OLYMPUS CORPORATION

If corrective actions taken in response to warning letters received from the FDA are insufficient or delayed, further regulatory measures may be taken, potentially affecting product supply. In June 2025, an import alert was issued for certain medical devices manufactured by Aizu Olympus Co., Ltd. (bronchoscopes, laparoscopes, ureteroscopes/renoscopes, and endoscope reprocessors), resulting in a suspension of imports into the United States. The Company is promoting risk-based product portfolio evaluation with patient safety as the top priority and globally standardizing its quality systems, while continuing direct communication with the FDA.

Non-compliance with applicable laws and regulations governing product development and approval processes could result in delays to product commercialization, restrictions on market entry, litigation, or other regulatory action. In the MedTech industry, regulatory requirements for medical devices continue to change, requiring continuous investment to ensure compliance. The Group is enhancing its compliance framework by strengthening global processes, policies, monitoring activities, education and training, and controls.

Military conflicts and trade wars threaten the supply chain and increase costs, while rapidly changing sanctions also create compliance risk; this is recognized as one of the Group's top priority risks. In key markets, domestic industry protection measures, tariff fluctuations, and preferential treatment for domestic suppliers may reduce profitability. In response, the Company is advancing preparations for local production in China, and in the United States is continuously monitoring tariff developments in coordination with industry associations.

Competition is intensifying in fields characterized by rapid technological innovation and price competition, which may affect the Group's ability to maintain its market position and profitability. A lack of depth or timeliness in market information, or misjudgment of market trends, customer needs, or competitor activity, risks undermining strategic decision-making and competitive advantage. The Group is addressing this by improving innovation effectiveness, accelerating product development cycles, and strengthening standardized market intelligence capabilities.

Disruptions to critical business infrastructure or logistics networks, particularly at points of concentrated dependency, could adversely affect product supply, business continuity, and the ability to provide services to customers and patients. Tight supply-demand balances for critical raw materials including semiconductors, dependence on single or sole-source suppliers, and delayed supplier recovery during crises also threaten supply stability. The Group is strengthening supply chain resilience through business continuity planning (BCP), maintaining safety stock, diversifying procurement sources, and evaluating supplier resilience.

Disruptions to manufacturing operations, including shutdowns at manufacturing sites, could cause production delays and affect the ability to meet customer demand. As large-scale resources continue to be allocated across manufacturing, quality, supply chain management, and R&D in response to the FDA warning letter, operational risk is trending upward. The Group is addressing this by introducing a systematic business continuity management (BCM) framework and strengthening crisis management capabilities.

The increasing frequency and sophistication of cybersecurity threats could result in unauthorized system access, data breaches, or disruption to critical operations, and the risk trend in the IT & Digital category is assessed as rising. Aging or obsolete IT infrastructure and applications, and insufficient governance over decentralized or non-standardized IT solutions, also heighten security vulnerabilities. The Group is addressing this through the operation of a comprehensive information security program, systematic lifecycle management, and the development of recovery and business continuity plans to improve IT resilience.

The expanding adoption of digital technology and AI in products and services may require adjustments to the operating model, organizational capabilities, and governance structure; failure to manage this transformation effectively could affect competitiveness and operational efficiency. In addition, failures or outages of critical core systems could affect core business processes, including manufacturing and supply chain operations. The Group is advancing digital transformation by strengthening its governance structure, enhancing technology development processes, and investing in digital talent.

Fluctuations in foreign exchange rates can constitute a significant risk; yen appreciation may adversely affect performance, while yen depreciation may have a favorable effect. In addition, deteriorating business performance or changes in financial market conditions may limit financing options, and changes to global tax laws or reassessment of deferred tax assets pose a risk of increased tax burden. The Group manages financial risk through the use of derivatives such as forward exchange contracts and currency swaps, global cash pooling, diversification of funding through public bond issuances and other means, and the adoption of fixed interest rates.

M&A activity presents both opportunities and threats; if risk mitigation measures are insufficient, goodwill impairment and related expenses could adversely affect business operations, performance, and financial condition. Rigorous due diligence and a systematic integration process are required, and improving effectiveness in target selection, due diligence, and post-acquisition integration remains a challenge. The Group aims to minimize risk through continuous improvement of its M&A processes and systems, while pursuing innovation through a combination of in-house development, M&A, and strategic alliances.