Canon Marketing Japan Inc.

In Office MFP, declining shipment volumes due to office consolidation and lengthening replacement cycles, as well as declining print volumes due to paperless initiatives, could put pressure on business performance. In laser printer toner cartridges, the expanding sales of third-party alternative products could squeeze the profitability of genuine Canon products, and in inkjet printers, the decline in unit and ink cartridge sales due to reduced color printing may continue. There is also a market contraction risk for interchangeable-lens digital cameras (mirrorless) due to changes in demand trends and the external environment.

Orders for semiconductor manufacturing equipment and inspection/measurement equipment are heavily influenced by the capital expenditure trends of semiconductor device manufacturers. If capital expenditure declines, the performance of the Industrial Equipment segment may deteriorate. This represents a structural vulnerability to cyclical fluctuations in demand.

Technological innovations such as generative AI are simplifying and automating work processes, which could reduce the volume of outsourced work in certain areas of the BPO business and negatively affect performance. On the other hand, as the expansion of advanced IT-driven operations progresses, the content of outsourced work is becoming more complex and diverse, and there is a risk that violations of related laws and regulations, information security incidents, or quality errors could damage the reliability and social trust of the Group.

In contract-based system development across a wide range of fields, if significant additional work hours arise due to discrepancies in understanding of specifications or progress with customers, costs may increase and adversely affect performance. The Company strives to prevent the occurrence of unprofitable projects through internal deliberation structures, project management, and work-hour management, but this does not guarantee complete avoidance.

If disasters such as earthquakes, large-scale flooding, or fires, infectious disease outbreaks, operational errors, or cyberattacks occur at the Nishi-Tokyo Data Center, this could result in the suspension of facility and system operations or the leakage of important customer information, potentially causing damage to business partners and others. Although the Company has obtained M&O certification and maintains high-performance facilities and strict security, these risks cannot be completely eliminated, raising concerns about a decline in trust and adverse effects on performance and financial condition.

Given that the Company holds a large amount of confidential corporate information and personal information, if important information is leaked externally due to a cyberattack or other cause, it could cause damage to business partners and other related parties, and the resulting decline in trust could adversely affect business operations, performance, and financial condition. The Company has established a basic information security policy and regulations, provides employee training, and maintains a system for preventing, detecting, and responding to cyberattacks through Canon MJ-CSIRT, but there is no guarantee that these measures will prevent all risks.

If natural disasters such as earthquakes and typhoons, or the outbreak of a serious infectious disease occur, human and physical damage may result, affecting business activities. Furthermore, this could trigger a chain of events including stagnation of economic activity, disruption of the supply chain, and reduced investment appetite among business partners, adversely affecting performance and financial condition. The Company has established backup systems and conducts disaster response drills, but there is no guarantee that damage can be sufficiently avoided.

Because many transactions involve collecting payment after the provision of products and services, unforeseen bad debt losses may occur. The Company takes measures such as credit management using external credit research agencies, risk hedging through factoring, and setting individual allowances for doubtful accounts, but if an unexpected event results in a large uncollectible amount, this could adversely affect performance and financial condition.

As a subsidiary of Canon Inc. (voting rights holding ratio of 52.1%), the Company holds exclusive domestic sales rights for Canon Inc.'s products, and the proportion of purchases from Canon Inc. remains at a high level of total purchases. If there is a major shift in Canon Inc.'s management policy or business development, or if Canon products can no longer maintain their competitive advantage in related industries, this could have a significant impact on the Group's business activities, performance, and financial condition.

Because the Company receives products and services from numerous business partners, including its parent company Canon Inc., there is a risk that natural disasters, major accidents, or other events could prevent it from receiving sufficient supply from these partners. If a supply shortage occurs, it may become difficult to smoothly promote sales activities, raising concerns about the impact on performance. As this risk originates from circumstances at business partners, it presents a structural challenge that the Group cannot fully control on its own.