OHASHI TECHNICA INC.

Fluctuations in economic trends such as business conditions and finance in Japan and overseas regions, and fluctuations in the production trends of automobile manufacturers and personal consumption trends affected by such conditions, may impact business performance and financial position. As the Group's operations are overwhelmingly weighted toward the automotive-related components business, and its dependence on the production trends of the automotive industry is high, the impact during economic downturns is significant. A supervisory system by directors has been established through monthly business report meetings.

As the Group conducts production, sales, and procurement activities in the Americas, China, ASEAN, Europe, and Taiwan, there is a risk that foreign currency translation differences related to the assets and liabilities of overseas subsidiaries will arise when the yen appreciates, resulting in a decrease in net assets. In addition, since the earnings of overseas subsidiaries are mainly denominated in foreign currencies, yen appreciation has a negative impact on consolidated net income. Efforts are being made to minimize the impact of fluctuations in exchange rates, ocean freight costs, tariffs, etc., by expanding the ratio of locally procured and in-house manufactured products handled by each Group company.

The Group operates in two business segments, the "Automotive-related Components business" and the "Other Related Components business," but the Automotive-related Components business accounts for an overwhelmingly large proportion, and production trends in the automotive industry have a direct impact on business performance and financial position. Amid ongoing structural transformation in the automotive industry, such as the shift to EVs, a high dependence on a specific industry is a factor that increases the risk of earnings volatility. The Company is working to maintain its responsiveness through a business model that combines both factory functions and fabless functions.

Price competition may intensify due to requests for price reductions from customers or improvements in the price and quality competitiveness of local competitors in overseas markets, potentially resulting in reduced profit margins due to lower selling prices or lost orders. In addition to maintaining and improving price competitiveness through cost improvements achieved in collaboration with manufacturing departments and suppliers, the Company strives to secure a competitive advantage through overall strengths including quality, delivery, and processing technology development capabilities.

If procurement costs rise due to increases in raw material prices, energy prices, labor costs, etc., or due to fluctuations in exchange rates, ocean freight costs, tariffs, etc. for imported goods, and if such price or cost increases cannot be passed on to selling prices, this may result in reduced profit margins. The Company seeks to minimize losses through negotiations with customers on passing costs through to selling prices, while also promoting the expansion of the ratio of locally procured and in-house manufactured products handled by each Group company.

If the Company fails to respond in a timely manner to information such as a customer's sudden production cuts or discontinuation of production, there is a risk of holding excess inventory, and if the customer does not agree to purchase or compensate for it, the Company may be forced to record a loss on disposal of goods. Conversely, delays in responding to requests for increased production may give rise to a risk of compensation for shortages. The Company has established an arrangement and inventory management system to obtain timely information on customers' production fluctuations, production discontinuations, design changes, etc., disseminate it to manufacturing departments and suppliers, and maintain appropriate inventory levels.

Changes in tariffs, import/export-related regulations, labor laws, environmental and quality-related regulations, etc. in the countries where the Group operates, or heightened geopolitical risk due to political, economic, or military tensions between countries, may impact business performance and financial position. The Company has established a system to obtain timely information on changes in laws, regulations, and policies in each country and changes in political and economic conditions, share the results of information analysis between the head office and Group companies, and consider and implement response policies.

If information system failures or leaks of confidential or important information occur due to cyberattacks, unauthorized access, computer virus infections, etc., this may lead to a decline in credibility and impact business performance and financial position. The Company is advancing both hardware and software security measures, strengthening backup systems, conducting employee education and training, and reviewing its BCP, including recovery measures anticipating damage from cyberattacks.

If a large-scale natural disaster beyond expectations occurs, causing delays or suspension of business activities at the Company's own business sites or at suppliers, resulting in a disruption of the supply chain, this may impact business performance and financial position. In addition to establishing a BCP and developing backup systems for disaster safety confirmation systems and core systems, the Company is considering alternative suppliers to address dependence on specific suppliers for certain components, and is continuously updating supply chain information.

Due to changes in the labor market, such as the declining birthrate and aging population in Japan and labor shortages in various overseas countries, there is a risk of rising labor costs, increased difficulty in recruitment, and higher recruitment costs. In addition, if the Company is unable to secure sufficient personnel with the specialized skills and diversity needed amid ongoing transformation in the automotive industry, this may impact sustainable growth. In addition to strengthening relationships with universities, utilizing recruitment agencies, and expanding recruitment channels from the same industry, the Company has extended the mandatory retirement age to 65 and established a contract employee system up to age 70, expanding opportunities for senior employees to remain active.