Odawara Engineering Co., Ltd.

In the winding equipment business, whose customers are manufacturing companies in the home appliance, automotive, industrial/medical, OA/AV, and telecommunications fields, orders and production activities are heavily influenced by trends in technological innovation and capital expenditure in each field, making it difficult for the Group to independently forecast the future. If the assumed preconditions diverge from actual results, this may affect business performance and financial condition. As a countermeasure, the Group continues management efforts aimed at establishing its position as a comprehensive manufacturer.

In the development of new products and technologies applying winding technology, the pace of technological innovation is accelerating, and needs are rapidly diversifying and globalizing. The emergence of new technologies exceeding expectations or drastic changes in trends in each field may increase the burden of R&D expenses, which could affect business performance and financial condition. Development competition is expected to intensify further going forward, requiring continuous investment.

The Blower and Housing Equipment Business supplies units and finished products to manufacturers related to industrial and machine tools and housing equipment, and demand is greatly affected by economic trends, corporate capital expenditure trends, the number of new housing starts, and trends in renovation work. If these preconditions differ from actual results, this may affect business performance and financial condition. Given the high dependence on the external macro environment, ensuring the accuracy of demand forecasts is a challenge.

In the Blower and Housing Equipment Business, in order to maintain and improve price competitiveness, the Group has established manufacturing and sales companies in China as subsidiaries of the consolidated subsidiary Raiyo Electric (Hong Kong) Co., Ltd., promoting production transfer and sales channel expansion. If geopolitical issues such as US-China conflict, deteriorating Japan-China relations, or a contingency involving Taiwan become manifest, this may affect business performance and financial condition. As dependence on operations in China increases, addressing geopolitical risk has become an important management issue.

The Group owns and utilizes intellectual property rights accumulated through the development of winding technology; however, in certain countries and regions, protection of intellectual property rights is insufficient, and there is a possibility of infringement by third parties. In addition, if the Group is unexpectedly accused by a third party of infringing intellectual property rights, this could result in the burden of compensation costs and litigation expenses, which may affect business performance and financial condition. While the Group strives to thoroughly protect its rights and utilize them as management resources, risks associated with global expansion remain.

The Group holds a large amount of confidential information obtained through its business activities, and if unforeseen events such as computer virus infection, unauthorized access, or theft occur, this may affect business performance and financial condition. As countermeasures, the Group has implemented physical security and information security systems, established management structures, and conducted training; however, complete defense is difficult given the increasing sophistication of cyber threats.

The Group conducts business globally and is subject to the laws, tax systems, and other regulations of countries around the world, including Japan. If there are changes in trends in the laws and tax systems of various countries, or if a material violation of laws and regulations occurs, this may affect business performance and financial condition. The Group upholds "corporate ethics and compliance" as a code of conduct and strives to raise compliance awareness through internal training and other measures; however, regulatory risks associated with multinational expansion continue to exist.

The Group's business sites may suffer physical and human damage due to natural disasters such as earthquakes, typhoons, and volcanic eruptions, accidents such as fires, terrorist attacks, or the outbreak and spread of disease, and if significant delays occur in production and shipment, this may affect business performance and financial condition. The Group recognizes the impact of large-scale disasters on production activities as a major threat, and works to mitigate risk by formulating a business continuity plan (BCP) and establishing a risk management structure centered on the Risk Management Committee.

If the business sites of the Group's material procurement sources or outsourcing partners suffer physical or human damage due to natural disasters, accidents, terrorism, disease, etc., this may impede the Group's production and shipment. In addition, if there is a sharp rise in the cost of raw materials, materials, or outsourcing expenses, this may affect business performance and financial condition. This is a risk that spans the entire supply chain, and diversifying procurement sources and securing alternative suppliers are important issues to address.