OMRON Corporation

As legal and regulatory frameworks for new technologies such as AI use and product security continue to develop, there is a risk of large-scale recalls, violations of laws and regulations related to product environment, safety, and security, and operational shutdowns caused by cyberattacks on networked products. As countermeasures, the company is promoting the acquisition of QMS certifications such as ISO9001, strengthening product security systems (PSIRT), and conducting on-site quality inspections.

U.S. tariff increases, China's tightening of rare earth export controls, intensifying competition and protectionist policies over advanced technologies such as semiconductors and AI, and conflicts in Iran and Ukraine are having a significant impact on corporate activities. A delayed response could result in a decline in supply chain competitiveness, product supply disruptions and cost increases, or violations of export control and sanctions regulations. The company is monitoring global political and economic conditions and reorganizing its export control and security trade management system.

While dependence on digital technologies such as AI, IoT, and cloud is increasing, cyberattacks are becoming more sophisticated and are expanding across the entire supply chain. Large-scale system failures, information leaks, business disruptions, and violations of data and privacy regulations in various countries could result in losses, administrative penalties, sales declines, and damage to brand value. The company is strengthening assessments and countermeasures in line with the NIST-CSF, establishing a CSIRT, and rolling out supply chain risk assessments globally.

As global business expansion progresses, the company must respond to the increasing sophistication and stringency of accounting standards such as revenue recognition and intangible asset valuation, the development of international taxation rules, and the growing complexity of customs law and transfer pricing taxation. Improper accounting treatment, declines in asset valuation, or violations of customs and transfer pricing regulations could result in financial restatements, large additional tax assessments, or settlement payments. The company has completed an internal control strengthening project (including the introduction of a risk detection tool for Chinese group companies) and is promoting compliance with accounting standards through the use of external experts.

The rapid evolution of technologies such as generative AI and AI agents, the development of AI regulations in various countries, an increase in intellectual property disputes, and the global expansion of counterfeit goods distribution are threatening business competitiveness. AI ethics issues and non-compliance with regulations, patent infringement disputes, leakage of technology and know-how, and insufficient technology development aligned with business strategy could lead to suspension of transactions, sales declines, and damage to brand value. The company is establishing an AI governance committee, formulating AI control rules, developing and executing an intellectual property strategy, and conducting counterfeit detection activities.

As the company accelerates the restructuring of its business portfolio by prioritizing M&A in the control equipment business under SF 2nd Stage, there are risks of deteriorating performance at acquired companies, failure to realize synergies, compliance issues, prolonged regulatory review due to investment restrictions in various countries, and the recognition of substantial costs associated with business withdrawals. The Board of Directors conducts progress reviews (at least once a year) of economic effect targets following acquisitions and investments, along with detailed due diligence.

As the company accelerates management speed through significant delegation of authority, the enforcement of laws and regulations such as anti-competition and anti-bribery rules is intensifying, new regulations addressing AI and alliances are being considered, and demands for price pass-through across the supply chain are increasing. Violations of business laws in new businesses, violations of competition law and the Subcontract Act, or bribery violations could lead to severe administrative penalties and damage to brand value. The company conducts compliance education through a Global Business Ethics Month, operates an internal whistleblowing system, and carries out risk-based internal audits.

Amid intensifying competition to acquire scarce talent with advanced technological expertise, the loss of talent with necessary skills and experience, failure to acquire such talent, and declines in employee engagement or labor disputes could lead to reduced business competitiveness and damage to brand value. The company is promoting talent allocation to priority businesses, reforming its evaluation and compensation systems, and addressing organizational issues through the engagement survey

There is an ongoing risk of tight supply of critical components such as semiconductors due to strong AI demand and heightened tensions in the Middle East, as well as social dysfunction caused by major natural disasters such as earthquakes and floods, and infectious diseases. Long-term supply disruptions from key suppliers, large-scale IT infrastructure outages, or production halts at the company's own factories could lead to losses, sales declines, and damage to brand value. The company is promoting the diversification of procurement and production systems for key products, establishing an emergency escalation system, and conducting crisis simulations and drills.

While due diligence obligations and import ban regulations regarding human rights issues such as forced labor and harassment are being developed, requirements for third-party assurance of environmental disclosures and greenwashing regulations are also being strengthened. The occurrence of human rights issues in the supply chain or inappropriate disclosures perceived as environmental regulation violations or greenwashing could lead to suspension of transactions and damage to brand value. The company is promoting human rights risk assessments using the RBA assessment tool, setting greenhouse gas reduction targets, and conducting biodiversity conservation activities in line with TNFD recommendations.