IMV CORPORATION

The Group relies on outsourcing partners for parts and processes that do not require in-house production, and in principle seeks to mitigate procurement risk by securing multiple outsourcing partners. However, if any disruption occurs in procurement from outsourcing partners, this may affect delivery schedule management, quality control, and other aspects. While Vibration Simulation Systems' core components are manufactured in-house at group factories including consolidated subsidiaries, and Measuring Systems' core components are manufactured in-house at the Company's own factories, risk remains for the portions dependent on external parties.

Sales of Vibration Simulation Systems tend to concentrate in March and September due to customers' budget execution schedules, and this tendency may be further strengthened by an increasing proportion of sales to government agencies. In addition, since products involving installation and operational verification are recognized as sales at the time of customer acceptance, delays in acceptance may cause revenue to shift between periods, becoming a factor in fluctuations in operating results. The timing of recognition of large-scale projects may also be a factor in monthly fluctuations.

The Group has a high proportion of domestic sales, with domestic sales accounting for approximately 55% of the total in the current consolidated fiscal year. Although the Group is working to expand overseas sales and address new testing demand in areas such as next-generation energy, if the recovery of domestic demand in existing industries such as the automotive industry is delayed beyond expectations, this may become a factor in fluctuations in operating results. The high degree of dependence on the domestic market structurally embeds downside risk to business performance.

As the proportion of overseas sales increases, foreign currency-denominated transactions are increasing, and if a significant divergence occurs between the initially assumed exchange rate and the actual market rate, this may affect business performance and financial condition. In addition, since the financial statements of overseas subsidiaries are prepared in local currency, fluctuations in exchange rates at the time of yen conversion for the preparation of consolidated financial statements affect financial position and operating results. Both translation risk and transaction risk exist.

In response to the effects of recent climate change, if costs related to global environmental conservation increase toward a decarbonized society due to the tightening of environmental regulations, this may affect the Group's business performance and financial condition. Furthermore, if the Group's response to the growing demand for transition to a decarbonized society is delayed, this may result in a decline in corporate value due to lost sales opportunities and other factors, potentially affecting business performance. Risk exists on both fronts: the cost of responding to tightened regulations and the loss of business opportunities.