AISIN CORPORATION

Economic downturns or contractions in automotive demand in key markets such as Japan, North America, Europe, China, Thailand, Indonesia, and India could directly impact sales of automotive-related products, which account for the majority of consolidated revenue. The Group continuously monitors changes in economic conditions and seeks to mitigate this risk by strengthening product competitiveness and promoting profit structure reforms.

Fluctuations in foreign exchange rates may adversely affect financial position and business results through yen conversion of overseas consolidated subsidiaries' financial statements and foreign currency-denominated transactions. In particular, a stronger yen environment carries the risk of reduced global price competitiveness for export products. The Group measures foreign exchange risk by currency and hedges using derivatives such as forward exchange contracts, currency swaps, and currency options.

Sales to the Toyota Group accounted for 69.7% of consolidated revenue in the fiscal year under review, meaning that changes in the Toyota Group's business strategy, purchasing policy, and production trends have a direct impact on business results. The Group is working to diversify risk by promoting new customer development centered on electrification products and market diversification, while also responding to rebound demand for ICE, HEV, and PHEV vehicles.

The rapid progress of electrification and intelligentization carries the risk of declining demand for gasoline vehicle products, the emergence of new competitors (such as electronics manufacturers), and strengthened alliances among existing competitors, making it difficult to maintain price competitiveness and product superiority. The Group is allocating development resources intensively to control and software areas such as electric drive units and brake systems, and is promoting development efficiency through generative AI utilization and technical collaboration with partners.

Sudden changes in trade policy including tariffs and import/export regulations, heightened military tensions, and geopolitical risks such as terrorism, political upheaval, and civil unrest could disrupt supply chains and logistics networks and raise product costs. The Group has established a system for sharing risk information among regional headquarters heads, and implements risk mitigation activities, including security trade control and sensitive technology management, through the Economic Security Committee.

Procurement of required quantities may become difficult due to trade policies of various countries, regulations on specific mineral resources, geopolitical impacts, or disasters affecting suppliers, and if rising procurement costs from surging resource, energy, and labor costs cannot be absorbed through internal efforts or price pass-through, this could adversely affect financial position and business results. The Group is implementing measures such as developing a supply chain information management system, promoting price pass-through through consultations with suppliers, and securing backup supplies.

As the Group's main products are automotive components related to driving, control, and safety, a large-scale recall or accident could damage brand value and result in significant costs. Although the Group carries product liability insurance, the scale of damages may not be fully covered depending on the magnitude of the incident. The Group has established a globally unified quality policy, sets quality confirmation milestones at each stage from development through mass production, and has a system in which the quality officer bears ultimate responsibility.

Three transition risks—rising prices of low-carbon raw materials, increased policy costs from carbon taxes and renewable energy adoption, and declining demand for gasoline vehicle products due to progressing electrification—will affect the business over the medium to long term. The Group is addressing this through both energy conservation and clean energy adoption in production, and the creation of new value through the evolution of products for electrified vehicles and the fusion of mobility and energy technologies.

Increasingly sophisticated cyberattacks and internal misconduct could cause information system failures, leaks of confidential information, and supply chain business interruptions, potentially leading to stagnation of business activities and loss of social trust. New risks are also emerging, including the risk of internal information leaks associated with advances in AI technology and the increasing sophistication of AI-enabled attacks. The Group has established a group-wide monitoring system through its specialized organization, the Information Security Promotion Department, developed AI usage guidelines, and conducts education and training for all employees.

Compliance risks such as antitrust law violations, violations of export transaction regulations, and harassment may increase alongside overseas business expansion, growing alliance opportunities, and diversifying values, and serious violations could result in damages claims, monetary sanctions from regulatory authorities, and loss of social trust. The Group strives for early detection and correction through the establishment of the Corporate Ethics and Conduct Committee, ongoing implementation of education to prevent individual compliance violations, and the establishment of internal and external whistleblower reporting channels.