Oi Electric Co., Ltd.

The Group has a high degree of dependence on certain customers related to electric power companies and telecommunications carriers. If the Group fails to adequately grasp customer needs or cannot provide attractive products and services, growth and profitability may decline. In particular, if a major natural disaster or significant change in social conditions causes customers to revise their capital expenditure plans, this could have a substantial adverse effect on the Group's financial position and business performance. The Group is addressing this through continuous efforts to understand customer needs and enhance the appeal of its products and services.

Many companies, including manufacturers and trading companies, have entered the information and communications equipment market, and some possess greater management resources than the Group. If competitors offer similar products and services at lower prices, it may become difficult for the Group to differentiate its products and services, potentially preventing it from securing revenue as planned. The Group is promoting business expansion in light of market trends such as the utilization of AI and the spread of IoT devices, but there is no guarantee of success.

In the information and communications equipment market, rapid technological advances and changes in market needs may result in the emergence of new technologies or changes in standards during product development, causing products to become obsolete even before they are launched. In addition, if rapid market fluctuations cause delays in the launch of developed products or a shortage of service support personnel, the Group may fail to meet demand and miss opportunities to expand market share. Management itself recognizes the difficulty of accurately predicting market trends.

The Group has established a dedicated quality assurance department and strives to maintain quality, including in cases where part of its products or services are outsourced, but there is no guarantee that defects will not occur in all products and services. If a large-scale defect or similar problem occurs due to an unforeseen event, the Group may be held liable for damages. While the Group addresses this through the establishment of a quality control system that includes outsourcing partners, this risk cannot be completely eliminated.

The Group procures many parts, including semiconductors, from external sources. If procurement is disrupted due to supply chain instability or sharp increases in raw material prices, this may affect the Group's financial position and business results. Procurement disruptions directly lead to stagnation in production activities and delays in product supply, making this a critical risk to business continuity. There is no explicit description in the securities report regarding specific countermeasures such as diversification of procurement sources or securing inventory.

Since the Group imports a portion of its parts, it is exposed to price fluctuation risk arising from foreign exchange rate movements. Significant exchange rate fluctuations may affect business performance and financial position through increased procurement costs. As a mitigation measure, the Group estimates costs based on exchange rates at appropriate timings.

The Group relies mainly on financial institutions for fund procurement. If fund procurement becomes insufficient or unsuccessful due to changes in financial institutions' policies or other factors, this may adversely affect the Group's financial position and business results. The securities report does not explicitly describe specific measures such as diversification of funding methods or alternative means. This is recognized as a risk in which changes in the financial environment directly affect business operations.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate and the long-term expected rate of return on pension assets. If actual results differ from these assumptions or if the assumptions are changed, this may affect expenses and obligations in future periods. In particular, a future decline in the discount rate or a change in investment yields could increase retirement benefit expenses, affecting the Group's financial position and business results. The impact amount accumulates and is recognized systematically over future periods.

For contracts on hand where a loss is expected and the amount can be reasonably estimated, the Group records the estimated loss as a provision for loss on construction contracts, which may affect its financial position and business results. Deterioration in the profitability of construction projects directly affects business performance through the recording of such provisions, making profitability management at the time of order acceptance important. There is no detailed description in the securities report regarding the specific management system for construction losses.

If the net realizable value declines significantly due to deteriorating market conditions, if there are changes in the usage or disposal status of inventory held over long periods, or if there are changes in the expected disposal or use of excess inventory, this may affect business results and financial position. The Group applies the "Accounting Standard for Measurement of Inventories," and there is a risk that sudden changes in market conditions could lead to the recognition of valuation losses. Along with the risk of impairment of fixed assets, this requires management as a risk of decline in asset value.