NIDEC CORPORATION

Suspicions of improper accounting treatment that could have a material impact on the consolidated financial statements as a whole—such as arbitrary adjustment of the timing of write-downs on assets with impairment risk, undertaken with the involvement or awareness of management—were identified, leading to the establishment of a third-party committee on September 3, 2025. If misstatements are identified through the investigation, this could have a material and pervasive impact on the consolidated financial statements. The investigation is currently ongoing, and the company intends to take appropriate action, including corrections to securities reports for prior and current fiscal years, as necessary.

In FY2023 (ended March 2023) and FY2024 (ended March 2024), overstatement of net sales due to misidentification of consolidation adjustments for transactions between consolidated subsidiaries was identified and recognized as a material weakness requiring disclosure. Furthermore, in FY2025 (ended March 2025), an underrecognition of unpaid customs duties resulting from errors in the declared country of origin for motors manufactured by a consolidated subsidiary was newly identified, and this was determined to constitute a material weakness requiring disclosure in the company-wide internal controls and internal controls over the financial reporting and closing process. While recurrence prevention measures have been formulated, including fostering a compliance-first mindset, strengthening the trade compliance framework, and reinforcing global governance structures, the reliability of financial reporting could be affected if material weaknesses recur in the future.

NIDEC positions M&A as a key growth strategy, but failure to select appropriate acquisition targets or unsuccessful post-merger integration (PMI) could result in goodwill impairment, adversely affecting business results and financial condition. There is also reputational risk arising from measures such as unsolicited acquisitions. As countermeasures, the company is working to select target companies aligned with its business strategy, conduct thorough due diligence, execute PMI swiftly, and minimize goodwill impairment risk. The risk level is assessed as "significant."

As customer quality requirements become increasingly sophisticated, failure to provide safe, high-quality products could lead to property damage, personal injury accidents, and claims, litigation, recalls, or administrative sanctions from customers. This could result in costs for recalling and repairing defective products and declining sales due to a damaged brand image, potentially causing serious adverse effects on financial and human resources. The company addresses this through building a global quality assurance framework headed by the Chief Quality Officer (CQO), holding regular quality meetings, and operating a quality management system based on international standards such as ISO 9001 and IATF 16949. The risk level is assessed as "significant."

With more than 300 group companies across over 40 countries worldwide and overseas sales accounting for approximately 90% of total sales, NIDEC faces the risk that the rise of protectionist trade policies, exemplified by U.S.-China trade issues, export restrictions on rare earths and other materials, and the materialization of geopolitical risks, could compound to cause fluctuations in product demand, difficulties in raw material procurement, supply chain disruptions, rising manufacturing costs, and restrictions on business activities. The company addresses this through optimizing its business portfolio, promoting local production for local consumption (Made-in-Market strategy), diversifying its supply chain, and strengthening its information-gathering framework. The risk level is assessed as "high."

Rapid technological innovation, such as advances in AI and autonomous driving technology, could cause a sharp decline in demand for conventional products (electric motors, sensors, etc.), reducing market share and profitability. Delayed response to the rise of new market players or rapid technological evolution could lead to declines in sales and profit. The company addresses this through strengthening its R&D division, collaborating with startups, and monitoring via a Technology Strategy Committee, among other measures. This risk is assessed as having "increased" year-on-year, with a risk level of "high."

As the company handles extensive confidential and personal information of customers, business partners, and employees, information leaks caused by cyberattacks, internal misconduct, or human error could result in substantial damages, fines, and loss of trust from customers and business partners, leading to declining sales and serious damage to brand image. The company addresses this through establishing a group-wide security management framework, conducting vulnerability checks on VPN equipment, and developing incident response manuals with regular drills. The risk level is assessed as "high."

A significant portion of sales is denominated in foreign currencies such as the U.S. dollar, euro, Chinese yuan, and Thai baht, and particularly when the yen appreciates, the yen-equivalent value of overseas sales declines, putting pressure on operating income and net income. Currency instability in emerging markets and foreign exchange gains/losses arising from fluctuations in foreign-currency-denominated assets and liabilities could also adversely affect financial condition. The company addresses this through utilizing natural hedges, regularly monitoring foreign exchange risk, and diversifying risk through transactions in multiple currencies. The risk level is assessed as "high."

NIDEC's continued success has depended heavily on the ability and leadership of its founder, Shigenobu Nagamori, and failure to produce new leaders who embody the founding spirit could adversely affect the business, business results, and financial condition. The company has established a nominating committee, is advancing succession planning, and has implemented executive candidate development programs such as a global management academy. As of April 1, 2025, the company built a global head office structure centered on CxOs and is progressing toward a systematized organizational function structure. The risk level is assessed as "high."

The company relies primarily on borrowings from financial institutions and capital market financing for the funds necessary for business growth and operations, and in the event of a deterioration in global economic conditions, a downgrade in credit rating or risk-averse behavior by investors could prevent the company from raising necessary funds on appropriate terms. If a shortage of working capital or delays in capital expenditure occur, this could seriously affect the company's growth strategy and competitiveness. The company addresses this through diversifying fundraising methods (bank loans, corporate bond issuance, etc.), utilizing a global cash management system, and working to maintain and improve its credit rating. The risk level is assessed as "high."