HORIBA, Ltd.

Demand for products such as Engine Exhaust Gas Measurement Systems and air/water pollution analysis equipment may fluctuate due to trends in exhaust gas and fuel efficiency regulations and changes in environmental laws and regulations by government agencies. In the new energy and carbon neutrality domains, including hydrogen, risk events have already partly materialized due to the discontinuation of subsidies in various countries, requiring a response to changes in product mix and cost reduction measures. As countermeasures, the Group continuously gathers the latest regulatory information, develops technologies compliant with regulations, and works to reduce risk by expanding its product lineup.

Structural changes in the automotive industry, such as the electrification of automobiles and advances in AI-related technologies, may affect the R&D and capital investment trends of automotive-related manufacturers, which could in turn affect the Group's financial position and operating results. The engineering and testing business related to automotive development holds substantial fixed assets, creating additional financial risk from declines in utilization rates. As a countermeasure, the Group is strengthening its comprehensive development engineering capabilities, from design to actual vehicle verification, for connected and autonomous vehicles (CAV), and is working to reinforce its business foundation to respond to a wide range of demand.

In the Advanced Materials & Semiconductor field, whose main products are flow control devices for semiconductor manufacturing equipment and quality control/R&D support equipment, sharp fluctuations in semiconductor market demand and technological changes directly affect the capital investment trends of semiconductor manufacturing equipment makers and semiconductor manufacturers, which could affect the Group's financial position and operating results. As a countermeasure, the Group strives to reduce risk by establishing operations close to customers geographically to build a system for gathering the latest information, and by developing a flexible production system that includes procurement.

In the Bio & Healthcare field, whose main products are hematology analyzers and scientific analytical instruments, demand may fluctuate due to deteriorating financial conditions at medical institutions, price competition, cuts to government R&D budgets, and changes in capital investment trends of private companies, which could affect the Group's financial position and operating results. As countermeasures, the Group works to reduce risk by strengthening information sharing across the Group, expanding new products and businesses in line with market needs and competitive trends, promoting localization including local production, and reinforcing the application of analysis and measurement technologies to growth areas such as drug development and manufacturing processes.

As policies and regulations aimed at decarbonization and carbon neutrality are being introduced in many countries and regions, the occurrence of events that are extremely difficult to address, and changes in policy trends such as the discontinuation of subsidies in new energy domains including hydrogen, may lead to major revisions of business activities and increased costs, which could affect the Group's financial position and operating results. As a countermeasure, the Group works to appropriately assess conditions and regulatory trends in each country and region to minimize the impact on management, while also creating business opportunities through CO2 reduction contributions from its own analysis and measurement solutions.

There is a risk that confidential information, such as customer and business partner information, order and contract information, and technical information, could be leaked, tampered with, destroyed, or rendered unusable due to human error or internal misconduct by employees, cyberattacks (unauthorized access, malware infection, ransomware, etc.), or security incidents in the supply chain. As countermeasures, the Group works to reduce risk and minimize damage by establishing information security-related regulations, providing continuous employee education and training, implementing technical safety management measures such as access control and network segregation, and establishing a global response framework (CSIRT).

For the Group, which operates business activities in countries around the world, significant exchange rate fluctuations beyond expectations may affect yen-denominated amounts in consolidated financial results, which could affect the Group's financial position and operating results. As countermeasures, the Group gathers information on the political and economic conditions and financial market trends of the countries in which it operates, promotes local procurement and local production, and executes forward exchange contracts within the range of import/export transaction amounts based on internal regulations.

The international situation surrounding the Group's businesses is changing significantly, including the situation in Russia and Ukraine, the situation in the Middle East, and the increasing complexity of U.S.-China relations. Sharp fluctuations in economic conditions and product supply-demand in overseas markets, changes in laws, regulations, and tax systems, and social disruptions such as terrorism and war may affect the Group's financial position and operating results. As a countermeasure, the Group continuously gathers information on the political and economic conditions, market trends, tax systems, and legal and regulatory trends of the countries in which it operates.

In corporate acquisitions and business alliances actively pursued for the purpose of growth and business expansion, if business development does not proceed as initially planned, this could affect the Group's financial position and operating results. As countermeasures, the Group works to identify risks through due diligence prior to acquisitions and alliances, regularly compares and analyzes business plans against actual results after acquisitions and alliances, and improves operational efficiency through integration with existing businesses.

If the market value of owned land, buildings, and other assets declines significantly, or if it is determined that all or part of the book value cannot be recovered due to continued business losses or declining profitability, the Group may record an impairment loss on fixed assets, which could affect the Group's financial position and operating results. In particular, the engineering and testing business related to automotive development holds substantial fixed assets, making it highly exposed to risk in the event of declining utilization rates. As countermeasures, the Group works to reduce risk through rigorous scrutiny of profitability and expected investment recovery timing at the time of investment decisions, periodic monitoring and performance evaluation after capital investment, and formulating and executing strategies when profitability deteriorates.