AIPHONE CO.,LTD.

A significant portion of domestic sales is linked to the number of new housing starts, and a decline in housing starts directly affects business performance. While the Company is focusing on strengthening overseas sales and expanding sales in the renewal market, dependence on the domestic new housing construction market remains high.

As a specialized manufacturer of communication equipment centered on intercoms, the Company is exposed to competition from other companies, and there is a risk that deteriorating market conditions or competitor actions could intensify demand fluctuations and price competition. Although the Company is strengthening development of high value-added products, changes in the competitive environment may affect business performance.

Since the Company procures parts and other materials from numerous suppliers, there is a risk that supply disruptions, delays, or price surges may occur due to issues with suppliers' production capacity or political and economic conditions in various countries, including the situation in the Middle East. Such procurement disruptions may affect business performance through production stagnation or increased costs.

Although the Company has established quality assurance regulations and thorough quality control, there is a risk of product liability arising from unforeseen defects. If a quality issue materializes, it may have a significant impact on business performance through compensation costs as well as brand damage.

Although the Company has established a compliance framework through the development of a code of conduct and regulations and the establishment of a risk management committee, business performance may be affected if a violation of laws or regulations occurs. There is also a risk that business activities could be constrained by changes in domestic and overseas laws and regulations.

The Company has established an appropriate management system for its intellectual property rights and conducts investigations to prevent infringement of third parties' intellectual property rights. However, if an intellectual property dispute with a third party unexpectedly arises, it may affect business performance through litigation costs and constraints on business activities.

Although the Company has established a Business Continuity Management System (BCMS) and conducts risk management at its domestic and overseas business sites, a large-scale natural disaster or a new pandemic exceeding expectations could cause severe damage across the entire supply chain. A decline in demand or restrictions on sales activities also poses a risk to business performance.

As the Company operates domestically and internationally, there is a risk that political and economic conditions in various countries or unforeseen wars or terrorism could affect business performance. It is explicitly stated that trends in U.S. tariff policy in particular may directly affect the Group's business performance, requiring continuous monitoring of geopolitical risks.

As the Company operates in various overseas regions, there is a risk that exchange rate fluctuations caused by economic conditions and environmental changes in each country could affect business performance. As overseas sales and procurement expand, exchange rate fluctuations in either direction—yen appreciation or depreciation—may affect earnings.

Although the Company has established information security regulations and continuously develops its operating environment for confidential information, including personal information, business performance may be affected through legal liability and loss of trust if an information leak or loss occurs due to unforeseen circumstances. Amid rising threats such as cyberattacks, continued strengthening of countermeasures is required.