YAMABIKO CORPORATION

The Yamabiko Group, whose primary markets are Japan, the United States, and Europe, may be affected in its business performance by changes in the political, economic, and social conditions of various countries, conflicts and terrorism, and trends in various regulations such as import/export controls, foreign exchange controls, and tax systems. It is explicitly stated that economic conditions in the three main markets (Japan, the United States, and Europe) in particular have a significant impact on the business. The Group continuously monitors the situation so that it can respond promptly when risks materialize.

In markets for green maintenance, agriculture and forestry, and construction, civil engineering, and ironworking, changes in policies such as agricultural policy and public investment, changes in industrial structure, and significant changes in private-sector capital investment trends and supply-demand trends may affect business performance. Because the Group targets major markets both in Japan and overseas, the impact could be extensive if demand fluctuations occur simultaneously across multiple regions. The Group continuously monitors market trends so that it can respond promptly when risks materialize.

Competition over new product development, price reductions, and enhanced after-sales service is intensifying in each business field, and business performance may deteriorate if the Group falls behind competitors in terms of quality or trading conditions. As a countermeasure, the Group is promoting the development of high-value-added products that continuously reflect customer needs, and in response to price competition, it has adopted a policy of maintaining selling prices while gaining customer satisfaction through the supply of high-value-added products.

Since more than half of net sales are denominated in foreign currencies, primarily the US dollar, a stronger yen would have a negative impact on business performance, while a weaker yen would have a positive impact. Exchange rate fluctuations also affect relative pricing against competing products in the same market and raw material costs. Although the Group implements a global production base configuration and hedging transactions as risk mitigation measures, unforeseen exchange rate fluctuations may affect business performance.

Surging raw material prices put pressure on profits, and supply instability may make product production difficult and lead to lost sales opportunities, potentially affecting business performance. As countermeasures, in addition to leveraging volume discounts through parts commonization, the Group continuously monitors suppliers' supply capacity, including their financial standing, and strives to establish a stable procurement environment.

If safety and environmental regulations, including emission regulations for small gasoline engines used in mainstay products, are strengthened worldwide, or if efforts to reduce greenhouse gases are further reinforced, development costs and capital investment required for regulatory compliance would increase, and failure to comply with regulations would make it impossible to sell products in the relevant markets. The Group generally recognizes that it can respond appropriately because regulatory revisions are typically preceded by advance announcements and transitional measures, and it has established a system for prompt response by monitoring trends worldwide, conducting planned research and development of environmental response technologies, and promoting activities in line with TCFD recommendations.

If a product defect or an unforeseeable event during use occurs, it may damage the corporate brand value and reduce sales volume, thereby affecting business performance. As countermeasures, the Group has fostered an organizational culture that prioritizes safety, enhanced its product inspection system, added warning labels to products, and established a system for prompt market response, and it has also taken out product liability insurance as a precaution.

Large-scale damage to domestic crops caused by abnormal weather such as cold damage, typhoons, and floods reduces farmers' purchasing power, while impediments to plant growth caused by droughts and similar factors lead to reduced demand for mainstay products such as brush cutters. In addition, if production sites are affected by natural disasters or infectious diseases, or if transportation networks or supply chains are disrupted for extended periods, production activities may stagnate. The Group strives to establish a system that enables it to continue important operations even in the event of a disaster or infectious disease outbreak, through regular equipment inspections, evacuation drills, and the formulation of a BCP (Business Continuity Plan).

As the Group holds customer information, personal information, and confidential business and technical information, business performance may be affected if information leaks or other incidents occur due to increasingly sophisticated and elaborate cyberattacks. In addition, if a third party infringes on intellectual property rights or files a lawsuit, this could lead to legal and compensation liabilities and damage to corporate brand value. In addition to establishing a management system and implementing reasonable technical measures, the Group conducts regular information security training for employees to prevent risks before they occur.

With respect to the excellent human resources essential for continuous growth, if the recruitment environment deteriorates significantly or the outflow of personnel continues to increase, it may become difficult to secure human resources as planned, potentially affecting medium- to long-term business performance. As Japan's declining birthrate is expected to make it more difficult to secure human resources in the future, the Group is strengthening mid-career hiring of highly specialized personnel in addition to new graduate recruitment, responding to diverse working styles through the introduction of a "Job Return System," and promoting the revitalization of people and organizations by revising its personnel system to be based on roles and results.