Shimadzu Corporation

Unexpected changes in policy, economic conditions, and capital investment trends in various countries, including Japan, may affect business performance and financial condition. This includes the risk that supply chain disruptions and resource price spikes caused by war, terrorism, or the spread of infectious diseases could stall the global economy. The Group formulates and implements sales strategies tailored to the market size and industrial structure of each region, but it may be difficult to respond to sudden changes in the external environment.

As overseas business expansion is a pillar of the Group's strategy, unforeseen changes in laws, regulations, or policies, trade restrictions or retaliatory measures, and social or political turmoil caused by terrorism or war may affect business performance. The Group addresses this through the establishment of the "Shimadzu Group Management Basic Regulations" and by assigning governance oversight functions to key subsidiaries in each region; however, the risk continues against a backdrop of heightened geopolitical risk. The Group conducts situational monitoring and shares information within the Group, utilizing both internal and external resources.

If quality issues or product safety concerns arise from product use under diverse conditions, this could lead to a decline in the Group's reliability and brand strength, potentially affecting business performance and financial condition. The Group has established an ISO-certified quality management system along with a "Quality Assurance Basic Policy" and "Product Safety Basic Policy," and works on continuous improvement at each stage of the product lifecycle. However, it is difficult to completely eliminate risks arising under usage conditions that are difficult to anticipate.

Given the business characteristics requiring advanced specialized technology, delays in commercialization or failure to develop new products that meet market needs could lead to a decline in competitiveness and insufficient capture of market trends, potentially reducing future business growth and profitability. The Group invests significant amounts in research and development of new products and technologies, but such investment does not necessarily translate into results. In fields where the pace of technological innovation is rapid, the risk of development delays is particularly likely to materialize.

If shortages or supply restrictions of raw materials occur due to natural disasters, epidemics, accidents, bankruptcy of suppliers, geopolitical risks, or other factors, this could affect production activities and lead to lost business opportunities, reduced price competitiveness, and deteriorating profit margins. The Group has taken measures such as securing a certain level of inventory of key raw materials, selecting alternative suppliers, and acquiring in-house production capacity, but there are limits to how it can respond to long-term supply deterioration or sharp increases in procurement prices.

Competition for hiring among manufacturing companies, particularly for R&D personnel, is intensifying, and there is a risk that internal demand cannot be met against the backdrop of Japan's declining working-age population. The Group also faces an increased risk of employee turnover due to growing labor market fluidity, and if it becomes difficult to secure and retain talented personnel, this could affect business performance and financial condition. The Group is responding through various measures such as internships, global talent recruitment, a mandatory retirement age of 65, a dual-track personnel system, and an internal job posting system, but the competitive environment continues to intensify.

The Group is subject to various laws and regulations in Japan and overseas, including security trade controls, anti-bribery laws, and antitrust laws. If a compliance violation is determined due to insufficient understanding or inadequate response to unexpected changes, this could result in losses from fines or surcharges, administrative sanctions such as business suspension, and a decline in credibility. The Group has established a prevention and early detection system through the enactment of the "Shimadzu Group Corporate Ethics Regulations," awareness-raising through group training and e-learning, and the establishment of an internal reporting hotline.

If cyberattacks exceeding expectations or unforeseen unauthorized use result in the leakage of important information or personal data, or in the suspension of business activities, this could have a material impact on business performance and financial condition. Under the "Shimadzu Group Information Security Basic Policy," the Group implements technical measures such as unauthorized intrusion prevention, data encryption, and website tampering prevention, along with regular security education for employees, but complete defense is difficult given the increasing sophistication of cyber threats.

With its global business operations, the Group conducts many transactions denominated in foreign currencies and is constantly exposed to foreign exchange fluctuation risk. In particular, yen appreciation has an adverse effect on the Group's business, and since the translated value changes when preparing consolidated financial statements in yen, excessive fluctuations in exchange rates may affect business performance and financial condition. The Group works to reduce this risk through measures such as establishing local production systems and using foreign exchange forward contracts, but it is difficult to completely eliminate the impact.

With global business operations that include intra-group transactions, the Group is subject to international tax risks such as those related to transfer pricing taxation. The Group strives to pay appropriate taxes in compliance with the tax laws of each country, but changes in tax systems in various countries or differences in views with tax authorities could result in unexpected tax burdens, potentially affecting business performance and financial condition. Despite paying close attention to international tax risk, changes in tax systems in each country are an external factor and are difficult to fully control.