KEYENCE CORPORATION

The Group conducts business in Japan as well as North America, Latin America, Europe, and Asia, and is affected by fluctuations in domestic and overseas economic trends. Although the Group has taken measures to diversify risk without dependence on specific products, customers, or regions, sudden changes in domestic and overseas economies may affect business performance and financial condition.

Costs and prices of foreign currency-denominated transactions are affected by exchange rate fluctuations. In addition, since assets, liabilities, revenues, and expenses denominated in local currencies are translated into yen when preparing consolidated financial statements, exchange rate fluctuations directly affect financial condition. Exchange rate fluctuations may also affect manufacturers' research and development investment and production facility investment trends, which could indirectly impact business performance through customer demand. The Group strives to reduce dependence on specific currencies by diversifying transaction locations and transaction currencies.

The Group holds important business information, personal information, and confidential information of business partners, and faces the risk of destruction, alteration, leakage, or internal system outages due to cyberattacks or unforeseen circumstances. While the Group is working to improve information literacy among employees and outsourcing partners, strengthen IT governance, and implement measures to prevent external intrusion, it is difficult to completely avoid cyberattacks using technology that exceeds the anticipated level of defense, and costs will be incurred to respond in the event of an incident.

Business activities in North America, Latin America, Europe, and Asia are exposed to risks from changes in political, economic, and social conditions, foreign currency and import/export-related regulations, geopolitical risks, and various regulatory risks such as import/export regulations, environmental regulations, and tax systems. The Group proceeds with overseas expansion after carefully examining profitability, market expansion potential, and various risks, but sudden changes in these factors may affect business performance and financial condition.

The Group must comply with product-related laws and regulations in Japan and overseas. If serious quality problems or large-scale recalls occur due to use under diverse and unforeseeable environments, costs to respond will increase. While the Group works on quality control through the establishment of ISO-certified quality and environmental management systems and cooperation with partner factories under a fabless system, additional costs may also arise if current laws and regulations are suddenly strengthened or changed.

In the event of natural disasters such as earthquakes, tsunamis, and floods (including those caused by climate change), industrial accidents, fires and explosions, wars, terrorism, or epidemics, damage to employees and facilities or business interruption may affect production and shipments. If such events occur at parts suppliers or product delivery destinations, business performance may also be affected through shortages or interruptions in parts supply or suspension of customers' production activities. The Group strives to diversify risk through a management structure that does not depend on specific business locations, suppliers, products, customers, or industries.

The Group is affected by accounting standards and tax systems in Japan as well as in various countries and regions in North America, Latin America, Europe, and Asia, and if significant system changes, strengthening, or new regulations are introduced, additional compliance costs will be incurred. If differences in views arise with relevant authorities, additional taxation or double taxation may occur, which could affect business performance and financial condition.

As the Group develops, manufactures, and sells automatic control equipment, measuring instruments, information equipment, and other products, it must comply with various environmental regulations in Japan and overseas. While the Group works on chemical substance management systems and activities to reduce CO2 emissions, reduce waste, and conserve energy, if various laws and regulations are changed or newly enacted, compliance costs will increase, which could affect business performance and financial condition.

The Group regards securing and developing excellent human resources as essential to the sustainable growth of its business. However, there is a risk that the Group may not be able to secure and retain the necessary personnel as planned due to structural changes in domestic and overseas labor markets, intensifying competition for talent, and rising labor costs. The Group strives to improve its ability to acquire talent and retention rates through the continued promotion of new graduate and mid-career recruitment, the development of education and training systems, the creation of a rewarding work environment, and the enhancement of compensation systems. However, if human resource development fails to keep pace with the speed of business growth, business performance may be affected.

The Group's policy is to actively consider M&A with the aim of expanding its business domain and increasing its growth speed, and decisions are made after thoroughly examining the target company's business content, financial condition, and other factors in advance. However, if changes in the business environment after an acquisition occur or the anticipated effects are not sufficiently realized, business performance and financial condition may be affected.