PRESS KOGYO CO.,LTD.

The Group, whose main products are automotive parts and construction machinery parts, has business performance directly linked to economic trends in Japan, North America, Europe, and Asia. An economic downturn in major markets or a demand decline exceeding forecasts could lead to a significant drop in operating revenue. While the Group works to reflect information gathering and analysis in its annual plans and medium-term management plan, there are limits to responding to sudden changes in the external environment.

The Group conducts production and sales activities in Japan, North America, Europe, and Asia, and is exposed to a wide range of risks including political and economic instability, social unrest such as war, terrorism, and riots, unexpected changes in laws and tax systems, labor disputes and sharp rises in labor costs, natural disasters and infectious diseases, and changes in management policy at joint ventures. If these risks materialize, production and sales activities may stagnate, adversely affecting business results and financial condition. As global operations expand, the diversity and complexity of these risks are also increasing.

The financial statements of overseas affiliated companies are denominated in local currencies and are translated into yen when preparing the consolidated financial statements, so exchange rate fluctuations directly affect business results and financial condition. In particular, since the Group conducts overseas business across multiple currencies, there is a risk that the yen equivalent of overseas earnings will decrease during periods of yen appreciation. The securities report does not describe specific hedging measures, and it is difficult to completely eliminate the impact of exchange rate fluctuations.

Amid major changes in the business environment, including the acceleration of electrification-related development and intensifying global competition, insufficient or untimely response to market and customer needs could lead to a decline in competitiveness. The medium-term management plan sets strengthening core businesses and responding to electrification as priority measures, and management resources are being invested in technological innovation and new product development; however, if results do not materialize as planned, business results could be adversely affected. In an industry environment where corporate restructuring is progressing, the speed of development and the accuracy of its direction have become increasingly important.

The Group has set a goal of achieving carbon neutrality by FY2050 (ending March 2050) and has established an interim target of reducing CO₂ emissions (Scope 1, 2) by 41.0% by FY2030 (ending March 2030) compared to FY2019 (ended March 2019). While the Group promotes energy-saving activities, replacement of equipment with highly efficient models, and introduction of renewable energy, and conducts scenario analysis in line with TCFD, if it fails to appropriately respond to physical risks (such as the intensification of natural disasters) or transition risks toward a decarbonized society (such as stricter regulations and increased costs), this could adversely affect business results and financial condition.

If a large-scale disaster such as an earthquake, tsunami, typhoon, or fire occurs, the resulting collapse or damage to buildings and facilities, disruption of lifelines, supply chains, transportation routes, and information infrastructure, and serious impact on human resources could cause a significant decline in production capacity or suspension of operations. Delays in product supply to customers and increased facility restoration costs could have a material impact on business results and financial condition. While the Group strengthens, reviews, and trains for its BCP and thoroughly implements disaster prevention measures, there are limits to its ability to respond to events that exceed expectations.

The Group procures much of the materials and parts necessary for its business activities from suppliers outside the Group, and there is a risk that delivery delays, product defects, deteriorating financial condition, unforeseen accidents, natural disasters, or other issues at specific suppliers could lead to shortages of raw materials and parts or increased costs. If a significant increase in costs or a production halt occurs, this could adversely affect business results and financial condition. While the Group implements measures such as securing multiple suppliers and providing prompt recovery support, it is difficult to completely eliminate risks across the entire supply chain.

Although the Group conducts manufacturing and third-party inspections based on international quality control standards, it cannot guarantee the complete elimination of defects in all products or complete prevention of recall issues. If a product defect occurs, recall response costs and product liability compensation may arise, and there is a possibility that the amount of compensation could exceed what is covered by insurance. Significant cost increases and a decline in social trust pose a risk of adversely affecting business results and financial condition.

The Group, which holds confidential information such as customer information and development information and utilizes IT and networks throughout its production activities, is exposed to increasingly sophisticated and advanced cyberattack risks. If an unforeseen incident occurs, information leaks could lead to a decline in social trust, the occurrence of liability for damages, increased recovery costs, and business disruption due to system downtime, which could adversely affect business results and financial condition. While the Group is expanding the scope of network threat monitoring, strengthening its security infrastructure, and enhancing education, it is difficult to completely eliminate this risk.

To strengthen global business activities, the continuous securing and development of personnel with advanced specialized skills and excellent management capabilities is recognized as an extremely important issue. While the medium-term management plan sets diversity and vitalization of human resources as priority measures, delays in these plans could affect future business development. Intensifying competition in the labor market and labor shortages due to the declining birthrate and aging population are background factors that increase the likelihood of this risk materializing.