HOYA CORPORATION

Within the Company Group, all executive officers play important roles ranging from the formulation of management policies and business strategies to business execution, and if an executive officer becomes unable to perform their duties, this may affect business results and decision-making. The Company is working to reduce this dependence through the development of succession plans and the establishment of a management structure, but the risk remains.

There is a risk that fluctuations in exchange rates for the US dollar, euro, Thai baht, and other currencies could reduce yen-denominated sales and profits. In FY2026 (ending March 2026), a 1% appreciation of the yen against the US dollar would reduce profit for the year by ¥988 million, a 1% appreciation against the euro would reduce it by ¥83 million, and a 1% appreciation against the Thai baht would reduce it by ¥52 million. The Company addresses this through same-currency settlement of receivables and payables in its three main currencies and diversification of production locations, but a significant exchange rate movement would inevitably affect business results and financial condition.

Unforeseen events such as changes in the political, economic, and legal environment, labor shortages, strikes, natural disasters, and infectious disease outbreaks may disrupt business operations. Sales are geographically diversified, with Japan accounting for 20%, Asia-Pacific 39%, the Americas 18%, and Europe 21%, but if the Company's response to changes in the external environment is delayed, there is a risk that business results and financial condition could deteriorate.

In the Life Care Business, price pressure is intensifying against the backdrop of the expanding scale of mass retailers, joint purchasing organizations, and the rise of online retailers, leading to a continuing decline in product prices. The Company is working to absorb this through cost reductions and a high-value-added strategy, but depending on the pace of price declines, there is a possibility of an adverse effect on business results and financial condition.

If production problems occur or the start-up of new equipment is delayed, this could not only affect the Company's own business results but also disrupt customers' production and sales plans, potentially leading to an expansion of competitors' market share. The Company strives to secure sufficient production capacity, but a production disruption due to any cause may affect business results and financial condition.

Acquiring new businesses through M&A or internal development is important for sustained growth, and this is examined as appropriate at investment committee and quarterly budget meetings. However, if the acquisition of new businesses does not progress, there is a risk of an impact on long-term business results and financial condition. Missed M&A opportunities or stagnation in internal development are risks that go to the heart of the growth strategy.

In the course of conducting its business, the Company holds large amounts of personal information, customer information, and confidential information. While measures such as IT asset management and training for personnel handling such information are implemented, in the event of an information leak, there is a risk of loss of social trust and liability for damages. With the advancement of digitalization, threats such as cyberattacks continue to exist.

The Life Care Business handles medical products, and the Company strives to strictly comply with quality standards through the acquisition of quality management certifications such as ISO13485 and the establishment of a Regulatory and Quality Affairs Department. However, if a quality issue occurs, there is a risk of recall costs, loss of customer trust, and liability for damages. Given the nature of medical devices, quality problems could have a significant impact on business continuity.

For some raw materials and components, there are a limited number of suppliers and substitution is difficult, creating a risk that stable procurement cannot be secured due to disasters or accidents at suppliers or sharp increases in purchase prices. The Company considers stable procurement through contracts and switching to alternative products, but if a procurement disruption occurs, it may result in lost business opportunities due to delayed product shipments, which could affect business results and financial condition.

As of the end of the fiscal year under review, the Company recorded ¥235.7 billion in property, plant and equipment, ¥54.4 billion in goodwill, and ¥21.6 billion in intangible assets. There is a risk that an impairment loss would be recognized if the book value falls below the recoverable amount due to unexpected changes in market conditions or other factors. The Company has established a system requiring discussion based on objective figures and approval by outside directors when considering capital expenditures and M&A, but the risk arising from changes in the external environment cannot be eliminated.