KYOSHA CO., LTD.

The company's core products, Single-sided & Double-sided Printed Wiring Boards, are used in a wide range of applications including automobiles, home appliances, office equipment, and electronic devices. If demand declines due to economic trends or fluctuations in production volumes across industries, this may affect operating results and financial condition. As a countermeasure, the company sells to a broad range of applications and diversifies risk by securing multiple sales destinations, targeting approximately 10% sales share per customer.

As the company has dispersed production sites both domestically and overseas, various risks associated with overseas business development exist, including changes in political conditions, tax systems, employment environments, supply chains, infrastructure such as electric power, wage increases, and public health and security conditions in each country. These are difficult to reasonably predict, and if they were to occur, they could have a significant impact on operating results and financial condition. The company strives to prevent and avoid such risks through close information sharing with group companies and gathering information from external consultants in each country.

While increases in the prices of basic materials such as crude oil, glass, copper, and pulp are sensitively reflected in the prices of main materials, automobile and home appliance manufacturers demand stable prices, making it difficult to immediately pass on sharp increases in main material prices to sales prices. In addition, if the surge in energy prices and logistics costs and disruption to supply chains caused by conflict in the Middle East region become prolonged or more severe, this may hinder raw material procurement and production activities. As countermeasures, the company promotes information sharing among group companies regarding basic material price fluctuations, promotes appropriate sales pricing, strengthens price negotiation power through joint purchasing, and diversifies procurement sources and secures alternative suppliers.

The company conducts business both domestically and overseas, and foreign currency-denominated transactions occur mainly in intra-group transactions. In addition, the main materials for domestically produced single-sided Printed Wiring Boards have a high import ratio, so large fluctuations in exchange rates may affect operating results and financial condition. As a countermeasure, the company implements risk hedging through forward exchange contracts and other means based on its "Derivative Transaction Risk Management Regulations."

The company is promoting research and development of environmentally friendly Printed Wiring Boards for electric vehicles (high current), new energy (solar and wind power), and LED light sources. If the launch of new products does not proceed as planned, this may affect operating results and financial condition. As a countermeasure, the company strives to improve development speed and accelerate market introduction by leveraging inter-company collaboration.

Although the company has dispersed manufacturing sites across 5 domestic and 3 overseas locations, if a natural disaster such as a major earthquake or a sudden accident such as a fire occurs, damage to production equipment could result in substantial time and cost for recovery. In addition, a worldwide pandemic of infectious disease could cause operational disruptions at the group and its business partners, potentially affecting the supply chain. The company works to mitigate risk through the implementation of safety and health activities at each site, the formulation of Business Continuity Plans (BCP) and establishment of backup systems, and enrollment in various insurance policies.

Due to the increasing sophistication of customers' quality requirements and technical standards, as well as the diversification of product usage environments, unexpected quality problems may arise during customer use. If a quality problem occurs, it may affect operating results and financial condition through product re-production, returns, replacement, and loss of orders. As countermeasures, the company implements improvement activities through sharing quality targets with customers, strengthens design reviews at the order-taking and mass-production stages, strengthens inspection systems, and enrolls in various insurance policies.

The company utilizes computer systems and communication networks in its production and sales activities. If unforeseen events occur, such as functional outages due to network failures, equipment malfunctions, or software defects, or data tampering, destruction, or information leakage due to unauthorized access, this may affect operating results and financial condition. As a countermeasure, the company has established an Information Security Committee and implements computer equipment management and employee training to prevent unauthorized access based on its regulations.

Although the company has established a group-wide risk management system based on its organizational regulations, authority regulations, and affiliated company management regulations, if a previously unanticipated global risk occurs, such as a sudden deterioration in a business partner's creditworthiness, this may require the recording of losses or provisions, affecting operating results and financial condition. As countermeasures, in addition to reassessing risks, developing countermeasures, and clarifying management methods in daily operations, the company is strengthening credit management of business partners and promoting the transfer of production from outsourced manufacturers to its own group.

In Japan, where the working population continues to decline due to the falling birthrate and aging population, if the company is unable to develop and secure human resources as planned, this may affect operating results and financial condition. As countermeasures, the company promotes human resource development and acquisition based on its management philosophy, while also striving to mitigate risk by accelerating operational efficiency through the use of digital technology (DX) and production automation.