IDEC CORPORATION

The risk that global business sites and employees may be affected by natural disasters such as earthquakes, heavy rain, floods, typhoons, and forest fires, resulting in operational suspension and damage. Partial or full suspension of operations may delay production and shipment, and substantial costs may be incurred to repair facilities. A BCP Formulation Subcommittee has been established within the Risk Management Committee, promoting the development of initial response flows, manuals and checklists, and regular safety confirmation drills.

The risk that significant changes in international relations, or social and market turmoil caused by conflicts, terrorism, demonstrations, or disputes, may have a major impact on financial condition, business sites, employee safety, and business development. In this fiscal year's assessment, the impact level was evaluated as having risen in light of the external environment. The Group works to collect information in a timely manner and mitigate risk through regional diversification, and when risks materialize, task forces are established for each issue theme to advance countermeasures.

The occurrence of a major product accident that could affect life and health poses a risk with significant impact not only on financial condition and business activities but also on reputation. This is recognized as a particularly serious matter for the Group, whose purpose is to realize safety, security, and well-being. The Group promotes early detection and response to abnormalities through the development of QMS-based forms and procedure manuals, monitoring of market claim failure information, and the establishment of alert functions and a major claims management list.

The risk that quality fraud, such as falsification of product performance or data, could have a major impact on business activities and reputation. In this fiscal year's assessment, the probability of occurrence was evaluated as having risen due to the expansion of global business. The Group works to prevent occurrence by establishing a workflow to check consistency between regulatory requirements such as catalogs and instruction manuals and product/design specifications, safety standards, and verification data, and by standardizing and systematizing reliability evaluation testing.

The risk that inability to appropriately manage and recover strategic investments could impact financial condition. In this fiscal year's assessment, both impact level and probability of occurrence were evaluated as having risen due to the execution of structural reforms and other factors. The Group strives to set appropriate investment amounts that take risk into account through prior verification and analysis, while steadily monitoring investment recovery and managing execution against plans.

The risk that excessive personnel turnover could impede corporate revitalization and the strengthening of human capital, significantly affecting sustainable growth and enhancement of corporate value. In this fiscal year's assessment, the probability of occurrence was evaluated as having risen in light of the business situation. The Group works to create a comfortable working environment that respects diversity and to foster an organizational culture, while also promoting operational efficiency through structural reform and appropriate global personnel allocation.

Cyberattacks that cause long-term network outages, affect core systems, or result in data loss or leakage pose risks to business activities, financial condition, and reputation. In this fiscal year's assessment, which includes overseas sites, both impact level and probability of occurrence were evaluated as having risen. The Group works to strengthen technical measures for information security and improve knowledge of security risks, while promoting regular inventories of confidential information and reviews of the information management system.

If actual future demand or market conditions deteriorate compared to the Group's estimates, a valuation loss on inventory may become necessary. The Group recognizes the risk that sudden demand fluctuations could lead to inventory becoming stagnant over the long term. In formulating supply and production plans, the Group works to flexibly reflect sudden demand fluctuations and reduce the risk of long-term inventory stagnation.

Depending on declines in fair value or the status of future cash flows, application of impairment accounting standards for fixed assets may result in impairment losses. In particular, there is a risk that impairment losses could arise on goodwill, trademark rights, and customer-related assets recorded in connection with the consolidation of APEM as a subsidiary, should profitability decline due to economic fluctuations or synergy effects fail to materialize. The Group is strengthening regular monthly and quarterly confirmation of business trends and management conditions, as well as efforts to maximize synergy effects.

In connection with the consolidation of APEM as a subsidiary, the Group has recorded goodwill and intangible assets (trademark rights and customer-related assets), and there is a risk of significant impact on financial condition if the expected synergy effects are not realized. Should profitability decline due to economic fluctuations or other factors, impairment losses may arise. The Group is strengthening regular monthly and quarterly confirmation of business trends and management conditions, as well as efforts to maximize synergy effects aimed at enhancing excess earning power.