Nissha Co., Ltd.

Strengthening of greenhouse gas emission regulations and carbon taxes associated with the transition to a low-carbon society may result in additional costs, and there is a risk of lost business opportunities due to failure to meet required standards. In addition, natural disasters caused by climate change may reduce factory production capacity or disrupt the supply chain. The Group achieved its 2030 target ahead of schedule (48.4% reduction rate in FY2024) and has newly set a target of "60% reduction in total CO2 emissions by 2035 (compared to 2020)."

The Group actively utilizes M&A as a growth strategy, and goodwill of ¥33,277 million was recorded as of the end of the current consolidated fiscal year. If the market and competitive environment change significantly from the assumptions at the time of the M&A execution and the acquired company's performance deteriorates, or if the growth rate or discount rate used in the value-in-use calculation fluctuates significantly due to interest rate changes or other factors, an impairment loss on goodwill may occur. The Group seeks to minimize this risk by conducting thorough due diligence prior to M&A execution and building a system to promote post-acquisition management integration.

The ratio of overseas sales in the current consolidated fiscal year reached 87.1%, and since transactions are primarily denominated in foreign currencies, sharp fluctuations in exchange rates may directly affect business performance and financial condition. The Group has a high degree of dependence on specific currencies, resulting in a structure prone to declines in sales and profit during yen appreciation phases. The Group strives to minimize this risk through localization of production and the use of foreign exchange forward contracts.

The proportion of sales attributable to specific customers is relatively high, creating a risk that sales may fluctuate due to matters beyond the Group's control, such as changes in demand for the customer's products, specification changes, or changes in sales strategy. This structure means that deterioration in the customer's business environment can directly spill over into the Group's business performance and financial condition. Under the 8th Medium-Term Management Plan, the Group is pursuing growth strategies across multiple focus markets including Medical Technology, mobility, and Sustainable Molded Products, and the degree of dependence on specific customers is trending downward.

With overseas sales accounting for more than 80% of the total, if country risks such as political and economic factors, changes in laws and regulations, or changes in tariffs and tax systems materialize, they may affect business performance and financial condition. In particular, changes in U.S. tariff policy and rising geopolitical tensions could have a direct impact on the global supply chain. The Group addresses this through appropriate diversification of production sites and continuous monitoring of local policy and legal trends.

The Group manufactures and sells products requiring high levels of safety, such as those for the mobility (automotive) market and the medical market. In particular, for products intended for the pharmaceutical market, if quality defects, design flaws, or unexpected side effects occur, this could result in product recalls, discontinuation of sales, or liability for compensation for health damage, significantly affecting business performance and financial condition. An unexpected large-scale quality problem could also directly lead to a loss of customer trust. The Group has established a risk minimization framework through the establishment of a Pharmaceutical Affairs Group directly under the officer in charge of pharmaceutical affairs and the development of regulations for responding to major quality incidents.

The Group holds important information entrusted by customers and suppliers, as well as new product information, technical information, and personal information. If confidential information is stolen or leaked due to a cyberattack or internal misconduct, this could have a serious impact on business operations and credibility. Data security risks associated with the spread of generative AI are also recognized as a new challenge. The Group is working on continuous improvement through internal ISMS audits and the PDCA cycle, enhancing security literacy through phishing email training, and continuously strengthening countermeasures against cyberattacks.

If the Group is unable to sufficiently secure and develop personnel in line with the restructuring of its business portfolio, it may become difficult to execute its growth strategy, which could affect business performance and financial condition. In an environment where diverse personnel work globally, a shortage of specialized talent could constrain expansion into focus markets (Medical Technology, mobility, Sustainable Molded Products). The Group addresses this through the formulation of HR systems based on its basic HR policy, promotion of women's advancement, development of leaders and executive candidates, and education and training programs aligned with the 8th Medium-Term Management Plan.

If governance and internal controls fail to function effectively amid global business expansion, misconduct by officers and employees of subsidiaries, or transactions and decisions that do not conform to management policy, may not be deterred, potentially affecting business performance and financial condition. If management of overseas group companies is inadequate, there is a risk that early detection of misconduct or compliance violations may be delayed. The Group has established a system with risk management coordinators assigned to major regions (the Americas, Europe, and China), monthly and quarterly business reviews, and internal control checks based on unified Group rules.

If human rights issues such as child labor, forced labor, or discrimination against foreign workers occur within the Group or its supply chain, this could lead to a decline in social credibility, suspension of transactions with customers, or litigation and liability for damages. Trends in strengthened human rights-related laws and regulations (such as supply chain due diligence legislation in Europe and elsewhere) may also affect business activities. In FY2025, the Group revised its "Basic Policy on Human Rights" to clarify its support for the UN Guiding Principles, and continues to conduct supplier questionnaires and on-site audits.