Oki Electric Industry Company, Limited

Overseas sales account for ¥46,900 million (11.1% of consolidated net sales), and if energy shortages, price increases, or supply chain disruptions occur, there is a possibility of shrinking product demand or delays in hardware production due to component supply shortages. In addition, changes in import restrictions, tariff policies, environmental regulations, information protection regulations, and other regulations could also affect operating results. As countermeasures, the Group is avoiding concentration of sales in specific regions, expanding procurement sources, and adopting alternative components.

The OKI Group has 26 overseas subsidiaries, with Vietnam as a major production base and Europe, India, and other regions as sales bases. If social unrest occurs due to coups, conflicts, terrorism, natural disasters, infectious diseases, or similar events, disruptions to raw material procurement, production delays, asset seizure, and human and physical damage could result. When such risks materialize, the Group's policy is to secure alternative procurement and logistics routes, transfer base functions, and, in cases of deteriorating profitability, consider responses including withdrawal.

The OKI Group, which conducts overseas business operations and production activities, is exposed to foreign exchange fluctuation risk. For a ¥1 depreciation of the yen, the euro would improve operating income by approximately ¥50 million, while the US dollar would worsen it by approximately ¥100 million due to increased procurement and manufacturing costs, among other factors. To address imbalances in foreign-currency-denominated asset and liability positions, the Group implements risk hedging through forward exchange contracts and marrying transactions, and speculative transactions are, in principle, prohibited.

The OKI Group, which carries interest-bearing debt, may face rising borrowing rates or restrictions on fund procurement due to fluctuations in financial markets and interest rates. In addition, a downturn in the stock market or deterioration in the investment environment could lead to a decline in the value of held listed shares and pension assets, resulting in valuation losses and a decrease in net assets. As countermeasures, the Group is restraining the level of borrowings, utilizing interest rate swap transactions, reducing holdings of listed shares, and regularly reviewing the pension asset portfolio.

In the defense domain, there are risks of component procurement concerns and supply delays due to labor shortages associated with geopolitical risk, while in the financial, retail, and global markets, insufficient response to digitalization and labor-saving needs could affect sales and profitability. The printer and PBX markets are in a contraction phase, and the timing of commercialization and scale of investment in next-generation communication technologies such as 6G and APN may fluctuate. As countermeasures, the Group is pursuing consideration of a joint venture with Hitachi, Ltd., business integration with Etoria Corporation, and the enhancement of existing network infrastructure, among other initiatives.

In the network infrastructure business, intensifying price competition with existing competitors and entry by overseas vendors into the Japanese market could reduce order opportunities, sales unit prices, and profit margins. In the financial, retail, and global markets as well, comprehensive service provision capability and sales/maintenance systems determine competitive advantage, and insufficient response could result in lost orders, price declines, and reduced market share. As countermeasures, the Group is leveraging its system construction capabilities for telecom carriers, strengthening monitoring, operation, and maintenance services in addition to equipment sales, and expanding its product lineup.

Global increases in demand for server equipment, semiconductors, optical fiber, and similar products may lead to supply shortages and price fluctuations, tight supply-demand conditions for semiconductor components including DRAM, changes in tariff policies and import/export regulations, and logistics disruptions along major maritime shipping routes, which could affect production plans, delivery times, and profitability. There is also a risk of reduced supply capacity among suppliers of mechatronics products, printers, PBX, and IoT products due to natural disasters, accidents, or labor shortages. As countermeasures, the Group is diversifying procurement sources, promoting in-house production, monitoring supply and demand for key components, adopting alternative components, and optimizing inventory levels.

Cyberattacks from outside the company, computer virus infections, improper handling of system equipment, and similar events could cause system outages, data loss or tampering, and leakage of personal or confidential information, potentially leading to reputational risk such as damage to corporate value, brand impairment, and loss of trust. As countermeasures, the Group has installed endpoint security tools on all terminals, established a 24-hour, 365-day monitoring system, and strengthened IT infrastructure measures, while continuing to work with business partners on self-checks aimed at improving information security levels across the entire supply chain.

With the advancement of AI and DX, competition to acquire DX talent and competitive manufacturing talent in the labor market has intensified, and failure to secure the necessary personnel could affect medium- to long-term business promotion. In the defense domain as well, labor shortages in expanding production capacity pose a risk of hindering the capture of growth opportunities. As countermeasures, the Group is reviewing and strengthening recruitment methods, developing diverse recruitment formats and channels, expanding growth opportunities for young and mid-career employees, utilizing senior talent, and expanding work-life balance support systems such as a childcare leave support incentive program.

The OKI Group is pursuing alliances, business acquisitions and divestitures, and consolidation of affiliated companies both domestically and internationally for the purpose of business expansion and management efficiency improvement. However, if the Group is unable to maintain cooperative relationships with partners, enters into unfair contracts, experiences contract breaches, or fails to develop anticipated markets, this could affect operating results and other outcomes. As countermeasures, the Group conducts credit checks and utilizes consultants when initiating transactions, and undertakes detailed review of contract terms and market research by internal and external specialist departments at the time of contract execution, working to reduce risk.