OKAMURA CORPORATION

If product and service development fails to keep pace with the speed of changes in customer preferences, business performance may deteriorate due to declining customer satisfaction. There is also a risk that competitors could imitate the Group's designs and technologies to sell at lower prices, or expand market share with their own high-value-added products. The Group addresses this by building competitive advantage through the "difference" in its value-provision concept, and by strengthening its ability to solve customer challenges, design capability, and production technology.

Although the Group has insurance coverage for product liability risk, there is no guarantee that the insurance will sufficiently cover damages, and product defects may adversely affect corporate reputation and business performance. As the business expands, the scope of quality management has diversified and become more complex, extending from physical goods to services and contracted construction work, increasing the risk that quality maintenance cannot keep pace with the speed of growth. In response, the Group has established a quality assurance committee covering the entire supply chain, and is strengthening its quality management system based on ISO9001 and conducting practical education in cooperation with business partners.

If the Group is unable to sufficiently secure, develop, and retain the human resources it needs, its business execution capability may decline, making it difficult to achieve performance targets. Insufficient investment in human capital, a lack of psychological safety, and inadequate attention to occupational health and safety may lead to lower employee morale, turnover, and reduced productivity, while violations of occupational health and safety laws and regulations could result in penalties, damages, and reputational harm. Countermeasures are described in the Group's approach to and initiatives on sustainability.

Delays in climate change countermeasures, violations of relevant laws and regulations, or failure to transition the business toward a resource-circulating model may damage social credibility and harm profitability by causing exclusion from customer selection criteria. There is a risk that this could impede the Group's contribution to building a sustainable society, affecting its long-term business foundation. Countermeasures are described in the Group's approach to and initiatives on sustainability.

If the supply chain is disrupted by natural disasters such as earthquakes or floods, accidents such as fires, the spread of infectious diseases, trade friction, or policy trends in various countries, business suspension, loss of opportunity, and recovery costs may result. Rising geopolitical risk and soaring energy prices leading to higher material costs and difficulty in procuring raw materials also pose a risk of adversely affecting business performance. The Group addresses this through emergency response regulations, BCP development, strengthened collaboration with business partners, and enhanced procurement activities that emphasize sustainability.

Even setting aside cases where controls over group companies fail to function, there is no guarantee that inappropriate or problematic conduct by officers and employees can be completely prevented, which may lead to a decline in social credibility and deteriorating business performance. There is also a risk that gaps in internal control design or increasingly complex and inefficient business processes could hinder the achievement of business objectives. The Group addresses this through internal, external, and overseas helplines, awareness surveys covering all employees, and activities to visualize, standardize, and improve business processes.

The risk of leakage of confidential information, including customer information and personal data, as well as the risk of cyberattacks on the ICT systems used in manufacturing, sales, and other business operations, is increasing year by year. A major information security incident could adversely affect business performance through loss of social credibility and business disruption. The Group has implemented multi-layered measures, including confidential information management rules, an information security policy, obtaining Privacy Mark certification, an incident response framework via the CSIRT established in 2020, and targeted phishing email training, but recognizes the risk that its response may not keep pace with increasingly sophisticated cyberattacks.

The Group's domestic sales ratio exceeds 90%, and if demand contracts due to reduced capital investment amid a downturn in the domestic economy, this could adversely affect business performance and financial condition. Although the Group has established a system to timely collect and analyze information on changes in the economic environment and flexibly review its business activities, there are limits to its ability to respond to sudden economic fluctuations. The high degree of dependence on domestic demand constitutes a structural risk factor.