FANUC CORPORATION

If war occurs in major markets such as Asia, Europe, or the Americas, it could have a severe impact on sales markets, supply chains, and logistics. Since overseas sales account for a large proportion of consolidated net sales, sensitivity to geopolitical risk is high. As a countermeasure, the Company is promoting stronger collaboration among group companies through "one FANUC".

Since R&D facilities and factories are concentrated in the head office area (Oshino Village and Yamanakako Village, Yamanashi Prefecture), damage could be severe in the event of a major earthquake or eruption of Mt. Fuji. As countermeasures, the Company is diversifying production sites through the establishment and expansion of the Mibu Plant (Tochigi Prefecture) and Tsukuba Plant (Ibaraki Prefecture), diversifying service sites, enhancing data center redundancy, and installing emergency power generation and cogeneration systems.

Increasingly sophisticated and rapid cyberattacks utilizing AI and other technologies could damage production equipment, halt production, leak confidential technical and business information, and damage customers' manufacturing equipment via IoT products. The Company also recognizes the risk of prolonged shipment stoppages due to ransomware, and is progressively developing its CISO appointment, CSIRT/SOC framework, PSIRT operations, and related certification acquisitions.

The Group's competitive advantage could be lost due to improving technological capabilities among emerging-market companies, shifting competitive dynamics including IoT system integration, and the emergence of new technologies. Delayed responses to changes in the external environment could have a severe impact on business strategy and operating results. The Group is working to strengthen its competitiveness by promoting industrial automation through the active application of control, digital, IoT, and AI technologies.

Changes to security trade control and economic security policies, expansion of extraterritorial application, increases in import tariff rates, and anti-dumping duties, among others, could have a major impact on product sales and supply chains. Since overseas sales account for the majority of consolidated net sales, the scope of impact is broad. The Group continuously gathers information on policies and regulations in each country, strengthens its security export control framework, and works to enhance supply chain resilience.

Shortages or delays in parts procurement could delay production, affecting customers' production activities and potentially damaging trust. On the other hand, there is also a risk of valuation losses on inventory due to excessive procurement. The Group is working to strengthen supply chain risk management, including securing multiple procurement sources and strengthening relationships with suppliers.

If the Group is slow to secure and develop excellent talent amid intensifying competition, or if excellent talent leaves the Group, this could significantly impact the Group's sustainable development through declining competitiveness and other effects. The Group is working to cultivate an attractive corporate culture and to develop and appropriately assign human resources through enhanced employee training, improved engagement, and improved work-life balance.

If compliance issues such as legal violations, quality fraud, or leakage of trade secrets occur, in addition to direct impacts such as penalties, a decline in social credibility and corporate image could significantly impact business strategy and operating results. The Group has established a Compliance Committee, strengthened employee training and internal controls, and reinforced company-wide quality control through its Quality Control Division.

The outbreak of infectious diseases such as novel viruses could threaten employees' health and safety, and the spread of infection or lockdowns at parts suppliers or outsourcing partners could significantly disrupt parts procurement and production. The Group continuously works to thoroughly implement infection prevention measures and to strengthen supply chain risk management, including securing multiple procurement sources for parts.

With overseas sales accounting for a large proportion of consolidated net sales, fluctuations in foreign exchange rates could affect the Group's operating results. This is listed as an "other risk" in the securities report, and the Company states that it will strive to prevent, reduce, or avoid such risk after considering the likelihood of its materialization and its impact.