HISAKA WORKS, LTD.

As the Company conducts business in many countries, including Japan, Asia, Europe, and the United States, trends in the global economy and business cycle fluctuations in each country may affect the Group's financial position and business results. Exchange rate fluctuations are likewise a factor affecting business performance. In cases of high dependence on a specific region, an economic downturn in that region carries the risk of directly leading to a decline in sales.

Fluctuations in the prices of stainless steel and titanium, the Company's main raw materials, affect business performance. When prices decline, downward pressure on product prices and adverse effects on inventory valuation may occur, while when prices rise sharply, profitability may decline due to increased manufacturing costs. Depending on inventory conditions, these effects may be further amplified.

For foreign currency-denominated transactions, the Company in principle hedges through forward exchange contracts concurrently with contract execution, thereby minimizing exchange rate risk after contract conclusion. However, risks remain that may affect the Group's financial position and business results, including the impact of changes in contract terms and potential disadvantages in price competition against foreign companies at the inquiry stage.

Retirement benefit expenses are calculated based on actuarial assumptions such as the discount rate and the expected rate of return on pension assets. A decline in the discount rate or a decrease in the fair value of pension assets may increase retirement benefit obligations, adversely affecting the Group's financial position and business results.

If the profitability or value of the fixed assets and securities held by the Group declines significantly, impairment treatment may become necessary. Recognition of impairment losses carries the risk of materially affecting the Group's financial position and business results.

The Company may carry out M&A for the purpose of developing new technologies and products and strengthening competitiveness. Although due diligence is conducted on target companies, unexpected liabilities may be discovered after acquisition. In addition, changes in the business environment or competitive landscape may disrupt business plans, posing a risk to the Group's financial position and business results.

Although the Company has established quality control regulations and strives to improve quality, it may bear product and quality liability in the event of unexpected defects or accidents. If such costs cannot be covered by insurance or other means, this could materially affect the Group's financial position and business results.

In the course of business operations, the Group faces the risk of litigation being brought by business partners or third parties, or legal proceedings being taken by regulatory authorities. Large and difficult-to-predict claims for damages or restrictions imposed on business operations could materially affect the Group's financial position and business results.

The Group is affected by a variety of regulations in the countries where it operates, including those related to investment, trade, competition, intellectual property rights, taxation, foreign exchange, the environment, food hygiene, and labor safety. Significant changes in the political situation or regulations may restrict business activities or increase costs, thereby affecting the Group's financial position and business results.

If natural disasters such as earthquakes and floods, the spread of infectious diseases, or war or terrorism occur at the Group's business sites, the Group may suffer significant damage. Even in the absence of direct damage, disruptions to supply networks such as electricity and gas, or the interruption of supply chains, pose a risk to the Group's financial position and business results.