DMW CORPORATION

The Group has a high proportion of business dependent on public works projects. If the trend of declining public investment continues, intensified competition among companies could lead to lower order prices and reduced order volumes, potentially worsening the profit environment. In response, the Group is shifting management resources toward domestic private-sector demand and overseas markets, diversifying its business portfolio, and working to establish a stable revenue base through the expansion of the P&M (Parts Supply & Maintenance) Service business.

For the Group, whose main business is product manufacturing, surges in the prices of raw materials such as steel and energy carry the risk of increasing manufacturing costs and worsening business results. The Group continuously works to pass on cost increases through regular monitoring of raw material prices and timely reflection in product costs, as well as to reduce manufacturing costs through improved operational efficiency via strengthened DX infrastructure.

Sharp fluctuations in crude oil prices leading to project freezes, or cost increases due to exchange rate fluctuations, could worsen the Group's business results. The Group is working to build a business structure less susceptible to specific market conditions through market diversification and expansion of its customer base, while also hedging risk through forward foreign exchange contracts as appropriate for foreign-currency-denominated transactions.

If the procurement of raw materials such as steel, electronic components, and equipment is disrupted due to the manifestation of geopolitical risks, natural disasters, or fluctuations in supply-demand balance, this could result in delays in product manufacturing, lost sales opportunities, and higher procurement costs, thereby worsening business results. The Group addresses this by regularly conducting supply chain risk assessments and working to secure alternative suppliers and diversify its supplier base.

As the Group promotes the expansion of its overseas business, changes in the international situation, including the outbreak of conflicts, could disrupt supply chains and hinder project execution, potentially affecting business results. The Group closely monitors changes in conditions in each country through close information exchange with overseas offices and local trading companies, while also promoting supply chain diversification and the establishment of local production systems.

If the fair value of securities held by the Group declines significantly due to sharp fluctuations in the stock and bond markets, foreign exchange rates, or economic conditions, this could affect the Group's business results and financial position. The Group strives for appropriate risk management by establishing internal regulations on investment criteria and management structures, and by having the Board of Directors determine investment policy and investment limits on an annual basis.

The Group's main production site is located in Mishima City, Shizuoka Prefecture, an area designated as a region requiring the promotion of disaster prevention measures against the Nankai Trough earthquake. Should a large-scale earthquake, storm or flood damage, or other natural disaster or infrastructure disruption occur, this could affect business results through operational suspension or supply chain disruption. The Group is formulating a basic BCP policy and establishing disaster prevention measures and early recovery systems, while also concluding mutual emergency assistance agreements with similar companies.

If the products or services provided contain serious defects, the Group could face substantial liability for damages, significantly impacting business results, as well as a decline in social reputation and brand value that could lead to reduced sales. In addition to continuously promoting quality assurance activities based on its quality management system, the Group records provisions for product warranties to prepare for the potential occurrence of costs related to free warranty repair work.

The Group is subject to a variety of legal regulations in each country and region in which it conducts business, including those related to trade, antitrust, intellectual property, product liability, foreign trade, foreign exchange control, and environmental recycling. The enactment or revision of laws and regulations, or unexpected interpretations or applications thereof, could affect business results. The Group ensures thorough compliance under its compliance promotion structure, while continuously monitoring developments in legal and regulatory changes, including through collaboration with outside experts, and maintaining a system for timely and appropriate response.

If failures in core business systems, cyberattacks, unauthorized access, or similar incidents cause delays or suspensions of operations and services, or lead to the leakage of important information, this could affect business results through a decline in social credibility or the occurrence of damage compensation liabilities. Centered on the Information Security Committee, the Group is strengthening internal regulations and management systems, moving servers to the cloud, establishing backup systems, and implementing multi-layered defenses against unauthorized access, while also regularly conducting information security training and targeted attack email response drills for all employees.