ALLIED TELESIS HOLDINGS K.K.

The Group has consolidated subsidiaries in 19 countries, and changes in the political and economic conditions of each country or region may cause disruptions to production and sales in specific countries or a sharp decline in demand. The Group strives to avoid dependence on specific countries or regions through in-house information gathering, monitoring by third-party organizations, and diversification of production and sales bases; however, changes in circumstances may affect business results and financial position.

Products use a large number of precision electronic components such as ICs, memory, and optical devices, and there is a risk that component prices will rise due to changes in the global supply-demand balance, increased demand from other industries or specific regions, supply reductions caused by disasters, or rising labor costs. The Group is diversifying its procurement sources, strengthening relationships, and considering alternative products; however, if procurement disruptions occur beyond expectations, this may affect business results and financial position.

Safety standards, environmental standards, and export-related regulations vary widely across countries and regions, and unexpected revisions to standards or regulations may disrupt the manufacture and sale of products. The Group strives for early detection through checking standards with component suppliers, external audits, information sharing within the Group, and cooperation with specialized organizations; however, depending on the content of any revisions, this may affect business results and financial position.

The Group implements quality control across the entire value chain (supplier evaluation, design review, in-process inspection, pre-shipment inspection, etc.), but if problems occur that exceed expectations, the Group may bear substantial liability for damages arising from customer system outages or risks to life and body. In addition, regardless of the veracity of the facts, there is a risk of loss of social trust, and although the Group has taken out liability insurance to prepare for such events, the impact on business results and financial position cannot be ruled out.

The overseas ratio of consolidated net sales has fluctuated at approximately 30% to 50%, and since product procurement in Japan is mainly settled in US dollars, the Group is susceptible to foreign exchange fluctuations. As the Group operates in 18 overseas countries, overseas expenses such as research and development costs are also affected by exchange rate fluctuations. The Group conducts sensitivity analysis and hedges such as forward exchange contracts based on market risk management guidelines; however, sharp fluctuations in exchange rates may affect business results and financial position.

The Group has established a compliance framework including corporate ethics regulations, and has set up an Integrated Compliance Committee, operates a compliance hotline, and conducts internal training tailored to the characteristics of each country and region. However, if a serious violation of laws and regulations occurs due to intentional or negligent conduct by officers or employees, the Group may suffer a loss of social credibility and bear liability for damages, which may affect business results and financial position.

In handling personal information and confidential information of customers and business partners through system construction and support services, there is a risk of unauthorized access, tampering, or data leakage due to cyberattacks and other causes. The Group has implemented measures such as obtaining ISO/IEC 27001 certification, encrypting business data, adopting PC thin clients, and taking out liability insurance; however, if information leakage occurs due to unforeseeable cyberattacks or other causes, the Group may bear substantial liability for damages and suffer a loss of social trust.

There is a risk that product development may infringe on third parties' intellectual property rights, as well as a risk that the Group's intellectual property rights may be infringed by third parties. The Group has established thorough investigation and verification at each development phase, assignment of specialized intellectual property personnel, and a cooperative framework with attorneys and patent attorneys; however, intellectual property protection systems are inadequate in some countries and regions, and if the manufacture or sale of similar products occurs or the manufacture or sale of the Group's products is disrupted, this may affect business results and financial position.

If a natural disaster such as an earthquake or an act of terrorism occurs in a country or region where the Group operates, this may cause operational disruption due to catastrophic damage to facilities at each site, as well as enormous costs related to repair or replacement of facilities. The Group has implemented measures such as diversifying sales and production bases, conducting earthquake-resistant construction, maintaining appropriate inventory levels, and taking out non-life insurance; however, if a sudden disaster or other event beyond expectations occurs, this may affect business results and financial position.

Sustainable growth requires the stable recruitment and retention of highly skilled engineering talent; however, the supply-demand balance for engineering talent, particularly in the IT and digital fields, is tight, and competition for recruitment is intensifying year by year. The Group is developing a compensation system that reflects market competitiveness, clarifying career paths, promoting flexible working arrangements, and improving the development environment; however, if the Group is unable to secure and retain talent as planned, this may affect business results and financial position.