OPTEX GROUP Company, Limited

The Group operates businesses around the world, and a deterioration in the economic conditions of the countries and regions where its products are sold may adversely affect its business results and financial condition. Approximately 60% of consolidated net sales are derived from overseas sales, resulting in a structure that is susceptible to economic downturns in specific regions. As a countermeasure, the Group has established its own bases in major overseas regions, and the heads of major operating companies meet monthly to exchange information and make timely strategic changes and responses.

As approximately 60% of consolidated net sales are derived from overseas sales, a prolonged sharp fluctuation in exchange rates against the yen for major currencies such as the US dollar, euro, British pound, and Chinese yuan, as well as emerging market currencies, may affect business results and financial condition. The Group implements foreign exchange hedging measures for a certain proportion of foreign-currency-denominated assets and liabilities, and works to improve the foreign exchange balance in its income and expenditures by maintaining its overseas production ratio and increasing its overseas procurement ratio to secure foreign-currency-denominated expenditures.

Significant changes in laws and regulations, major changes in tax systems or tax rates, changes in foreign exchange policy, import/export restrictions, or other economic, social, or political changes in the countries and regions where the Group operates may adversely affect its business results and financial condition. In addition, risks of legal violations by companies, such as compliance violations and stricter labor environment regulations, are becoming increasingly diverse. The Group carefully monitors changes in the global situation, shares information among operating companies to enable prompt responses, and thoroughly educates officers and employees to raise awareness of legal compliance.

Based on its medium- to long-term business portfolio strategy, the Group actively pursues M&A globally, including entry into new fields related to its existing businesses. If, due to unforeseen circumstances or significant changes in market trends after an acquisition, the acquired business does not perform as initially planned, this may adversely affect the financial condition through impairment of goodwill and other intangible fixed assets. The Group conducts thorough due diligence and carefully examines valuations before executing acquisitions.

The Group procures product materials through a global supply chain, and if it becomes difficult to obtain materials or purchase prices rise sharply due to changes in economic conditions, changes in the international situation, supply chain troubles, or other factors, this may adversely affect business results and financial condition. In particular, a prolonged tightening of supply and demand for electronic components, especially semiconductors, could significantly affect business performance, and inadequate supplier response from an ESG perspective, such as addressing conflict minerals and environmental considerations, could also adversely affect the Group's social reputation. The Group is working to strengthen stable procurement and management systems by considering alternative materials, diversifying suppliers, and enhancing communication with suppliers.

If financial markets become unstable when significant funding needs arise, such as for M&A, fund-raising costs may increase, affecting business results and financial condition. The Group's policy is to respond by comprehensively considering financial conditions, the macro environment, and its own situation when raising funds.

If policies and regulations related to climate change become stricter than expected, this may affect business results and financial condition through increased costs and lost sales opportunities. In addition, if large-scale natural disasters such as typhoons, heavy rain, or earthquakes occur, business activities may be restricted, affecting business results and financial condition. The Group is working to address both regulatory requirements and market demands by developing environmentally friendly products.

If a large-scale outbreak of an infectious disease such as a novel coronavirus or novel influenza occurs, deterioration in market conditions and disruption of sales activities may adversely affect business results and financial condition. The Group is establishing systems for remote work and staggered work hours, and building non-contact sales activities utilizing IT, while also flexibly focusing on industries that are growing due to the spread of infection prevention measures.

If an information security risk related to data leakage occurs, it may affect the Group's business, business results, and financial condition. The Group has created the "OPTEX Group Code of Conduct" in Japanese and English and distributed it to officers and employees worldwide to encourage the performance of duties in accordance with social and ethical norms, while the "Group Compliance Promotion Committee," chaired by the Representative Director and President, promotes and oversees risk management.

If legal risks related to intellectual property rights, customer credit risks, or risks related to human resource development and recruitment occur, this may affect the Group's business, business results, and financial condition. The Group strives to cultivate a corporate culture and educate and raise awareness among officers and employees through regular review and examination of risks via the "Group Compliance Promotion Committee" and the global rollout of the "OPTEX Group Code of Conduct."