SEIKO CORPORATION

In the Industrial Machinery Business and Cold Forging Business, most products are produced on a build-to-order basis, making the business structurally susceptible to the direct impact of changes in customers' management policies and inventory adjustments. Since a decline in orders directly affects business performance, sensitivity to demand fluctuations is high. Although efforts are made to secure orders through shortened delivery times and enhanced quality assurance, risks arising from external factors remain.

The Electrical Equipment Business depends on specific suppliers such as Mitsubishi Electric Corporation and Kurashiki Kako Co., Ltd., while the Vehicle-Related Business depends on specific suppliers such as Subaru Corporation, Volvo Car Japan Corporation, Porsche Japan K.K., BYD Auto Japan Co., Ltd., and Sumitomo Rubber Industries, Ltd. for product supply. If competitiveness of handled products declines due to the introduction of new products by competing manufacturers, or if suppliers experience supply disruptions or change their product strategies, this could have a material impact on business performance. This represents a structural risk in which supplier trends are directly linked to the continuity of the Group's business.

In the Industrial Machinery Business, the Company holds patents related to packaging machinery technology to protect its intellectual property; however, if competitors develop superior technology and obtain patents, the competitiveness of the relevant business could decline. In addition, although investigations are conducted to avoid infringing third parties' intellectual property rights, such investigations have limitations, and the risk remains that the Company may in the future be accused of infringing other companies' intellectual property rights. If infringement is determined to have occurred, this could result in damages claims and business restrictions.

All plants in the Industrial Machinery Business and Cold Forging Business have obtained ISO9001 certification and are engaged in quality assurance efforts; however, it is not possible to guarantee the complete elimination of defects in all products or zero occurrence of recalls. Should a recall occur, response costs could affect business performance. Although efforts are made to prevent occurrences through the development of quality control systems, it is difficult to completely eliminate this risk.

In the Cold Forging Business, chemical agents are used in the surface lubrication treatment of materials during the manufacturing process, and the Company works to reduce environmental impact through compliance with environment-related laws and regulations and ISO14001 certification. However, if environmental pollution occurs due to an unforeseen accident, business continuity could become difficult, and revisions to relevant laws and regulations could give rise to new management and disposal cost burdens. Because the manufacturing process involves the use of chemical agents, the business structure is susceptible to the effects of regulatory tightening.

The Company has established personal information protection rules regarding customer and business partner information obtained in the course of business, and strives for appropriate management; however, should an information leak occur, this could damage social trust and corporate image, and could affect business performance through damages claims and similar actions. Although continuous efforts are made to enhance information management systems, risks such as cyberattacks and internal misconduct cannot be completely eliminated.

The major bases of each business are concentrated within Shizuoka Prefecture, creating a risk that the entire business could be broadly affected if the region is struck by a natural disaster. In particular, measures have been taken to minimize human and physical damage in the event of a large-scale earthquake, but the Company could suffer severe damage should such an earthquake occur. The geographic characteristic of concentrated business locations is a structural factor that heightens business continuity risk.