events beyond expectations occur.

The Group has established a basic information security policy, conducts information system risk assessments, and implements successive countermeasures. However, confidential information such as customer information and technical information could be leaked due to unauthorized access using technology beyond expectations, computer viruses, or other unforeseeable events. If such a leak occurs, it could result in liability for damages and a decline in competitiveness, which could affect business performance and financial position.