NOMURA CORPORATION

The Group conducts business under regulations such as the Construction Business Act, the Measurement Act, and the Secondhand Article Dealer Act, and future significant changes to or tightening of these regulations could result in business restrictions or increased capital expenditure costs. If the Group receives administrative dispositions, penalties, or liability claims, this could lead to increased costs and a decline in social credibility. As countermeasures, the Group operates and complies with guidelines for each relevant law, promotes compliance based on its Compliance Regulations, and conducts employee training.

If an unforeseen event causes information systems to become inoperable, or results in information leakage or loss, this could affect not only the Company but also its business partners, leading to a decline in credibility and deteriorating business results. As countermeasures, the Group has established an information security manual based on its Information Handling Management Regulations, implements various security measures, and provides regular information security training to officers and employees.

The Group operates primarily in the Greater Tokyo area and eastern Japan, and if a large-scale earthquake, typhoon, or other natural disaster causes significant damage to business locations, business partners, or officers and employees, this could affect business results and financial position. The spread of infectious diseases such as COVID-19, resulting in employee infections or deteriorating economic conditions, poses a similar risk. As countermeasures, the Group conducts disaster drills, updates its Business Continuity Plan (BCP), and maintains a system for establishing an emergency response headquarters led by the President.

The main raw materials used in packaging material products are petrochemical products, and significant fluctuations in international crude oil prices directly affect purchase prices. Since packaging material products account for more than half of the Group's net sales, if price pass-through proves difficult, this could have a material impact on business results and financial position. As countermeasures, the Group gathers information from specialized trade publications and suppliers, negotiates price adjustments with suppliers, and revises product prices with the consent of customers.

Amid a global movement to reduce plastic waste, packaging material products and logistics packing products, which account for a large portion of net sales, primarily use plastic film as a raw material. If new legal regulations, such as usage restrictions, are implemented, this could constrain handling of these products and affect business results and financial position. As countermeasures, the Group works to gather information on legal amendments at an early stage and promotes the development and expansion of plastic-reducing products, such as biomass plastic products and limestone-blended plastic products.

If a substantial number of employees resign within a short period, or if human resource acquisition and development do not proceed as planned, this could affect business results and financial position. If in-house training is insufficient and employees' skill levels fail to reach the required standard, this could result in a decline in competitiveness and management standards. As countermeasures, the Group diversifies its recruitment methods, enhances its training system, and introduces appropriate evaluation and compensation systems.

Raw materials such as petrochemical products are procured amid an increasingly globalized supply chain, and the materialization of geopolitical risks could lead to raw material price surges, delivery delays, or procurement difficulties. If cost reduction or price pass-through proves difficult, this could affect business results and financial position. As countermeasures, the Group is working to reduce risk by strengthening information gathering, diversifying and spreading out its sourcing base, and considering alternative materials.

The majority of the packaging machinery manufacturing process is outsourced to two companies, Magtronics Co., Ltd. and K.S.I. Co., Ltd. If a significant change occurs in the management policy or business performance of these subcontractors that makes continued transactions difficult, securing alternative suppliers may take time, affecting business results. As countermeasures, the Group regularly confirms the financial condition of each company, maintains stable business relationships, and gathers information on and considers alternative suppliers, including adding new subcontractors.

If a serious product defect occurs due to deficiencies in development design, manufacturing, or inspection processes, this could result in liability claims exceeding insurance coverage amounts or capital expenditures associated with changes in materials or manufacturing methods, potentially affecting business results. If it takes time to implement corrective measures, there is also a risk of lost sales for the affected products. As a countermeasure, the Group implements strict quality control based on management standards and procedures established under its Quality Control Regulations.

The Company's primary customers are rice wholesalers, retailers, and food service operators. Poor harvests due to adverse weather and declining rice consumption resulting from population decline or changing dietary preferences could lead to reduced orders for packaging materials and packaging machinery. As countermeasures, the Group is gathering information on production and consumption trends through sales activities, reviewing sales plans, and diversifying its revenue composition by expanding into sales channels beyond rice, such as food, fertilizer, and pet-related products.