ORGANO CORPORATION

A Taiwan contingency, intensification of US-China conflict, and strengthened export controls (such as EAR regulations) could restrict business activities in key regions centered on Taiwan, China, and North America. In particular, a Taiwan contingency is expected to restrict business not only in the event of military invasion but also due to deteriorating cross-strait relations, potentially having a material impact on business results. As countermeasures, the company is proceeding with scenario analysis, formulation of crisis management plans, execution of management drills, and the launch of a cross-functional task team for US projects.

The Water Treatment Engineering Business accounts for 85.5% of consolidated net sales, of which the electronics industry field accounts for 71.1%, indicating a highly concentrated structure. 56.7% of trade receivables are concentrated in the top three companies, meaning that changes in the trends of major customers, deterioration of their financial condition, or bankruptcy could have a significant impact on business results. As countermeasures, the company is promoting the stabilization of fluctuations in plant orders through the expansion of equipment-owning services and sales of Water Treatment Chemicals, as well as strengthening credit management.

The company depends on specific suppliers for key materials such as ion exchange resin, and changes in suppliers' management strategies or rising material prices due to deteriorating conditions in the Middle East or yen depreciation could impact business results. As the scale of projects in the electronics industry field expands, the risk of insufficient capacity among partner companies responsible for design and on-site construction is also increasing. The company is pursuing procurement from multiple suppliers, consideration of alternative products, development of new overseas procurement sources, and development of partner companies with M&A also under consideration.

Along with the rapid development of AI, cyberattack methods are becoming more diverse and increasing in number, and system breaches could cause business disruption or leakage of confidential information, potentially having a material impact on business results. The importance of this risk is increasing as the scope of IT tool and cloud utilization expands. The company is promoting migration to a zero-trust network, establishing an immediate incident response system through the establishment of ORGANO-CSIRT, and continuously strengthening its information infrastructure.

Expanding resources is essential to respond to market growth centered on the electronics industry field, and if a capacity shortfall occurs, it could lead to lost growth opportunities, loss of market share due to switching to competitors, and loss of trust from existing customers. Part of the supply of ion exchange resin depends on the production capacity of the company's own plants. The company is proceeding with global headcount increase plans, automation and efficiency improvement of design work using digital technology, and expansion of the delivery system through utilization of the Global Engineering Center (GEC).

Amid the continued expansion of orders in the electronics industry field, employee turnover or failure to secure personnel could lead to reduced production capacity, lower delivery quality, or loss of order opportunities, and this is recognized as an extremely important risk. Against the backdrop of the declining birthrate and aging population, competition to secure digital talent is intensifying globally, and failure to ensure diversity could also lead to the risk of homogenization in decision-making. The company is conducting training by rank and function, promoting education to develop digital talent, and strengthening the recruitment of excellent personnel regardless of nationality or gender.

Along with the expansion of equipment-owning services, lease investment assets reached ¥53,856 million at the end of the current consolidated fiscal year, and since investment recovery takes place over a long period, the company is exposed to credit risk such as deterioration in customers' financial condition. Business results could also be affected if expected results from M&A are not achieved or if partner companies' capabilities are insufficient. The company has set investment limits for risk assets, promoting appropriate risk-taking with an awareness of growth and capital efficiency.

If there are delays in developing technologies to address semiconductor miniaturization and multilayering, or delays in utilizing ICT/AI technology leading to a decline in competitiveness, it could become significantly more difficult to execute the growth strategy, potentially having a major impact on business results. A shortage of products addressing sustainability issues could also lead to a loss of growth opportunities. The company is deepening core technologies and creating new businesses through

Tosoh Corporation, the parent company, holds 44.47% of voting rights (including indirect ownership), and changes in the parent company's capital policy or management strategy, as well as trends in the capital markets regarding minority shareholder protection, could affect the business development and share price of the company's group. The company has established a special committee composed solely of independent outside directors to protect the interests of minority shareholders, and independent outside directors make up a majority of the board of directors.

Due to its global business operations, the company is subject to the laws and regulations of many countries and regions, and strengthened regulations related to human rights and sustainability could lead to increased response costs and constraints on business activities. Inadequate responses could lead to a decline in social trust and loss of customers. The company has set