Yamaha Motor Co., Ltd.

The Group is exposed to intense competition in many markets, including motorcycles and Marine products, and may find it difficult to set favorable prices in certain situations. Pressure to secure profits becomes pronounced during market downturns, and if new products developed through investment cannot be sold as planned, this may affect business performance and financial position. As countermeasures, the Group is accelerating its premium strategy in ASEAN and India, improving development speed through platform-based development, and promoting sales stabilization in the Marine business through long-term contracts with boat builders.

With overseas sales revenue accounting for approximately 90% of the Group's total, there is a wide range of foreign currency-denominated transactions in raw material and parts procurement as well as product sales, and exchange rate fluctuations directly affect sales, revenue, and expenses. In addition, since consolidated financial statements are prepared by translating the local currency-based performance of overseas subsidiaries into yen, fluctuations in exchange rates against the yen for each currency may affect business performance and financial position. The Group works to minimize the impact through foreign exchange hedging transactions and price pass-through for exchange rate fluctuations.

With overseas sales revenue accounting for approximately 90% of the total, amid rising geopolitical risk and economic security risk, if import/export regulations are implemented, revised, or abolished, unfavorable tax system or tariff changes occur, foreign exchange regulations are imposed, or tax audits and additional tax assessments including transfer pricing taxation occur, this may affect business performance and financial position. In response to U.S. tariffs, China's export control ordinances, and amendments to the Foreign Exchange and Foreign Trade Act, the Group established the Trade Control and Economic Security Promotion Committee in July 2023, and a committee composed of executive officers and above conducts timely risk identification and deliberation of countermeasures.

Threats are becoming more diverse due to the increasing sophistication of ransomware attacks and the rise of supply chain-based attacks, and if customer personal information or technical confidential information is leaked or information system failures occur, this could lead to a decline in social credibility and liability for damages. If a failure occurs in critical information systems, including control systems at manufacturing sites, this could cause serious disruption to product supply and business continuity, potentially having a material impact on business performance and financial position. Under a company-wide risk management structure headed by the CRCO, the Group promotes 24-hour monitoring by the CSIRT, incident response training, BCP formulation, and improvement of security levels across the entire supply chain.

Major manufacturing sites in Japan are concentrated near the anticipated epicenter area of the Nankai Trough megaquake, and if such a massive earthquake occurs, manufacturing sites could be directly affected, and operational delays or interruptions could affect business performance and financial position. The Group is carrying out seismic reinforcement work on key buildings and equipment, moving information systems to the cloud, and advancing disaster preparedness measures such as BCP formulation, earthquake insurance enrollment, and evacuation drills.

As products are manufactured at factories in various countries around the world, market actions such as recalls may be implemented from the standpoint of regulatory compliance and customer peace of mind, and if a large-scale recall or product liability lawsuit results in substantial costs or liability for damages, this may affect business performance and financial position. The Group aims to reduce this risk through the establishment and operation of a quality management system based on ISO9001, development of a system for consolidating market quality information, and activities to foster quality awareness.

Some of the raw materials and parts used in product manufacturing depend on specific suppliers, and if stable procurement or procurement at stable costs becomes difficult due to uncontrollable factors such as market fluctuations or disasters, this may affect business performance and financial position. It is noted that a sharp rise in raw material prices or prolonged parts shortages could have a material impact, and the Group is advancing measures such as switching to compatible parts and securing supply volumes through long-term provision of indicative quantities.

In many of the countries and regions where the Group operates, it is subject to a wide range of environmental regulations and other laws and regulations concerning product safety, fuel efficiency, exhaust gas regulations, pollutant emission levels from factories, and these regulations tend to become stricter. Changes in regulations or laws may affect business performance and financial position, and the Group addresses this through the establishment of green procurement guidelines and the promotion of environmental activities by a dedicated team.

In various countries, the enactment of laws and regulations based on human rights norms advocated by the UN and ILO is progressing, and the need to address human rights risks across the entire supply chain is rapidly increasing. If timely and appropriate responses are not made or if efforts are insufficient, this could damage brand image and social credibility, as well as cause stagnation or delays in production activities and additional response costs, potentially adversely affecting business performance and financial position. The Group is promoting the rollout of the "Yamaha Motor Group Human Rights Policy" to group companies and business partners, incorporation of human rights clauses into contracts, and risk identification activities through human rights due diligence.

Business funds are procured through internal funds, borrowings from financial institutions, and bond issuance, but if financial institutions change their lending stance due to changes in the economic environment, financial markets become unstable, or credit ratings are downgraded, there is a risk that fund procurement as planned may become difficult and fund procurement costs may increase. The Group reduces liquidity risk and interest rate rise risk through timely preparation and updating of cash flow plans, maintenance of liquidity on hand, diversification of procurement methods through bank borrowings and bond issuance, long-term fund procurement at fixed interest rates, and use of interest rate swap transactions.