SYSMEX CORPORATION

Escalating conflicts between nations, trade friction, and stricter import/export regulations could restrict sales and procurement activities across the more than 190 countries and regions in which the Group operates. In particular, in countries where domestic industry protection measures are intensifying, a shift to local production may be required, necessitating cost increases and restructuring of supply arrangements. As a countermeasure, the Group has brought into full operation a new site in India equipped with both diagnostic reagent and instrument production functions, and is promoting local procurement of raw materials in China and India.

The impact of healthcare cost containment policies in China, such as the principle of minimum necessity and centralized procurement systems, has already materialized, leading to reduced capital expenditure appetite and fewer product sales opportunities. In the event of a worsening global economic environment, there is also a possibility of a chain reaction of tightening government healthcare finances and shrinking budgets at medical institutions in various countries. As a countermeasure, the Group is complementing growth by providing solutions that improve the profitability of medical institutions through the use of robotics and AI, and by expanding strategic products into Global South markets such as India, Brazil, the Middle East, and Africa.

The ratio of overseas sales to consolidated net sales stood at a high level of 88.3% in FY2026 (ending March 2026), and in a yen appreciation phase, the yen-converted value of overseas sales and assets decreases, adversely affecting business performance. For FY2026 (ending March 2026), the estimated impact of a ¥1 fluctuation in exchange rates is ¥798 million in net sales and ¥207 million in operating profit for USD, ¥596 million in net sales and ¥71 million in operating profit for EUR, and ¥4,089 million in net sales and ¥2,993 million in operating profit for CNY. As a countermeasure, the Group is working to mitigate foreign exchange impacts through forward exchange contracts hedging foreign currency-denominated receivables and payables, and through global diversification of production sites, mainly for diagnostic reagents.

Due to the wide range of laws and regulations associated with global operations, if a legal violation or misconduct occurs, it could lead to a loss of social credibility and litigation or compensation risk. In fact, the Group was investigated by the Japan Fair Trade Commission on suspicion of violating the Antimonopoly Act, and a commitment plan was approved in February 2025, the implementation of which is currently underway. As a countermeasure, the Group has established a Compliance Committee, enacted a Global Compliance Code, developed a global whistleblowing system, and continues to provide ongoing training for officers and employees.

In addition to the increasing complexity and sophistication of regulatory approval requirements in various countries, there is a move to revise regulatory frameworks in response to the spread of new diagnostic methods utilizing digital technology and software, creating a risk of increased response costs and loss of market opportunities due to delayed new product launches. The impact of China's centralized procurement system and reductions in insurance reimbursement points has already materialized. As a countermeasure, the Group established the Global QARA Headquarters in fiscal 2025, strengthening its ability to grasp the latest information through participation in industry associations in each country and to obtain and maintain regulatory approvals in a timely and accurate manner.

Technologies such as AI and robotics are rapidly advancing in sophistication, and the progress of telemedicine solutions and AI diagnostics could significantly change business models in the healthcare field; a delayed response could lead to a decline in competitive advantage. If internal digitalization and data utilization do not progress sufficiently, there is also a risk of reduced operational efficiency and increased business promotion costs. As a countermeasure, the Group is promoting open innovation with universities, research institutions, and companies, has obtained Japan's first manufacturing and marketing approval for an Alzheimer's disease testing reagent, and is advancing the development of laboratory automation and AI-based test result analysis systems.

Difficulty in procuring parts and raw materials, including rare minerals, disruption of distribution routes due to conflicts between nations or trade friction, and large-scale natural disasters, fires, or pandemics at production plants or warehouses pose a risk of halting stable product supply to medical institutions worldwide. Diagnostic reagents, which account for 61.6% of consolidated net sales in FY2026 (ending March 2026), are a core business, and the impact of a supply stoppage on business performance could be significant. As a countermeasure, the Group is building a mutual supply network across multiple production sites, procuring raw materials from multiple suppliers and increasing inventory, formulating and training for BCP, and strengthening the BCP functions of the new Sysmex RA plant.

If the Group's products are infected as a result of cyberattacks targeting medical institutions, testing operations could be halted and unauthorized access to patients' personal information could occur. Intrusion into or failure of internal information systems leading to leakage of confidential information, and inadequate information management in the use of generative AI leading to the provision of erroneous information or infringement of rights, could also undermine the reliability of operations. As a countermeasure, the Group has established PSIRT and CSIRT, formulated a product security policy and an information security policy, implemented 24-hour monitoring, and introduced mechanisms for detecting unauthorized communications and isolating malware.

In R&D and production site expansion, investment in IT infrastructure and cutting-edge technologies, and corporate acquisitions and capital alliances, changes in the business environment or the emergence of unforeseen risks could prevent expected effects from being fully realized, potentially delaying the achievement of strategic goals. In deals such as the acquisition of JEOL's clinical chemistry testing business, the success or failure of PMI could also affect business performance. As a countermeasure, the Group conducts thorough due diligence in advance, deliberates and makes decisions at management meetings and other venues, and is strengthening its management process through regular PMI monitoring.

Intensifying global competition for talent could make it difficult to secure the highly specialized personnel and next-generation leaders necessary to drive the business, potentially affecting business performance. Inadequate assurance of workplace health and safety could also lead to deterioration in employees' physical and mental health, lower morale, and loss of talent. As a countermeasure, the Group is promoting the introduction of a job-based personnel system, providing educational programs tailored to career stages, implementing a hybrid work style for all employees, developing attractive compensation systems such as trust-type stock compensation, and improving the transparency of human capital information through ISO 30414 certification.