MUSASHI CO.,LTD.

The sophistication and diversification of cyberattacks, including ransomware, supply chain attacks, and unauthorized access to cloud environments, poses a risk of information leakage, system failures, and business disruption. Should such incidents occur, they could impact operating results and financial condition through loss of social credibility, damage claims, and business recovery costs. While the Group has established a management framework through Privacy Mark, ISO9001, and information security management system certifications as well as employee training, complete elimination of such risks is difficult.

In promoting the use of digital technologies including generative AI, various risks exist such as unintended external transmission of confidential and personal information, hallucination, use of shadow AI, and cyberattacks exploiting AI (such as prompt injection). There is also a risk that existing services and business processes may become obsolete due to the rapid advancement of AI technology. While the Group strives to build an appropriate usage framework through the establishment of usage guidelines and employee training, complete elimination of these risks is difficult.

In the Printing Systems Equipment segment and the Paper & Processed Paper Products segment, the contraction in demand for printed materials and paper accompanying digitalization has continued over the long term, and this trend is expected to continue going forward. The Group is responding by strengthening equipment sales in the post-print processing field, expanding sales of in-house developed software, and increasing handling of high-value-added original products; however, if the demand contraction proceeds beyond expectations, it could impact operating results and financial condition.

The Group depends on external suppliers for much of the raw materials and parts necessary for product manufacturing, and some products use specialty materials with limited procurement sources. Heightened geopolitical tensions such as US-China conflict, tightening of import/export regulations and economic security regulations in various countries, imposition of additional tariffs, and global semiconductor supply-demand tightness pose a risk of supply shortages and increased procurement costs. Should these occur, they could impact operating results and financial condition through production interruptions, delays, and increased procurement costs.

The Group has business sites including manufacturing plants in Japan, and large-scale earthquakes, tsunamis, typhoons, floods, volcanic eruptions, or major power outages exceeding BCP assumptions could cause damage such as production interruptions and disruption of transportation routes. There is also a possibility that increased response costs and loss of business opportunities may arise due to the strengthening of carbon taxes and emissions regulations and growing demands for GHG emission reductions accompanying the transition to a decarbonized society. While the Group is advancing preparedness for natural disasters through the introduction of disaster prevention equipment, there are limits to responding to events beyond expectations.

While the Group promotes strengthened quality control at each stage of manufacturing, development, and procurement, as well as in the provision of digitalization services, it cannot completely eliminate the possibility of defects or flaws occurring in products and services, including software. Should defects or flaws occur, costs for product recall and repair, compensation to customers, and lost opportunities may arise.

The Group is subject to a wide range of laws and regulations covering quality, transactions, environment, labor affairs, occupational safety and health, accounting standards, and taxation, and strives to build and maintain a compliance framework. However, if violations of these laws and regulations are discovered or determined to have occurred, it could impact operating results and financial condition.

The Group is subject to various laws and regulations covering commercial transactions, environment, safety, security, quality assurance, chemical substance management, labor, patents, accounting standards, and taxation. Changes to existing laws and regulations, introduction of new laws and regulations, or addition of compliance requirements due to business expansion may require investment and expenses for response. These could impact operating results and financial condition.

Securing and developing excellent human resources is essential for continuous enhancement of corporate value, and the Group is working to foster a free and open corporate culture and to create a comfortable working environment through business process reforms. However, there is no guarantee that the Group can stably recruit and retain excellent human resources, and if a large number of excellent personnel leave the company or development does not proceed as planned, it could impact business development.

While the Group promotes M&A and capital alliances aimed at business expansion, changes in the domestic and overseas economic environment may result in insufficient control over the management and business of acquired or allied companies. If the customer base or personnel of an acquired company are lost and the initially expected synergies are not achieved, there is a risk that the investment amount may not be fully recovered, which could impact operating results and financial condition.