Mitsubishi Corporation

In addition to geopolitical risks such as US-China conflict, the Russia-Ukraine situation, and the Middle East situation, the global economy faces extremely high uncertainty due to trends in US trade and monetary policy and the weakening Chinese economy. These changes may affect personal consumption, capital expenditure, and commodity market conditions, potentially causing fluctuations in the prices, trading volumes, and costs of products and goods in the businesses the Company operates across global and diverse industrial sectors. The Company monitors developments in each risk factor while maintaining a management system in which business groups and specialized corporate departments collaborate.

The Company operates natural gas and oil development and production businesses and LNG businesses in North America, Southeast Asia, Australia, and other regions, and fluctuations in crude oil and LNG prices have a significant impact on its business performance. The Brent crude oil price has moved in a range from the low USD60 per barrel to the low USD70 per barrel, and it is estimated that a fluctuation of USD1 per barrel would change net income by approximately ¥2.4 billion annually. The LNG spot price rose to over USD20 in March 2026 amid escalating tensions in the Middle East, and high volatility stemming from geopolitical risk is expected to continue for the time being.

The Company holds the Coking Coal Business in Australia (BMA, 50% interest, property, plant and equipment book value of ¥1,160.6 billion) through MDP, as well as copper asset interests in Chile and Peru (Anglo American Sur 20.4%, AAQ 40%), and bears the risk of fluctuations in coal and copper prices. For copper, it is estimated that a price fluctuation of USD100 per ton would change net income by approximately ¥2.6 billion annually. A prolonged downturn in commodity market conditions may impact business performance through impairment of property, plant and equipment or equity-method investments held by the Company, and the Company conducts evaluations based on medium- to long-term price outlooks.

The Company bears the risk of fluctuations in foreign currency exchange rates against the yen through foreign currency-denominated settlements in import/export and cross-border trade transactions and investments in overseas businesses. It is estimated that a fluctuation of ¥1 in the USD/JPY exchange rate would change net income by approximately ¥5.0 billion annually. A stronger yen reduces the yen-converted amount of foreign currency-denominated dividends received and the equity in earnings of overseas consolidated subsidiaries and equity-method affiliates, having a negative impact on net income. The Company implements hedging measures such as forward foreign exchange contracts, but complete avoidance of this risk cannot be guaranteed.

As of the end of the consolidated fiscal year under review, the Company held marketable securities with a fair value of ¥1,440.6 billion (including unrealized gains of ¥348.6 billion), primarily held in business partners and affiliated companies, and there is a risk that a decline in stock prices could reduce unrealized gains and erode corporate pension assets. In addition, total interest-bearing debt (excluding lease liabilities) stood at ¥5,746.9 billion, most of which is at floating interest rates, and in the event of a sharp rise in interest rates, interest expenses may increase ahead of other factors, temporarily having a negative impact on business performance. The Company manages interest rate fluctuation risk through its ALM Committee and has established a system for agile response to market risk.

The Company extends credit to business partners in the form of accounts receivable, advance payments, loans, guarantees, and equity investments, and bears the risk of losses due to deterioration in the creditworthiness or bankruptcy of business partners. There is also credit risk with respect to counterparties in derivative transactions entered into for hedging purposes. The Company has established transaction approval and credit limit settings for each business partner and an internal credit rating system, and obtains collateral and guarantees, but complete avoidance of credit risk cannot be guaranteed.

In its overseas transactions and investments, the Company bears country risk arising from a country's political, economic, and social conditions, including delays in or the inability to collect payments or conduct business operations, and geopolitical instability, including the Russia-Ukraine situation, continues. The ALM Committee, chaired by the CFO, regularly monitors the risk status of country-by-country portfolios and implements hedging measures such as insurance coverage, but it is difficult to completely avoid the risk of deteriorating political, economic, or social conditions. If such risks materialize, the Company's business performance may be affected.

The Company holds large-scale investment projects such as Australian coking coal (BMA), copper assets in Chile and Peru, LNG Canada (property, plant and equipment book value of ¥428.7 billion), Lawson, Inc. (book value of ¥502.6 billion), and Eneco (goodwill book value of ¥167.0 billion), and bears the risk of being unable to recover invested funds, incurring additional losses, or failing to achieve planned profits due to changes in the business environment or withdrawal. After executing an investment, the Company formulates and manages an annual "management plan," but it is difficult to completely avoid the risk of failing to generate expected profits. In particular, for Eneco, a downturn in electricity demand or the European macroeconomy could impact business performance through goodwill impairment.

The Company operates globally across numerous domestic and overseas locations and is required to comply with a wide range of laws and regulations, including the Companies Act, tax laws, the Antimonopoly Act, anti-bribery laws, security export controls, sanctions-related laws, and environmental laws. In particular, the Company must respond to the introduction and strengthening of economic sanctions by various countries stemming from the Russia-Ukraine situation, and the Compliance Committee, headed by the Chief Compliance Officer, directs and supervises legal compliance on a consolidated basis. If the Company is unable to fulfill its legal and regulatory obligations, its business performance may be affected.

In the event of a crisis such as a natural disaster (e.g., earthquake or flood), an emerging infectious disease, a major accident, terrorism or riots, a cyber incident, or a geopolitical emergency, damage to employees, business locations, equipment, or systems may occur, potentially disrupting sales and production activities. The Company has implemented measures such as establishing an emergency crisis response headquarters, developing business continuity plans (BCP), implementing earthquake resistance measures, conducting regular drills, and maintaining stockpiles, while also promoting business continuity management (BCM). However, it is not always possible to avoid all damage and impact, and in the event of a crisis, the Company's business performance may be affected.