EBARA CORPORATION

The main risks are a decline in international market competitiveness and loss of business opportunities due to delays in decarbonization measures, and direct damage to business sites and the supply chain due to the intensification of weather-related disasters. Natural disaster risk has actually materialized, as seen in the company's response to the Nankai Trough earthquake extra information in August 2024 and the Hokkaido/Sanriku offshore aftershock caution information in December 2025. As countermeasures, the company is promoting climate-related scenario analysis based on TCFD, advancing measures toward carbon neutrality by 2050, and transitioning to an all-hazard type business continuity plan.

In a rapidly changing market environment, there is a risk that a shortage of personnel supporting technological innovation and insufficient coordination between R&D and business strategy could lead to delayed responses to customer requirements and loss of competitive advantage. There are also concerns about the inability to create new added value due to a shortage of personnel with a spirit of challenge. As countermeasures, the company is promoting the codification of knowledge and know-how from R&D activities and improving development efficiency through AI utilization, strengthening coordination with the heads of business divisions, and promoting talent development through external co-creation and collaboration.

As the diversification and specialization of desired talent profiles progresses across business segments, the risk of failing to achieve recruitment strategy formulation and workforce planning targets is increasing. There are concerns that a rapid increase in the burden on managers and insufficient response to the advancement of management skills could lead to a decline in the quality of team operations and increased turnover. As countermeasures, the company is promoting the restructuring of business-specific recruitment strategies, utilization of the internal job posting system, strengthening of compensation systems, and expansion of management education for managers.

In addition to the disruption and instability of the supply chain due to rising protectionism and regional conflicts, there are concerns about business succession risks stemming from the aging of suppliers and insufficient response to regulations protecting small and medium-sized enterprises. The company also recognizes the risk that its group's economic activities could give rise to human rights issues. As countermeasures, the company is strategically implementing geopolitical diversification and multiplication of suppliers, and strengthening its response to human rights due diligence and enhancing internal education.

There is a risk that the US-China economic conflict, US tariff policy, and the increase in regional conflicts could threaten the safety and business continuity of overseas group sites. During the escalation of Israel-Iran tensions in June 2025, the company actually considered evacuation policies for expatriate staff and their families, an event that materialized in practice. As countermeasures, the company is expanding the functions of its trade control department, promoting economic security measures, formulating risk scenarios, and conducting regular information sharing and countermeasure discussions among executive officers.

In addition to the impact on business performance from foreign exchange fluctuations and rising interest rates, there is a risk that delayed response to demand fluctuations caused by the shortening of business cycles, particularly in the semiconductor industry, could lead to loss of market share. In particular, in the Precision & Electronics segment, changes in customer investment and utilization rates accompanying fluctuations in semiconductor demand, as well as supply-demand imbalances, affect earnings and market share. As countermeasures, the company is continuing risk diversification through its five-company structure organized by facing market, expanding a stable earnings base by strengthening the Service & Support (S&S) business, and promoting the establishment of a production system that responds to economic fluctuations.

There is a risk that external cyberattacks, human error, natural disasters, and infrastructure failures could cause prolonged suspension of critical operations and services, leakage of confidential and personal information, and destruction or tampering of important data. Responding to changes in attack trends, such as the increase in account takeover-type attacks, is also a challenge, and there is a risk that the impact could spread throughout the entire supply chain. As countermeasures, the company is introducing multi-layered technical defense measures, establishing a management system compliant with ISO 27001 standards, conducting ongoing education and training, and strengthening supply chain management capabilities.

As demonstrated by the recommendation received from the Japan Fair Trade Commission on February 20, 2025 based on the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors, there is a risk that a weakening of legal compliance awareness and the formalization of internal systems could lead to serious legal violations, resulting in damages claims, administrative penalties, loss of order opportunities, and a decline in social reputation. In response, the company is promoting the "Company-wide Fair Procurement Promotion Program," implementing measures for trade fairness, price pass-through response, and business process review, while also newly establishing the "Legal Amendment Response Committee" to develop a system for formulating, disseminating, and monitoring legal compliance policies under CRO leadership.

There is a risk that continued excessive reliance on the knowledge and know-how of veteran employees could have a negative impact on product quality due to their retirement. It has also been pointed out that arbitrary judgments based on in-house standards and organizational logic could induce quality fraud. As countermeasures, the company is promoting the transformation of the quality assurance process through the digitalization and sharing of past data and know-how, thoroughly implementing engineering ethics education and governance, and fostering a quality-focused culture.

The main risks are the adverse effects of failing to detect significant inappropriate matters in the financial condition or business operations of an acquisition target company during due diligence, and the failure to achieve expected synergies due to deficiencies or delays in the post-acquisition integration process. As countermeasures, the company has established a specialized department to consolidate M&A-related knowledge and develop talent, building a review system staffed by experts in each field, and establishing a smooth integration promotion system through coordination between the responsible departments at the companies and corporate headquarters.