OKUMURA ENGINEERING Corp.

There is a risk that valve production costs will rise due to sharp increases in domestic and international market prices for metal materials such as copper, stainless steel, aluminum, and iron. Difficulty in securing supply of raw materials, or delays or difficulties in passing on price increases, are also anticipated. The Group is responding by developing new suppliers, improving productivity, and reducing raw material usage through design reviews.

In Malaysia and China, the Group's major overseas production bases, there is a risk that material supply could be suspended or delayed due to economic, political, legal, tax, regulatory, or disaster-related factors. The Group has established a system to respond by utilizing alternative procurement in Japan and inventories held at each manufacturing site in the event of a supply disruption.

In Asia, the Group's main sales region, there is a risk that customer operations could be suspended due to political measures, foreign exchange policies, large-scale natural disasters, the spread of infectious diseases, and other factors, leading to a slowdown in sales activities. The Group maintains close communication with sales agents to gather local information and takes appropriate action as needed.

As most products are made to order and major demand comes from plant-related industries including shipbuilding, construction, and electric power, trends in these industries and changes in economic conditions have a direct impact on business results. The Group aims to reduce concentration risk by diversifying sales channels, developing new demand areas, and cultivating new business partners.

While the Group is focusing on customized products to expand its business, increasing competition may intensify pressure to lower prices, potentially leading to price competition. The Group aims to improve price competitiveness through the development of value-added products via R&D, as well as cost reductions through design and material reviews and productivity improvements.

The Marine Exhaust Gas Valve is manufactured and sold under product certification obtained from Everllence SE, and there is a risk that manufacturing and sales of this product would become impossible if the certification were not renewed for any reason. The Group strives to maintain certification by enhancing its quality control system and strengthening communication and cooperation with Everllence SE.

If a large-scale product recall or damages claim resulting from a product defect materializes and cannot be covered by product liability insurance, this could have a material impact on business results. The Group has built a quality control system through prototype evaluation, various inspections during the manufacturing process, and thorough investigation and improvement upon discovery of defects.

In the event of a large-scale earthquake and tsunami centered around the Nankai Trough, or large-scale flood damage caused by a massive typhoon, there is a risk that stable product supply could become difficult due to asset impairment or loss and damage to the logistics network. The Group has built a system for early business recovery through regular disaster prevention drills to raise employee awareness and the development of BCP regulations.

External cyberattacks or internal negligence or theft could result in the leakage, destruction, or falsification of confidential and personal information belonging to customers, business partners, or the Group, or could cause information systems to shut down. The Group is implementing measures such as establishing a Group-wide management framework, strengthening IT and facility security, and providing employee training.

Fluctuations in exchange rates affect the yen-translated amounts of consolidated subsidiaries' financial statements and the foreign exchange translation amounts related to import and export transactions; significant fluctuations could affect business results due to the occurrence of foreign exchange gains or losses. The Group has established foreign exchange risk management regulations and responds to sudden market changes by utilizing foreign currency reserves, foreign currency deposit accounts, and forward exchange contracts.