Imasen Electric Industrial Co., Ltd.

Geopolitical risks in Europe and the Middle East, additional U.S. tariffs, and rising prices may affect resource prices and financial markets, which could impact the Group's business results and financial position. In addition, shifts in automakers' electric vehicle strategies are expected to bring significant changes to future economic trends. In response, the Group has expressed support for the TCFD recommendations (March 2023), established materiality issues, and is promoting the development and production of electric drive units.

Since overseas sales account for a certain proportion of the Automotive Parts Business, fluctuations in the yen exchange rate may significantly affect the competitiveness of selling prices and business results. Translation differences on foreign currency-denominated transactions also affect the financial position. In response, the Group implements forward foreign exchange contracts based on internal standards and promotes local procurement and local production toward local production for local consumption.

The Automotive Parts Business accounts for 94.2% of the Group's total sales, with a high degree of dependence on specific customers: 39.4% for the Honda Motor Co., Ltd. group, 19.5% for the Mazda Motor Corporation group, and 9.8% for the Mitsubishi Motors Corporation group. There is a risk that the Group's business results could be significantly affected by changes in these companies' business policies or the occurrence of quality issues. While maintaining collaborative relationships with customers, the Group is advancing business transformation, including addressing electric vehicles.

If a defect occurs in automotive parts, the Group may bear a portion of the customer manufacturer's repair costs in accordance with its share of responsibility, which could affect business results. Although the Group carries product liability insurance, there is no guarantee that the coverage amount will sufficiently cover the final burden. The Group is working to improve quality globally through obtaining and maintaining IATF 16949:2016 certification and establishing a Quality Control Headquarters.

Inappropriate conduct related to quality among manufacturing companies has been increasing across the industry, and if a compliance violation occurs within the Group, in addition to the impact on business results, there is a risk of loss of social credibility. The Group is working to foster an open corporate culture through the appointment of a Compliance Officer, the establishment of the "Ethics and Compliance Committee," the operation of an email suggestion box, and the implementation of employee satisfaction surveys.

In the procurement of raw materials and parts, the Group is affected by price increases due to market fluctuations, changes in tariff policy, and instability in the supply of resources and energy, with the situation in the Middle East further adding to the uncertain outlook. If the situation worsens further, it could affect business performance and financial condition. The Group is working to maintain supply through diversifying suppliers, extending inventory days, and switching to local procurement.

If natural disasters such as earthquakes or floods, or infectious diseases occur at production sites in Japan or overseas, operations may be directly or indirectly affected. The Group has established a Business Continuity Plan (BCP) to minimize damage and ensure business continuity, and has set up reporting lines for emergencies to build a system for prompt response.

If the value of tangible or intangible fixed assets held by the Group declines significantly, or if business losses continue, the recognition of impairment losses could affect business performance and financial condition. The Group's policy is to promptly assess the amount of impairment loss when signs of impairment are identified, in order to minimize the impact on business performance and financial condition.

Production and sales activities depend on IT systems and communication networks, and cyberattacks such as ransomware or hardware failures could disrupt business activities, resulting in loss of social trust and significant costs. The Group has formulated a roadmap for establishing a security foundation and is working to raise employees' security awareness through the internal publication of the "Imasen Information Security Handbook."

As competition for digital talent intensifies across the industry, labor mobility is accelerating, and if the Group cannot offer attractive compensation and benefits, it risks losing talent, which could affect business continuity. Since April 2024, the Group has moved away from seniority-based wages to a new personnel system that evaluates challenge and performance, aiming to improve employee engagement.