Daido Metal Co., Ltd.

In business operations across North America, Asia, Europe, and other regions worldwide, fluctuations in political and economic conditions, geopolitical risks such as the situations in Ukraine and the Middle East, U.S. tariff increases, and human rights issues may affect business results and financial condition. As countermeasures, the Group is developing a reporting system based on affiliated companies management regulations, operating and verifying internal control systems, strengthening supply chain management, implementing sales price pass-through, and conducting human rights due diligence.

For major raw materials such as steel, copper, aluminum, tin, and resin materials, price instability due to changes in the supply-demand environment and the need to secure inventory in response to China's tightened export restrictions may affect business results and financial condition. As countermeasures, the Group is implementing reductions in material usage (yield improvement), promoting dual-sourcing procurement in principle, stabilizing procurement through strengthened cooperation with suppliers, and conducting ongoing price revision negotiations with customers.

If cyberattacks by hackers or computer viruses cause a halt in business activities, data loss, or leakage of information including personal data, this may affect business results and financial condition through direct losses from business suspension and loss of social credibility. As countermeasures, the Group utilizes external data centers, maintains a continuous network monitoring system, has a management system based on information incident response regulations, conducts targeted phishing email response training, and has established an in-house CSIRT and joined the Nippon CSIRT Association.

If domestic production plants located in Aichi, Gifu, Chiba, Tochigi, Fukushima, Saga, and other locations become unable to operate due to large-scale earthquakes, floods, or other natural disasters, this may disrupt production activities and affect business results and financial condition. As countermeasures, the Group has formulated business continuity plans (BCP) and conducts disaster drills, has introduced a safety confirmation system, has fire and windstorm/flood insurance for all domestic production plants, and has earthquake insurance for major plants (up to the coverage limit).

If accidents, claims, or recalls occur due to product defects, this may affect business results and financial condition through the incurrence of substantial product compensation costs or customers switching to other companies. As countermeasures, the Group extracts defect cases at each plant and continuously addresses them based on quality improvement plans, maintains product liability (PL) insurance both domestically and overseas, and enrolls in recall insurance depending on transaction status.

As intensifying global competition demands strengthened price competitiveness, if excessive price competition leads to market-wide price declines, this may affect the Group's global market share as well as business results and financial condition. As countermeasures, the Group is working to achieve product prices that follow market needs through cost reduction via improved production efficiency and cost-reduction activities, as well as strengthened profitability management.

Although the Group continuously conducts new product development in response to market needs as well as seed development, the outcomes of R&D activities are uncertain, and substantial expenditures may not necessarily lead to results. As countermeasures, the Group has built a triangular structure among the design and development department, the manufacturing and production engineering department, and the sales department, conducting development that takes into account market suitability and profitability.

As environmental regulations are being tightened not only in environmentally advanced regions such as the EU but also in emerging countries, the Group must respond to environmental regulations in various countries regarding both production activities and the products themselves, and increased costs due to tightened regulations may affect business results and financial condition. As countermeasures, the Group is developing new materials that do not contain environmentally hazardous substances and working to share the burden of response costs through mutual consultation with customers.

Increased costs for R&D and capital investment associated with responding to vehicle electrification and carbon neutrality, as well as opportunity losses due to delays in such initiatives, may affect business results and financial condition. As countermeasures, the Group has established a dedicated organization to promote energy-saving and renewable energy activities at domestic and overseas production plants, and is advancing basic technology development for wind turbine bearings through the establishment of a Wind Turbine Technology Research Institute and construction of an experimental building.

If the acquisition and development of human resources do not proceed as planned due to the declining domestic working population and intensifying competition for talent overseas, this may restrict business activities and stagnate corporate growth, thereby affecting business results and financial condition. As countermeasures, the Group is actively recruiting new graduates and mid-career hires, promoting the appointment of foreign nationals, women, and senior employees, building diverse career paths, and strengthening human capital management through improved employee engagement driven by DX promotion.