TSUBAKIMOTO KOGYO CO.,LTD.

Sales in the Power Transmission Components and Equipment & Systems businesses are highly dependent on capital expenditure trends across industries and manufacturers' component supply volumes, and a slowdown in capital expenditure due to economic downturn may affect overall business performance. The Group monitors changes in the global economic situation and collects forecast information on capital expenditure demand and production plans in each industry to enable prompt response, with regular reporting and deliberation at the Board of Directors and Executive Officers' Meeting.

For long-term large-scale construction projects for which sales are recognized on a percentage-of-completion basis, specification changes, additional construction work, deterioration in the financial condition of subcontractors, delivery delays, and similar factors may result in additional costs and construction delays, leading to a decline in profitability due to the recording of provisions for construction losses. The Group has established a management system for each construction project, strictly manages estimates at the time of order receipt and progress after order receipt, and has a system in place to promptly revise estimated costs when profitability changes.

Mid- to long-term growth is highly dependent on the capabilities of individual employees, and there is a risk that failure to secure excellent talent in a planned manner or stagnation in talent development may hinder mid- to long-term growth. This has been positioned as a central theme of the Sustainability Promotion Committee, and the Group continuously implements consideration of its own personnel system, employee education including OJT, improvement of treatment, and development of a comfortable working environment.

If information leakage occurs due to computer virus infection, unauthorized access, or similar causes, it may lead to a decline in social credibility and adversely affect business performance and financial position. The Group works to ensure information security through the introduction of systems resistant to cyberattacks, thorough implementation of a Group-wide management system for protecting personal and confidential information, and regular vulnerability testing and countermeasures.

Natural disasters such as major earthquakes, sudden accidents, or the outbreak of infectious diseases may render the Group's business activities impossible, and damage to production facilities or infrastructure disruptions at customers or suppliers may hinder the sale or procurement of machinery and equipment. In addition to regular facility inspections, disaster drills, and the introduction of a safety confirmation system, the Group has established regional distribution of operations based on BCP concepts and systems for sales activities and product delivery instructions from home.

Tsubakimoto Chain Co. and its group companies are an important supplier accounting for approximately 30% of the Group's total purchase amount, and if the supply of the company's products is disrupted, it may become difficult to fulfill delivery obligations and meet delivery deadlines to customers, potentially leading to a decrease in sales. The Group addresses this by building a continuous product supply system through close information exchange with the Tsubakimoto Chain group and obtaining production plan information.

In overseas expansion centered on Southeast Asia, terrorism, political instability, and differences in business customs may lead to deterioration in the performance of overseas subsidiaries. In addition, if the exchange rate fluctuates significantly when translating foreign currency-denominated items of overseas consolidated subsidiaries into yen, this may adversely affect operating results and financial position. The Group collects information through overseas subsidiaries and representative offices, and hedges exchange rate fluctuation risk through foreign currency deposit account settlements and forward exchange contracts.

Regarding securities investments in customers, suppliers, financial institutions, and others, market value may decline significantly due to economic conditions or trends in corporate earnings, and the Group may record impairment losses if the financial condition of an investee company deteriorates significantly. For cross-shareholdings, the Group plans to sell shares for which the significance of holding is deemed to have diminished, and the Board of Directors deliberates on the appropriateness of continuing to hold each stock at the end of the fiscal year.

Intensified competition with competitors in each business field may lead to price competition and quality competition, resulting in a decrease in sales and profit. As countermeasures, the Group focuses on the continuous development of new products that enhance customer value, total equipment installation proposals leveraging engineering capabilities, and added-value proposals tailored to customer needs.

Both cost increases due to tightened regulations toward decarbonization (such as carbon taxes) (transition risk) and business disruptions due to the intensification of natural disasters under a +4°C temperature rise scenario (physical risk) may affect business performance. The Sustainability Promotion Committee identifies risks and opportunities based on scenario analysis, evaluates their financial impact, and considers countermeasures, reporting identified and evaluated risks to the Board of Directors and other bodies as appropriate.