CENTRAL AUTOMOTIVE PRODUCTS LTD.

The Group supplies automotive parts and related products to approximately 60 countries worldwide and is affected by changes in political and economic conditions in each country as well as exchange rate fluctuations. Domestically, drastic changes in the market environment during the current period of major transformation in the automotive industry, as well as automotive production disruptions caused by large-scale natural disasters or the spread of infectious diseases, may affect business operations and financial results. As countermeasures, the Group monitors market trends through field-based sales activities and conducts appropriate reviews at Board of Directors meetings and management meetings.

If the business performance of an affiliated company deteriorates significantly and it is determined that its business will not develop as planned, the Group may need to record a provision for investment losses or an impairment of shares in the affiliated company, which could have a material impact on financial results. The Group addresses this by requiring regular reports to the Board of Directors from affiliated companies and by building an appropriate operational structure under a shared management philosophy.

New legal amendments aimed at consumer protection, the environment, and safety may give rise to significant litigation, and depending on the Group's response to laws such as the Act on the Protection of Personal Information, the Unfair Competition Prevention Act, and the Consumer Products Safety Act, business operations and financial results may be materially affected. The timing of materialization is expected to be medium- to long-term. The Group works to obtain information on relevant legal amendments at an early stage and thoroughly ensures legal compliance through cooperation with internal and external relevant organizations.

As a development-oriented company, the Group develops products based on surveys of latent demand; however, developed products do not necessarily contribute to profits. Because the product portfolio targets specific markets and channels, delays in responding swiftly to market changes may stall new customer development and adversely affect financial results. The Group utilizes the Nakanoshima R&D Center, with the Research & Development Group taking the lead in improving the speed and precision of development and improvement activities.

In overseas sales activities, country risks such as large-scale natural disasters, political instability, travel restrictions due to infectious diseases, terrorism, and financial crises, as well as intensifying competition from low-priced products from emerging markets, may affect business operations and financial results. The Group addresses this through regular information gathering in each country and strengthened cooperation with local subsidiaries.

Goodwill arising from corporate acquisitions is recorded on the consolidated balance sheet, and if profitability declines due to changes in the business environment or other factors, an impairment loss may be recorded, potentially affecting financial results. The Group conducts reviews at least once a year, or more frequently when there are indications of impairment, to ensure appropriate valuation management.

Risks related to customer information management and compliance, as well as risks arising from external factors such as environmental issues and legal regulations, may affect business operations and financial results. The Group has established a Risk Management Committee to visualize risks and minimize their impact when they occur, and has put in place a system for timely reporting to the Board of Directors and management meetings.

If infectious diseases such as COVID-19, influenza, or norovirus spread among employees, temporary suspension of business activities and other effects may impact business operations and financial results. The Group addresses this by formulating a business continuity plan (BCP) for infectious diseases and establishing an appropriate management structure for prevention and containment.