YOKOWO CO.,LTD.

More than 70% of sales and more than 80% of production occur overseas, with production subsidiaries in China, Malaysia, Vietnam, the United States, and the Philippines serving as major bases. Economic sanctions, trade friction, tariff increases, and stricter import/export regulations, along with heightened geopolitical tension and political instability, could significantly affect production activities and the supply chain. In response, the Company is diversifying and distributing its procurement sources, selecting suppliers according to economic regions, and establishing a system for rapid response in the event of an emergency.

Orders are heavily dependent on market trends and customer performance in the automotive, semiconductor testing, mobile device, and advanced medical device markets. Advances in the integration and softwarization of in-vehicle communications, among other factors, could reduce demand for existing products, and intensifying price competition with competitors could undermine competitive advantage. In response, the Company is fostering new businesses and transforming its business model through the Incubation Center established in April 2023, and is exploring new core technologies by establishing a CTO position and implementing Scrap & Build in its R&D division.

As more than 70% of sales and more than 80% of production occur overseas, with much of the revenue, cost, and held assets denominated in local currencies, sharp fluctuations in exchange rates directly affect business performance and financial position after conversion into yen. Under the currency composition as of the end of the current consolidated fiscal year, yen appreciation has a negative impact on earnings while yen depreciation has a positive impact. The Company works to mitigate this risk through thorough management of foreign-currency-denominated receivables and payables, securing a total currency balance across all global sites, and reviewing its hedging policy.

Unforeseen events such as war, conflict, infectious diseases, and inflation could significantly increase the procurement and delivery costs of raw materials and parts, potentially causing supply delays or stoppages. In particular, there are concerns that the risk of a blockade of the Strait of Hormuz amid heightened tensions in Iran, along with soaring prices of raw materials such as gold and copper, could put pressure on manufacturing costs. The Company addresses this through strategic inventory stockpiling, diversification of logistics routes, diversification of procurement sources, and securing design flexibility through advance qualification of alternative materials and specifications.

If important management information assets or customer-entrusted information are leaked, destroyed, or tampered with due to internal information leaks or external cyberattacks, the Company could suffer significant damage or losses. The Company has established an information security system in line with the ISO27001 framework, and conducts ongoing education for officers and employees as well as regular internal and external audits. Information security is also maintained in telework environments through the use of communication encryption software, among other measures.

If defects in the Company's products cause damage to customers' property or lead to market recalls of customers' products, the Company could bear liability for damages, affecting business performance and financial position. Because the Company supplies parts and testing equipment used in customers' manufacturing and inspection processes, the scope of impact from quality issues is broad. The Company is preparing for such contingencies by strengthening specification and requirement verification, promoting zero-defect activities, expanding employee training, and maintaining product liability insurance.

Intensifying competition for talent has made it difficult to secure personnel with the necessary skills and know-how, and the absence of successors could cause departmental functions to stagnate and career paths to become fixed, potentially affecting medium- to long-term business promotion, production and supply capacity, and product quality. The Company is developing personnel capable of flexibly handling multiple tasks, planning systematic succession, and considering an open recruitment system for cross-departmental projects, while also working to improve operational efficiency and productivity through the introduction of Microsoft Copilot for Microsoft 365.

If the Company's decarbonization efforts are deemed insufficient, this could lead to reduced or discontinued business from customers, divestment, and reputational decline, resulting in deteriorated business performance and a falling share price. There is also a risk that rising temperatures could increase cooling and energy costs, putting pressure on earnings. The Company obtained SBTi certification on March 31, 2026, and has set targets to reduce Scope 1 and 2 emissions by 42% in FY2030 (ending March 2030) compared to FY2024 (ending March 2024) and Scope 3 emissions by 25% over the same period, addressing this through expanded procurement of renewable energy, among other measures.

Insufficient governance functions could lead to deteriorated business performance, a falling share price, and reputational decline, and investments yielding returns below the cost of capital could erode corporate value. Since the 87th Annual General Meeting of Shareholders held on June 27, 2025, the Company has set the ratio of independent outside directors at 50% (4 out of 8), and is working to improve the transparency of the Nomination and Compensation Advisory Committee. The Company is enhancing the precision of decision-making through thorough ROIC-based management, clarifying investment and withdrawal criteria, and establishing a three-lines-of-defense system.

If the post-M&A integration process does not proceed smoothly, the Company may fail to realize expected synergies and enhance corporate value as intended. Furthermore, if the share price remains undervalued for a sustained period, the risk of receiving unsolicited acquisition proposals or takeover attempts from competitors or others increases. The Company addresses this through the Business Risk Management Committee's involvement in the decision-making process, thorough ROIC-based management, expansion of strategic partnerships with key partners, and long-term stabilization of the shareholder structure through strengthening of the employee stock ownership plan.