Noritsu Koki Co., Ltd.

The risk of large-scale typhoons, floods, and forest fires due to global climate change, as well as major earthquakes in Japan, is increasing, and facility damage, power supply outages, and human casualties could cause significant disruption to business operations, including delays or suspension of production and shipment. The Group formulates and continuously reviews BCPs across the entire Group and conducts annual disaster prevention drills for all employees to establish a response framework.

Many products are manufactured at domestic factories and outsourced production sites in Asia, and if significant damage to factory facilities occurs due to natural or man-made disasters, or if power supply and demand issues arise following a major earthquake, production activities may stall or halt. There are concerns about the impact on financial position and operating results, including the incurrence of recovery costs, but appropriate response frameworks based on each company's BCP have been established.

The prices and lead times of raw materials and parts purchased from domestic and overseas suppliers are affected by global supply-demand trends and transportation conditions, and prolonged disruption could impact the financial position and operating results. In addition, if inadequate human rights or environmental responses are discovered within the supply chain, this could lead to suspension of procurement and deterioration of social reputation. In addition to examining alternative parts, diversifying suppliers, and appropriately passing on price increases, the Company is promoting the establishment of a supply chain management framework through sustainability initiatives.

While holding personal information and confidential information of customers and business partners, if information is leaked due to unauthorized access resulting from cyber attacks, this could impact the financial position and operating results through the occurrence of damages and deterioration of corporate image. Measures are being taken, including the establishment of an information security policy, strengthening of network monitoring and management systems, continuous implementation of security education and targeted attack email drills for all employees, and acquisition of Privacy Mark certification by related group companies.

The proportion of overseas revenue to consolidated revenue is extremely high at 91.5% for FY2025 (ending December 2025), and foreign exchange fluctuations directly affect the financial position and operating results. Because it is influenced by a wide variety of fundamentals, the timing of manifestation is difficult to predict; currently, the Company addresses this primarily through natural hedging centered on transactions denominated in Japanese currency.

The Company intends to continue actively pursuing M&A as part of its growth strategy, and if synergy effects and profit growth are not realized as planned due to changes in the business environment and competitive landscape, unexpected liabilities, additional funding requirements, or goodwill impairment losses may arise, impacting operating results. In addition to conducting due diligence, the Company has established a framework for regular monitoring and reporting/discussion at its most important meeting bodies, and has a system in place to reflect any indications through appropriate measurement procedures in the financial statements when they arise.

With overseas revenue accounting for 91.5% of consolidated revenue, economic downturns, contraction in demand, unforeseen accidents, or changes in laws and regulations in the various countries and regions where the Company operates could impact the financial position and operating results. Each business entity conducts risk management through daily communication with business partners and business process controls.

The Company supports the TCFD recommendations and has conducted 1.5°C and 4°C scenario analyses, estimating financial impacts as of 2030, including increased response costs due to decarbonization policies and regulatory tightening as a transition risk, and increased response costs due to the intensification of extreme weather events as a physical risk. The Sustainability Committee leads efforts to reflect scenario analysis results in management strategy while continuing to promote information disclosure.

As the Company operates globally, non-compliance with domestic and international laws and regulations, or the occurrence of fraud or violations of internal rules, could impact business performance and financial position through damage to social trust and brand value, as well as increased costs from fines and penalties. Under the Basic Compliance Policy, Code of Conduct, and Anti-Bribery and Anti-Corruption Policy, the Company conducts compliance training for the entire Group at least once a year, and promotes preventive activities through regular deliberations by the Compliance Committee and the operation of an internal reporting system.

Products such as building materials are subject to a wide range of laws and regulations and public standards, including the Building Standards Act, seismic reinforcement standards, and the Fire Service Act, and fundamental revisions to seismic and fire-prevention standards triggered by large-scale earthquake disasters or heightened safety awareness may necessitate specification changes, performance evaluation testing, and facility upgrades, potentially increasing R&D expenses and capital investment. The Company has established a system to continuously gather the latest information from relevant government ministries and industry associations to identify regulatory change trends early, while pursuing a strategy of turning regulatory tightening into business opportunities through the development of high-value-added products that anticipate legal reforms.