HAGIHARA INDUSTRIES INC.

Physical damage and difficulty in business continuity may arise from an increase in natural disasters and sea-level rise, and there is also a possibility of increased costs due to the introduction of carbon taxes and difficulties in raw material procurement. As countermeasures, the Group is strengthening disaster preparedness, developing flexible raw material procurement systems, and promoting a shift toward business activities aimed at minimizing greenhouse gas emissions. On the other hand, the Group positions product groups that contribute to climate change adaptation, such as those for disaster prevention applications, as business opportunities and is also working to strengthen this field.

Various disasters such as earthquakes, storms, lightning, floods, and fires may cause physical harm to employees and their families and physical damage to business assets, potentially leading to a decline or suspension of business activities. The Group has formulated a business BCP that includes disaster prevention measures for facilities, disaster drills, establishment of communication systems, and insurance coverage, and strives to minimize losses when damage occurs.

If a violation of domestic or overseas laws and regulations occurs, the Group may be forced to pay substantial fines or suspend operations. In recent years, new risk factors such as human rights issues and export controls have become apparent, and the Group works to ensure thorough legal compliance through information gathering by the legal department, related departments, and outside experts, as well as through its code of conduct.

If unexpected defects arising from product design or manufacturing occur, there is a risk of losses due to product liability claims and the like. In addition to maintaining a manufacturing system that complies with domestic and overseas quality control standards, the Group has taken out product liability insurance as a measure to limit losses in the event of defects.

Due to the issue of ocean plastic waste and the fact that plastics are derived from fossil fuels, reputational risk related to the manufacture and sale of plastic products is increasing, and there is a possibility that the use of plastics may be restricted in the future. The Group has judged that the practical application of alternative materials will be difficult for the time being, and is proceeding with technology development and consideration of collection systems aimed at thorough reuse of production loss and expanding "horizontal recycling," in which used products are reprocessed into equivalent products.

In the Synthetic Resin Processed Products Business, polyethylene and polypropylene resins are the main raw materials, and fluctuations in raw material prices, which are affected by crude oil and naphtha market conditions and exchange rates, as well as electricity rates, may affect business results. In the Machinery Products Business, there is also a risk of increased costs and sales delays due to disruptions in the procurement network for components such as semiconductors. The Group aims to curb these risks through technology development to reduce dependence on specific raw materials and by passing on cost increases to product prices through strengthened price competitiveness.

The materialization of geopolitical risks such as conflicts may cause soaring raw material prices and disruptions in logistics networks, resulting in increased costs and delays in the delivery of raw materials and products. Furthermore, a contraction in demand for the Company's products due to a global economic downturn is also anticipated. While the Group aims to minimize the impact through maintaining appropriate inventory levels and passing on cost increases to sales prices, it is explicitly stated that there is a possibility that business results will ultimately be affected.

There is a risk that earnings may fluctuate at individual subsidiaries due to changes in demand for the products they handle and economic conditions in their sales regions. While pursuing optimization of the production and sales systems across the entire Group, the Group carries out management support such as assistance with the cash flow of each subsidiary and appropriate estimation of the business value of each subsidiary.

If a system failure occurs due to a cyberattack or the like, it may have a significant impact on business continuity, and if an information leak occurs, it could lead to liability for damages and loss of the Company's credibility. Under the IT BCP, the Group develops and operates appropriate information systems and conducts information security education for employees to prevent incidents and mitigate damage.