UNICHARM CORPORATION

If products and services fail to respond in a timely and appropriate manner to the shortening of consumption trend cycles driven by the evolution of digital technology and the spread of social media, as well as the shift in demand toward lower-priced products caused by the global economic slowdown and inflationary pressures, this may result in the loss of competitive advantage and damage to brand value, potentially leading to a decline in revenue and market share. As countermeasures, the Company is building a system for real-time consumer insight analysis utilizing generative AI and other technologies, shortening development and production lead times, and reviewing flexible brand and price portfolios by region.

If the Company is slow to rebuild its sales strategy and supply chain in response to drastic changes in distribution structures driven by the rapid expansion of digital channels such as e-commerce, social media, and live commerce, this may result in the loss of new growth opportunities and a decline in presence in existing channels, potentially leading to a decline in revenue and market share. As countermeasures, the Company is strengthening strategic partnerships with major e-commerce platform operators, expanding D2C channels to accumulate proprietary data, and formulating optimal channel mixes for each country and region.

Delays in responding to intensifying competition beyond the existing framework, including the growing scale of global major manufacturers through M&A, the rise of manufacturers in emerging countries, and the entry of digital platform operators and private brands, may lead to a decline in profitability due to price competition and a shrinking market share. As countermeasures, the Company is securing quality advantages through proprietary patented technologies and sustainability initiatives, and allocating management resources preferentially to high-value-added fields and high-growth areas through periodic reviews of its business portfolio.

Data breaches or system outages/malfunctions caused by cyberattacks may result in the burden of damages liability, the incurrence of recovery and response costs, lost profits due to operational stoppages, and mid- to long-term damage to trust. As countermeasures, the Company has deployed a unified security system combining EDR and SOC across domestic and overseas group companies, and is strengthening early detection and proactive response capabilities against cyberattacks, as well as continuously enhancing and expanding IT asset management and incident response systems.

If production sites or the supply chain are damaged by natural disasters such as earthquakes, typhoons, or floods, or by large-scale accidents, this may result in prolonged operational suspension or disruption of the supply network, potentially having a significant impact on management due to recovery costs and lost profits arising from operational disruption. As countermeasures, the Company is strengthening supply chain resilience through the formulation of BCPs and regular drills at domestic and overseas group companies, the establishment of global fire prevention standards and compliance checks, and collaborative drills with major suppliers and the development of safety confirmation systems.

If product defects or design flaws result in fatal accidents or serious health damage, this may result in damages liability, criminal penalties, brand damage, and a decline in sales. As countermeasures, the Company is building a system to maintain a consistent quality level across the group, conducting regular analysis of nonconformities and complaints and formulating prompt corrective measures and recurrence prevention measures, and establishing an emergency response system and a highly transparent internal information sharing mechanism.

The introduction or increase of carbon taxes and significant fluctuations in energy prices may lead to rising operating costs, while soaring raw material prices may lead to rising procurement costs. Product development that does not take into account the reduction of greenhouse gas emissions may also lead to mid- to long-term damage to trust. As countermeasures, the Company is promoting product development that achieves both efficient use of materials and reduction of emissions using primary data on GHG emissions by material, continuing to develop and sell products conforming to the "SDGs Theme Guideline," and advancing a roadmap toward achieving a 100% renewable electricity ratio by 2030.

Fluctuations in exchange rates due to changes in regulations, economic environments, and political situations in each country and region may affect sales denominated in foreign currencies and raw material procurement costs, and may also have a negative impact on financial position and operating results when translating the financial statements of overseas group companies into yen during periods of yen appreciation. As countermeasures, the Company is minimizing risk through foreign exchange hedging that comprehensively considers foreign currency-denominated transactions and receivables/payables held, and is suppressing the impact of yen appreciation on overseas assets through the active payment of dividends from group companies holding funds in excess of planned investments.

Delays or shortfalls in the recruitment of highly specialized personnel or leadership talent, or the turnover of key personnel, may delay the execution of management plans and strategies. As countermeasures, the Company is promoting the realization of optimal personnel placement and the systematic selection and development of successors through talent management utilizing data and generative AI, flexible acquisition of external talent, the development of "resonant talent" utilizing the OODA loop and generative AI, and strengthening engagement through support for autonomous career development based on career visions.

In investment decisions aimed at achieving business transformation and discontinuous growth, if the investment recovery plan deviates due to the materialization of geopolitical risk, abrupt changes in the macroeconomic environment (interest rates, exchange rates, material prices, etc.), or laws and regulations, or if the post-investment integration process or business launch does not proceed as planned, this may adversely affect financial position and operating results due to a prolonged investment recovery period or the recording of impairment losses. As countermeasures, the Company is continuously monitoring geopolitical risk and laws and regulations, diversifying the supply chain and investment allocation, and conducting risk-return evaluations at the Board of Directors and Risk Committee based on the examination of returns exceeding the cost of capital and risk appetite.