DAIFUKU CO., LTD.

Amid rising global inflation, higher interest rates, shifts in trade policy, and heightened geopolitical risk, customers' capital expenditure decisions are prone to fluctuation, and if customers review or postpone their investment plans, orders and business performance could be affected more than anticipated. At the same time, factors such as increased semiconductor-related investment driven by the expansion of AI utilization present opportunities for business expansion. As countermeasures, the Company continuously monitors economic conditions, market environment, and trade policy, and flexibly revises its management and business plans.

As the Company provides products and services to customers across a wide range of industries, the loss of a key customer could have a significant impact on business performance. The likelihood of occurrence is assessed as "somewhat high," and no specific timing of materialization has been set. The Company continuously monitors changes in customers' capital expenditure plans and seeks to minimize the impact by flexibly reflecting such changes in its management plans.

Amid rapidly changing industrial structures and social environments, identifying and launching new business domains involves uncertainty, and failure to appropriately capture such changes could result in missed medium- to long-term growth opportunities. Even in the existing Material Handling field, delayed responses to technological trends such as AI and robotics could lead to a decline in competitiveness. As countermeasures, the Company has established a dedicated organization (Business Innovation Division) and is strengthening its R&D structure through the establishment of the Kyoto Lab in FY2025 (ending December 2025) and the Tokyo Lab in FY2026 (ending December 2026).

If the securing and development of next-generation management and managers is insufficient, the continuity of organizational operations could be impaired, posing a risk to medium- to long-term business performance. The timing of materialization is assessed as within 5 years, with the degree of impact rated as "large." The Company addresses this through the formulation and operation of succession plans and the enhancement of development programs.

With 61 consolidated companies and 11,417 consolidated employees (of which 7,559, or 66.2%, are subsidiary employees), if a subsidiary's business execution and compliance systems are inadequate, losses due to fraudulent acts, improper accounting practices, or failures in project management could occur, potentially affecting business performance and social credibility. The Company addresses this through the development of Group-wide common policies and regulations, ongoing compliance training, planned implementation of subsidiary audits by the Internal Audit Department, and the establishment and operation of a Group-wide common internal reporting hotline.

In the course of managing and operating highly confidential information assets such as customer information and technical information, if information leakage occurs due to internal misconduct or negligence, it could adversely affect business performance through the disruption of business activities, damage to the corporate brand, and loss of social credibility. The Company addresses this through the establishment of management classifications according to the importance of information assets, development of personnel, physical, and organizational management systems, implementation of information security audits, and verification of information management status across the entire supply chain, including outsourcing partners.

Amid a global increase in cyberattacks, if unauthorized access or malware infection results in the leakage or improper use of important information assets or system shutdowns, this could adversely affect business continuity and performance through delays in product and service delivery and damage to the corporate brand. In addition to implementing technical countermeasures, the Company has established a response framework centered on a dedicated organization (CSIRT), and has developed processes for understanding the scope of impact, initial response, prevention of damage escalation, and recurrence prevention, as well as conducting ongoing education and training for employees.

In the event of a large-scale natural disaster such as an earthquake, typhoon, or heavy rainfall, damage to domestic and overseas manufacturing and After-Sales Service sites, facilities, and personnel, as well as disruption of lifeline infrastructure, could halt business activities. In particular, the Shiga Plant plays a crucial role in Group production, and in the event of a wide-area disaster such as a Nankai Trough earthquake, business performance and financial condition could be significantly affected. The Company addressed this by substantially updating the large-scale disaster response manual at its Osaka Head Office in FY2025 (ending December 2025) and establishing a dedicated organization responsible for BCP development and training starting in FY2026 (ending December 2026).

Material Handling Systems are composed of a wide variety of parts and materials, and if supply is delayed or halted due to natural disasters, geopolitical risks, supplier operational stoppages, or other causes, this could disrupt the continuity of production, installation work, and After-Sales Service, adversely affecting business performance. Short-term risks are addressed through diversification of procurement sources and consideration of alternative procurement, while medium- to long-term risks are addressed by disseminating and reinforcing transaction policies through the SCM Committee and visualizing supplier risk through SAQs (Self-Assessment Questionnaires).

If the recruitment and development of specialized personnel in R&D, design, maintenance service, etc., and next-generation managers does not proceed as planned, the continuity of business operations, technical know-how, and competitive advantage could be impaired, potentially affecting business performance. Domestic and overseas labor markets are experiencing greater difficulty in recruitment and increasing labor mobility. The Company addresses this through diversification of recruitment methods (expansion of internships, referral hiring, regional employee system, etc.), development of educational programs through the Daifuku Academy, retention initiatives utilizing engagement surveys, and the formulation and operation of succession plans.