FRANCE BED HOLDINGS CO.,LTD.

More than 50% of net sales in the Medical Service business depend on the long-term care insurance system, and there is a risk that net sales could decline significantly if services are designated as outside the scope of insurance coverage or if the coverage rate is reduced in the system revisions that occur every three years. As countermeasures, the company is working to build a revenue base independent of long-term care insurance and promoting the development of products for active seniors and the expansion of rentals for the general public, but it is difficult to completely eliminate the impact of system revisions.

The furniture retail market to which Interior Health business customers belong is susceptible to economic trends, consumer sentiment, land prices, and housing tax systems, and there is a risk that demand will decline due to economic downturn or the progression of the declining birthrate and aging population. In addition, if other companies lead with similar products or technologies, there is a possibility of declining sales prices, shrinking profit margins, and bad debt losses arising from the deterioration of customers' business conditions. As a countermeasure, the company is promoting the expansion of sales channels to a wide range of industries, including e-commerce companies, home centers, and mass retailers.

Products are manufactured based on JIS standards and the company's own standard, FES, but there is no guarantee that defects will not occur in all products, and a large-scale recall or liability claim could result in substantial costs. Although the company has product liability insurance, there is no guarantee that it will fully cover the final amount of compensation, and there is also a risk of decreased net sales due to brand damage. There is also a possibility of receiving administrative sanctions from regulatory authorities.

Due to the nature of its business, the company handles large amounts of customer personal information, and if an information security incident occurs due to a cyberattack or similar cause, there is a risk of bearing legal responsibility and significantly damaging social trust. Countermeasures have been taken through subscription to liability insurance and the establishment of an information management committee, but it is difficult to completely eliminate the risk.

The company bears credit risk of losses arising from deterioration in the creditworthiness or business failure of counterparties in various business transactions. Although the company sets transaction limits and payment settlement methods and conducts trend verification and management through a receivables management committee, it is difficult to eliminate all risk, and if a counterparty's failure or similar event occurs, it could affect operating results and financial condition.

Foreign currency-denominated monetary receivables and payables arising from import and export transactions of raw materials and merchandise carry foreign exchange fluctuation risk, and although hedging is conducted through derivative transactions, it is difficult to completely eliminate the impact, including indirect effects. In transactions with multiple countries centered on Asia and Europe, changes in economic conditions in each country and social disruption caused by disasters, riots, terrorism, or war may also affect the import and export environment.

The company has many business locations, mainly in Japan, and there is a risk that business activities could be halted or substantial costs could arise for facility repairs due to natural disasters such as typhoons and earthquakes, fires, power outages, or epidemics. In the event of an infectious disease outbreak such as COVID-19, a significant scaling back of business activities may be required, and the company responds based on a business continuity plan and a crisis management headquarters headed by the Representative Director, Chairman and President, but depending on the duration of the impact and the degree of economic effect, it could affect operating results and financial condition.

Changes in economic conditions and social disruption in overseas resource-producing countries create a risk that fluctuations in resource demand and prices will increase overall costs for the company, including raw materials and merchandise procurement prices. The company continuously monitors domestic and international social conditions, but it is difficult to completely avoid cost increases, which could affect operating results and financial condition.

The company strives to secure and develop human resources through regular new graduate and career hiring, a continuous employment system, a system for promoting part-time employees to full employee status, and internal and external training, but if there is a failure to achieve staffing plans or a greater-than-expected outflow of personnel resulting in a labor shortage, it could affect operating results and financial condition through a decline in operational efficiency.

Across the entire group, consisting of the company and 10 domestic and overseas subsidiaries, there is a risk that if governance does not function effectively or controls become insufficient, misconduct such as legal violations, improper accounting practices, quality fraud, or inadequate information management could occur. The company has implemented various measures, including the development of internal regulations, internal audits, monitoring, and education and awareness initiatives, but if misconduct were to occur, it could lead to administrative sanctions, litigation, damages, and additional costs, as well as a decline in social trust and brand damage, which could affect operating results and financial condition.