KOHOKU KOGYO CO.,LTD.

The company has a high proportion of overseas sales and operates multiple production sites in Asia, exposing it to the risk of supply chain disruption due to changes in the economic conditions, social situation, or political circumstances of relevant countries, or due to natural disasters. Delays, interruptions, or discontinuation of business could have a material impact on the company's financial position and business results. The company seeks to achieve both stable supply and business continuity through production at multiple sites, holding inventories of key materials, and installing in-house power generation equipment.

Due to the high proportion of overseas sales, the company bears foreign exchange risk associated with foreign-currency-denominated transactions and holdings, and sudden fluctuations in exchange rates could affect its financial position and business results. The company manages positions in foreign-currency-denominated receivables and payables, basically making foreign currency payments using foreign currency receipts, while flexibly converting to yen or purchasing foreign currency as needed to mitigate risk.

In addition to price fluctuation risk for raw materials such as aluminum wire, the Optical Components & Devices Business uses raw materials including rare earths, and the company is highly dependent on specific suppliers for some materials. If supply chain disruption or supplier insolvency occurs due to natural disasters or accidents, stable procurement could be hindered, potentially affecting the company's financial position and business results. The company strives for stable procurement through regular audits of suppliers and diversification of procurement routes.

While the company maintains a high market share in submarine cable-related products within the Optical Components & Devices Business, the limited number of market participants results in a high degree of dependence on specific customers. Significant changes in the supply-demand environment of this market or in the transaction volume with major customers could have a material impact on the company's financial position and business results. The company strives to maintain its existing customer base while pursuing the creation of new businesses and the development of new fields and markets.

The company offers highly competitive products in global niche markets, but if price competition intensifies due to competitors' pricing policies or other factors, this could affect the company's financial position and business results. The company's basic strategy is non-price competition through the promotion of high value-added product development and maintenance of a high market share, thereby minimizing the impact on business results.

Cyberattacks such as targeted attacks and ransomware are increasing in frequency and severity, and if leakage of important confidential information or business suspension occurs, it could affect the continuity of business activities, including the procurement, production, logistics, and sales systems. The company is promoting the development of regulations such as its Basic Policy on Information Security, employee training, and the introduction of management software, striving to build a system across group sites that minimizes damage and fulfills supply responsibilities.

The company has obtained quality standard certifications such as IATF16949 and ISO9001 and focuses on achieving high quality, but if a product defect occurs, it could result in the payment of large product liability damages and indirect losses arising from quality defects, potentially affecting the company's financial position and business results. In addition to continuously strengthening its quality control system, the company mitigates damage by taking out product liability (PL) insurance both in Japan and overseas.

Representative Director, President and CEO Taro Ishii plays an extremely important role in research and development, sales policy, and management decision-making, and if he becomes unable to perform his duties for any reason, this could affect the company's financial position and business results. The company is working to strengthen its management control structure through information sharing with officers and employees via the Board of Directors and Management Committee, and to develop a structure that does not rely excessively on him.

Representative Director, President and CEO Taro Ishii and his asset management company, IF Management Co., Ltd., together hold 61.8% of the total number of issued shares. If he sells the company's shares in the future for any reason, this could affect the market price and trading conditions of the shares. Although he has indicated a policy of acting as a stable shareholder while also giving consideration to the interests of minority shareholders, the structural risk of share concentration continues to exist.

For sustained business growth, the company may pursue M&A or business alliances, which require substantial investment, and if issues related to intellectual property rights or personnel arise, this could affect the company's financial position and business results. When conducting M&A or business alliances, the company's policy is to carry out comprehensive due diligence covering not only technical aspects but also financial and legal aspects, and to proceed only after appropriately understanding the risks of the target company.