TSUBAKIMOTO CHAIN CO.

There are concerns about decreased demand due to reduced capital investment and worsening corporate operations amid an economic downturn. In particular, if drastic structural changes occur in the automotive industry, the largest customer segment, such as a decline in production volumes of internal combustion engine vehicles or reduced capital investment, this could have a material impact on business performance and financial position. As a countermeasure, the Company focuses on developing only-one products based on market needs, striving to expand sales and secure profits.

Delayed response to climate change and environmental regulations is expected to result in lost business opportunities and increased procurement costs. There is also a risk that business continuity may become difficult due to the intensification of natural disasters. The Company conducts scenario analysis divided into transition risks and physical risks, and manages CO2 emission reduction activity plans through PDCA led by the Environment Committee.

Over 60% of consolidated net sales are derived from overseas sales, and there is a risk that terrorism, war, or conflict occurring in the countries or regions where the Company operates could lead to decreased product sales, factory operation suspensions, and disruptions in parts procurement. The Company seeks to reduce risk across the Group by strengthening its global production system and diversifying production sites and procurement sources.

If a serious accident, recall, complaint, or quality misconduct occurs due to a product defect, this could damage the Company's brand image and result in compensation costs not fully covered by product liability insurance, etc., potentially impacting business performance and financial position. Based on the "Tsubaki Group Quality Basic Policy," the Group Quality Committee leads efforts to pursue high quality and thoroughly implement quality control.

If system outages or security issues occur due to cyberattacks or similar causes, this could damage the Company's brand image and result in damages not fully covered by cyber risk insurance. The Annual Securities Report evaluates the impact level as "medium to large." The Company implements technical measures, employee training, regular information security audits, and vulnerability assessments by third-party organizations, and is also working to build a response structure for when incidents occur.

Inadequate responses to stakeholders' human rights in the countries and regions where the Company operates could damage its social reputation and impact business performance and financial position. The Annual Securities Report evaluates the impact level as "medium to large." The Company works to reduce this risk by formalizing a basic human rights policy, establishing a help line, conducting harassment prevention activities, and implementing human rights due diligence at domestic and overseas Group companies.

In the global supply chain, sudden supply changes or price spikes caused by political or economic disruption or supplier-specific circumstances could make parts procurement and factory operations difficult, potentially leading to reduced or delayed product production. The Company addresses this by dual-sourcing hard-to-substitute materials and parts, diversifying supply sources through sharing procurement information across the Group, and strengthening partnerships with suppliers.

A sharp surge in the prices of raw materials such as Steel Products or energy prices could lead to increased costs and deteriorating profitability, impacting business performance and financial position. The Annual Securities Report evaluates the impact level as "medium to large." The Company addresses this through cost reduction via productivity improvement, diversification of procurement sources, and price negotiations with both suppliers and customers.

If a third party engages in unauthorized use of patents, trademarks, know-how, etc., or if the Company is subject to an intellectual property infringement lawsuit filed by a third party, this could impact business performance and financial position. The Annual Securities Report evaluates the impact level as "medium to large." The Company addresses this by establishing internal regulations, gathering information on other companies' intellectual property, and appropriately managing its own rights (including know-how).

Amid global business operations, unexpectedly sharp exchange rate fluctuations could impact business performance and financial position. The Annual Securities Report evaluates the impact level as "small to medium." The Company works to reduce risk through diversified forward exchange contracts and by promoting the localization of production and procurement.