KING JIM CO., LTD.

Amid a shrinking trend in the core file products market due to digitalization and paperless initiatives, the Group is actively investing in the development of new products that respond to diversifying work styles and lifestyles; however, not all such development investments are guaranteed to be accepted by the market. If investment recovery cannot be expected, this may adversely affect business performance. As a countermeasure, the Group is focusing on product development aimed at creating new markets and on developing safety-conscious and environmentally conscious products, seeking to establish a third pillar following "King File" and "TEPRA (Label Writer)".

There is a risk that third parties may file lawsuits alleging infringement of intellectual property rights, as well as a risk of third parties imitating the form of the Group's products, either of which could affect business performance. The Group conducts prior investigations into the existence of third-party intellectual property rights when commercializing products, and cooperates with external attorneys and patent attorneys when litigation is filed. In addition, when products suspected of infringing the Group's own intellectual property rights are discovered, the Group takes action such as sending warning letters demanding the cessation of sales and production.

Although the Group has established and operates a management system based on quality control standards, unexpected product defects that cause damage to customers could lead to a loss of customer trust. While the Group carries product liability insurance, there is a possibility that the insurance may not fully cover the amount of damages, which could affect business performance. As a countermeasure, the Group updates its quality control standards as appropriate and works to maintain and strengthen its management system as well as ensure strict compliance with and enforcement of its operations.

The Group's products primarily use synthetic resin, paper, steel sheet, semiconductors, and other raw materials, and prices may fluctuate significantly due to crude oil market conditions or global supply-demand imbalances. Sharp increases in raw material prices or difficulties in stable procurement could directly affect business performance. As countermeasures, the Group implements measures such as purchasing from multiple suppliers, collaborating with suppliers, using alternative materials, and reducing costs through improved production efficiency.

As the Group primarily conducts production overseas and operates business activities in various countries, mainly in Asia, changes in economic and political conditions, and disruptions to operations or transportation caused by war, terrorism, or the spread of infectious diseases could impede parts procurement, manufacturing, and sales. There is also a risk of additional tax burdens arising from differences in interpretation with tax authorities in various countries. As countermeasures, the Group diversifies the countries and regions of its procurement sources, maintains safety stock, conducts prior investigations into country risk, and prepares transfer pricing documentation with the assistance of external experts.

As the Group primarily conducts production overseas and engages in some foreign currency-denominated transactions for the import and export of products and raw materials, and also holds foreign currency-denominated receivables and payables, significant foreign exchange fluctuations could affect business performance. A sharp depreciation of the yen is also said to potentially lead to restraint in hiring numbers. As a countermeasure, the Group utilizes hedging methods such as forward exchange contracts.

Although the Group conducts production planning and inventory management based on demand forecasts, actual sales may fall significantly short of forecasts due to changes in market conditions or discrepancies with sales projections. If the net realizable value falls below the acquisition cost due to a significant decrease in product value from obsolescence or a decline in profitability, the Group would need to record a valuation loss on inventory, affecting business performance. As countermeasures, the Group works to improve the accuracy of demand forecasting by appropriately gathering external environment and sales information, and continuously monitors inventory levels while adjusting production accordingly.

The Group positions M&A as a means of business expansion and actively considers such opportunities; however, if contingent liabilities or unrecognized liabilities not identified during prior due diligence exist, or if business development does not proceed as planned due to changes in market conditions or other factors, an impairment of the investment value of the target company may become necessary, affecting business performance. As countermeasures, the Group thoroughly conducts detailed prior due diligence, discusses and verifies business development and profit/loss plans following management integration, and promotes smooth management integration through the establishment of a cross-departmental committee.

Cyberattacks and unauthorized access from outside, defects in software and information equipment, and unauthorized removal of information from within could result in information leakage or tampering, potentially disrupting business activities and affecting business performance. As countermeasures, the Group installs antivirus software, conducts employee training and awareness activities, and has established rules for the use of external storage devices to guard against internal misconduct.

Amid intensifying competition for capable human resources, a declining working-age population may make it difficult to acquire and retain the necessary talent. In addition, if a sharp depreciation of the yen or sudden economic fluctuations force the Group to restrain hiring numbers, this could affect the Group's business performance. As countermeasures, the Group is working to provide educational opportunities, ensure fair evaluation and compensation, establish flexible working arrangements such as telework, promote DE&I, and visualize and address organizational issues through engagement surveys.