SHIMANO INC.

The risk that large-scale natural disasters such as earthquakes, hurricanes, and volcanic eruptions may cause the suspension of operations at factories and sales companies, as well as the interruption of supply of raw materials and parts. Damage to finished and work-in-process products and a decline in consumer sentiment leading to reduced demand are also anticipated. As countermeasures, the Company has diversified manufacturing bases on a global scale, formulated disaster recovery plans, and taken out appropriate insurance.

The risk that the spread of infectious diseases, including new viruses such as COVID-19, may cause infections to spread among employees and lead to the suspension of factory and sales company operations due to lockdowns, as well as the interruption of supply of raw materials and parts. A decline in consumer sentiment leading to reduced demand also has a significant impact on business performance. The Company is addressing this through the global diversification of manufacturing bases, the establishment of telework-compatible systems, and infection prevention measures based on government guidelines.

The risk that cyberattacks from outside may cause business systems to stop functioning or malfunction, resulting in the suspension of business activities. The leakage of confidential technical and business information or personal information could also lead to a loss of competitiveness, reputational damage, payment of damages, and sanctions under personal information protection laws. The Company addresses this through the establishment of an organizational security framework, the introduction and updating of antivirus software, employee training, and appropriate insurance coverage.

The risk of incurring substantial fines, damages, and reputational damage due to violations of personal information protection laws such as the EU's GDPR, antitrust and competition laws, foreign bribery prevention laws, and consumer protection laws in various countries. As Shimano operates globally, compliance across a wide range of jurisdictions is required. The Company has established an e-learning program for employee education, formulated a code of conduct, and built a risk guidance and compliance check framework through the legal departments in each region.

The risk of liability for damages related to personal injury or property damage caused by defects in the Group's products, as well as the risk of incurring replacement or repair costs due to recalls, etc. If a product defect issue becomes widespread or prolonged, it could also damage the brand's value. The Company aims to minimize losses through the establishment of a robust quality control system, a global framework for rapid response in the event of defects, and product liability insurance.

The risk that the rapid improvement in the technological capabilities and competitiveness of competitors may reduce the relative appeal of the Group's products, intensifying price competition and leading to technological obsolescence. Failure to introduce new technologies could also significantly impact business performance. The Company addresses this through active investment in R&D for new technologies and products to enhance competitiveness, initiatives in digital transformation, and collaboration with leading companies.

The risk of an impact on business performance due to the introduction of carbon taxes, as well as the risk of brand value damage due to environmental measures falling short of stakeholder expectations. The intensification of typhoons and floods leading to disaster damage and recovery costs, as well as supplier production stoppages, also significantly impact business performance. The Company addresses this through the reduction of GHG emissions, enhanced disclosure of information on bicycles as low-carbon mobility, the formulation of disaster recovery plans, and the diversification of production sites and procurement sources.

The risk of reputational damage arising from an inability to appropriately address human rights issues present in the supply chain. With its global procurement network, Shimano is required to manage human rights broadly, including with respect to its suppliers. The Company addresses this through requests for compliance with a vendor code of conduct that includes human rights protection clauses, the formulation of a human rights policy, the promotion of human rights due diligence, and the establishment of a grievance mechanism.

The risk that foreign exchange fluctuations may affect the performance and yen-denominated conversion of assets of overseas subsidiaries, as well as spill over into raw material prices. For Shimano, which conducts production and sales globally, foreign exchange fluctuations have a direct impact on business performance. The Company addresses this by avoiding exchange rate fluctuations through yen-denominated sales of products manufactured in Japan and by holding deposits in stable currencies at overseas consolidated subsidiaries.

The risk that rising tariff risks due to the rise of protectionism, changes to tax systems and trade rules accompanying economic sanctions against specific countries, and regional economic instability caused by terrorism or conflict may impede the Group's production and sales activities. For Shimano, which operates globally, addressing geopolitical risks is important. The Company addresses this through the global diversification of manufacturing bases and the establishment of a global product deployment framework that does not depend on specific regions.