GSI Creos Corporation

If a sudden change in economic conditions, such as a recession or financial crisis, occurs in major markets including Japan, North America, Asia, and Europe, it may lead to a contraction in demand or a decline in product procurement capability. Since the Group conducts extensive overseas operations in both the fiber-related business and the industrial products business, there is a risk that economic disruption in a specific region could spread to the overall business performance.

The Group conducts transactions in multiple currencies and is exposed to foreign exchange fluctuation risk related to foreign currency-denominated monetary receivables and payables. Although risk mitigation is pursued through forward exchange contracts, a sharp fluctuation in exchange rates could affect the Group's operating results and financial position.

The Group extends credit in the form of trade receivables and guarantees to a diverse range of domestic and overseas business partners, and there is a risk that losses may arise if a specific business partner defaults due to unforeseen bankruptcy or other events. Although strict credit management is implemented, including setting credit limits, periodically confirming collection status, and recording allowances for doubtful accounts, there is no guarantee that credit risk can be completely avoided.

The Group makes business investments both domestically and overseas with the aim of expanding its business scope, and losses may arise if expected returns are not achieved or if intended withdrawal is not possible due to relationships with business partners, among other factors. Although monitoring of each investee and periodic evaluation and review of investment value are conducted after investments are made, it is difficult to completely avoid such risk.

In the fiber-related business, whose main products are clothing and fashion items, short-term changes in fashion trends and consumer preferences, as well as unseasonable weather such as cool summers or warm winters, directly affect sales. Although efforts are being made to improve the precision of product planning and shorten production lead times, given the business characteristics centered on seasonal products, deviations in demand forecasting may lead to inventory risk and deterioration in profitability.

In handling a wide range of products from fibers to industrial products, if a product liability incident attributable to the Company or its suppliers occurs, it may lead to a decline in corporate or brand image and substantial claims for damages. Although appropriate quality standards have been established for both clothing and non-clothing products, it is difficult to completely eliminate such risk.

If confidential corporate or personal information is leaked due to cyberattacks or virus infection, or if information systems become inoperable due to natural disasters or accidents, it may lead to a decline in operational efficiency and adversely affect business performance. Although crisis management measures are being advanced, including establishing information security management regulations and introducing cyberattack detection systems, responding to situations beyond expectations remains a challenge.

As the Group conducts extensive business operations overseas, unforeseen political or economic disruption caused by terrorism or war, or changes in laws and regulations, may significantly impede business activities. Although the Group responds with the utmost care based on past experience and available information, it is difficult to completely avoid unpredictable risks.

As the Group handles a diverse range of fiber-related and industrial products both domestically and overseas, it is subject to various laws and regulations, and violations of these could result in restrictions or limitations on business activities. Although efforts are being made to comply with laws and regulations through strengthening the compliance framework, responding to changes in the regulatory environment remains an ongoing challenge.

The Group recognizes that changes in policies and regulations associated with climate change may affect its business activities, and both transition risk and physical risk could impact operating results. In May 2023, the Group expressed its support for the TCFD recommendations and established a Sustainability Committee to promote overall sustainability initiatives, including climate change countermeasures; however, if events beyond expectations occur, they may adversely affect business performance.