NITTAN Corporation

There is a risk that the market scale of the Group's existing business areas will contract due to the decline in internal combustion engine (ICE) production accompanying the tightening of environmental regulations worldwide. While there has been a temporary re-evaluation driven by the diversification of powertrains, including hybrid vehicles, the long-term decline in demand for internal combustion engines could put pressure on management. As a countermeasure, the Company is promoting development toward the commercialization of VISION I (ICE domain) and VISION II (EV domain) under "NITTAN Challenge 10."

Uncertainty regarding the future continues due to heightened geopolitical risks, including the prolonged situation in the Middle East, volatility in financial and capital markets, and developments surrounding U.S. trade policy, and there is a risk that changes in market conditions in various countries will affect business performance. Based on information obtained from domestic and overseas sites, issues are reported to the Management Committee and Board of Directors, countermeasures are implemented, and progress toward annual targets is monitored.

For the Group, which conducts overseas business, foreign exchange fluctuations pose a risk that directly affects earnings. Exchange rate fluctuations in foreign currency-denominated transactions may adversely affect business performance and financial position. As a countermeasure, the Company implements forward exchange contracts as necessary and works to shorten the collection period for foreign currency receivables.

There is a risk that the Company's existing products will lose competitiveness due to advances in electrification and the emergence of low-cost, innovative technologies and products. The aging of products and changes in or decline of internal combustion engines could threaten the earnings base of existing businesses. The Company addresses this through the promotion of product development aligned with future needs and new business development under "NITTAN Challenge 10."

Following the subsidiarization of Ena Metal Manufacturing Co., Ltd. in October 2024, the Company continues to consider business expansion through M&A; however, there is a risk that expected benefits may not be realized due to fraud that cannot be detected through due diligence or due to difficulties in the PMI (post-merger integration) process. There is also a risk of loss of management control as a target of an unsolicited (hostile) takeover. The Company addresses this through collaboration with experts, the use of representation and warranty clauses, promotion of NC10 activities, proactive IR activities, and enhancement of corporate value through share buybacks.

The Group, which has overseas affiliated companies, faces a risk of inadequate governance across the group due to language barriers and difficulty in securing sufficient staffing. If fraud occurs or errors arise in financial results, this could lead to a loss of credibility and reduced reliability of financial reporting. The Company addresses this through dialogue with the heads of local subsidiaries, continued regular audits, and utilization of an internal whistleblowing system.

If the Company is subject to a cyberattack or if unexpected system trouble occurs, this could disrupt business operations and significantly affect business performance and financial condition. There is also a risk of leakage of personal information or confidential information due to unauthorized access, among other causes. The Information Security Committee implements security enhancement measures incorporating the expertise of specialized vendors, and carries out group-wide rollout and regular training.

The situation in which it is not easy to recruit excellent talent continues, creating a risk that securing the necessary personnel will become difficult. A shortage of talent could lead to declining productivity and a weakening of the ability to drive new business initiatives. The Company addresses this through strengthening its recruitment system and enhancing recruitment tools, clarifying its human capital management policy, improving engagement, and developing work-life balance measures.

If a recall or quality defect occurs, the Company risks losing customer trust, being held liable for substantial compensation costs, and having business relationships terminated. This could affect operating results and financial position through a decline in social reputation. The Company addresses this through thorough implementation of a quality management system based on ISO9001 and IATF16949 standards and the use of product liability insurance.

In the planned renewal of the Company's core systems, there is a risk that deficiencies occurring during system migration could cause a halt in corporate activities and errors in financial reporting. This could affect the entire business process and lead to serious issues in internal controls. The Company plans to verify the validity of functions and figures by checking items after migration, and to audit and take corrective action on the revised business processes and financial closing processes.