RISO KAGAKU CORPORATION

In addition to stencil printing machines and inkjet printers, competition exists with copiers and laser beam printers. If competition in terms of performance and price intensifies, it may adversely affect the group's business performance and financial condition. Changes in the competitive environment in the mainstay office printing equipment-related products market constitute the greatest risk factor.

If technological innovation emerges that competes with stencil printing technology or inkjet technology, there is a risk that product competitiveness could decline significantly. If the company fails to anticipate the flow of technological innovation and cannot develop attractive new products, future growth and profitability will decline, adversely affecting business performance and financial condition. The risk of the core business's technological foundation becoming obsolete is directly linked to business continuity.

Approximately half of net sales are to overseas customers, and yen appreciation against the US dollar and euro may adversely affect business performance. Since the value of sales, expenses, and assets denominated in local currencies fluctuates depending on the exchange rate used for conversion into yen, exchange rate fluctuations directly affect earnings. In particular, the impact on business performance and financial condition is significant during periods of yen appreciation against major currencies.

The company has manufacturing bases in China and Thailand, and sales subsidiaries around the world, creating a risk of unforeseen events such as political instability, anti-Japanese sentiment, labor disputes, terrorism, natural disasters, and the spread of infectious diseases. If a large-scale event occurs, it could lead to the suspension of production and sales activities or the loss of local assets. The company pays close attention to grasping the situation and strives to prevent damage, but complete avoidance is difficult.

Among the sales subsidiaries, there exist underperforming subsidiaries that have continuously recorded ordinary losses due to poor sales and other factors. Although improvement measures such as cost reductions, sales channel restructuring, and staffing reviews are being implemented, if performance does not improve as planned, it may adversely affect the overall performance and financial condition of the group.

The company holds customers' personal information, technical know-how, and confidential information, and if leaked, it would bear liability for damages and social responsibility, in addition to undermining corporate competitiveness. Measures such as establishing personal information protection regulations and corporate confidentiality management regulations and obtaining Privacy Mark certification have been implemented, but complete prevention cannot be guaranteed. Information leakage, in addition to adversely affecting business performance and financial condition, would constitute a serious blow to the corporate brand.

The company places maximum emphasis on quality control at its manufacturing bases in Ibaraki Prefecture, Yamaguchi Prefecture, China, and Thailand, but there is no absolute guarantee that no serious defects will occur in its products. Defects leading to recalls or product liability claims would incur substantial costs and could seriously affect corporate reputation, potentially leading to decreased sales. The company has product liability insurance, but it may not cover all damages in some cases.

Many of the raw materials and parts that make up the company's products are chemical products and resins derived from naphtha, and it is recognized that the intensifying situation in the Middle East is affecting the supply of crude oil and naphtha. Depending on future developments, this could lead to rising manufacturing costs, increased expenses, and impacts on product sales and service provision. Close attention is required regarding the risk of geopolitical risk spilling over into the direct cost structure.

The company is subject to a wide range of legal regulations not only within Japan but in countries around the world, including business licensing, antitrust, trade, environmental, and information control regulations. If legal regulations that affect business continuity are imposed in the future, it may adversely affect business performance and financial condition. Measures such as establishing compliance management regulations and compliance codes of conduct and setting up hotlines have been implemented, but there is also a risk of losing trust due to the actions of a single employee.

Securing specialized technical personnel and management strategy personnel is essential for the company's continued business development, but there is a risk that securing personnel as planned will become difficult due to Japan's declining birthrate, aging population, and shrinking labor force. If personnel acquisition does not proceed smoothly, it may affect business development, performance, and growth prospects over the long term.