RYODEN CORPORATION

The Company sells a wide range of products and services—including FA Systems, Air Conditioning & Building Systems, and Electronics—to the manufacturing, construction, and medical industries, among others, and business fluctuations, sluggish industry demand, or reduced capital expenditure directly affect performance. Both the likelihood and impact of occurrence are rated at the highest level (5/5), positioning this as the most critical risk. Under the innovation strategy of the medium- to long-term management plan "ONE RYODEN Growth 2029|2034," the Company is deepening and expanding existing businesses while exploring new domains, aiming to transform into a corporate structure less susceptible to economic fluctuations.

Amid a continuing decline in the working population, recruiting, developing, and retaining excellent talent is the most critical challenge for sustainable growth, rated with a likelihood of 4 and an impact of 5. If diversity, including the advancement of women, is insufficient or if talent attrition occurs, this could have a material impact on business performance and financial condition. The Company is addressing this by improving its HR systems, providing employee training, and enhancing engagement initiatives, while setting the ratio of female managers as a KPI in its medium- to long-term management plan.

Against the backdrop of the Paris Agreement and the 2050 carbon neutrality declaration, tightening of environment-related laws and regulations, introduction of carbon taxes, and increased environmental conservation costs may affect performance, and this is rated with a likelihood of 4 and an impact of 4. In addition to increased costs of responding to stricter regulations, there is also a risk of decreased social credibility due to delayed response. The Company has set targets of a 42% reduction in Scope 1 and 2 emissions and a 25% reduction in Scope 3 emissions by 2030 compared to FY2023 levels, and has established a Sustainability Committee to address this.

The major supplier for FA Systems and Air Conditioning & Building Systems is Mitsubishi Electric Corporation, which accounts for a high dependence ratio of 18% of consolidated purchase volume (likelihood 3, impact 4). Changes in Mitsubishi Electric's business strategy or distributor policy, or changes in supply trends, pose a risk of directly affecting the Group's performance and financial condition. In addition to maintaining a close relationship through sales agency agreements, the Company is working to enhance its value as a trading function and strengthen relationships with suppliers through its supply chain strategy.

Large-scale earthquakes, abnormal weather, and other natural disasters may damage infrastructure such as business offices and networks, or disrupt distribution networks, potentially impairing head office and branch functions and sales activities (likelihood 4, impact 3). There are also concerns about ripple effects across the entire supply chain due to disasters affecting suppliers and customers. The Company aims to minimize impact through the development of disaster prevention manuals and BCPs and by securing BCP inventory.

Fluctuations in market conditions or a decrease in customers' anticipated requirements may result in disposal losses or valuation losses on held inventory, potentially affecting performance and financial condition (likelihood 4, impact 3). Inventory risk tends to materialize especially in items with large demand fluctuations, such as semiconductor and device products. The Company strives to maintain appropriate inventory levels through thorough management based on standard inventory management operating rules, setting of ordering authority, careful examination of customer requirements, and securing commitments to purchase.

System outages or leaks of confidential and personal information due to cyberattacks, unauthorized access, computer viruses, and the like may lead to suspension of business activities, impacts on the supply chain, and a decline in social credibility (likelihood 4, impact 3). The spread of remote work has expanded the network perimeter, increasing this risk. The Company implements multilayered measures, including building a CSIRT structure, transitioning to zero-trust security, conducting targeted email attack drills, and taking out cyber risk insurance.

The Company operates in China, Southeast Asia, Europe, and the Americas, and with overseas sales accounting for 24% of consolidated net sales, unexpected changes in laws and regulations, deterioration in political and economic conditions, and social unrest due to terrorism or war may affect performance and financial condition (likelihood 4, impact 2). The Company gathers intelligence on conditions and takes timely countermeasures through self-checks of local laws and regulations, collaboration with local consultants, and regular exchange of information with overseas subsidiary executives.

In supplying products to overseas customers and procuring from overseas suppliers, sales, expenses, and asset values converted into yen are affected by exchange rate fluctuations, potentially making it difficult to secure planned profits (likelihood 3, impact 3). Medium- to long-term currency fluctuations also pose a risk of disrupting the execution of procurement and supply plans. The Company aims to minimize short-term fluctuation risk through currency hedging transactions such as forward foreign exchange contracts.

In creating new businesses based on the innovation strategy of the medium- to long-term management plan, the Company itself will bear quality risks and risks of intellectual property rights infringement that were previously borne by suppliers, and this could affect performance and financial condition if unexpected defects occur (likelihood 3, impact 2). The Company is promoting an intellectual property strategy centered on its Strategic Technology Center and working to strengthen its structure both domestically and internationally.