SUN-WA TECHNOS CORPORATION

The Group's main products handled are electronic components, FA equipment, industrial robots, etc., and demand is concentrated in the industrial electronics and mechatronics industries. Therefore, changes in demand trends and capital expenditure trends in that industry directly affect business performance. There is a risk of significant declines in sales and profits during economic downturns or periods of restrained capital investment.

The proportion of purchases from the major supplier Yaskawa Electric Corporation was 7.6% (¥9,642 million) in FY2026 (ending March 2026), representing a certain degree of concentration. If the company's management policy or sales policy changes, it may affect the Group's procurement and business results. The Group continues to address this by maintaining and strengthening the business relationship as a partner company.

As the Group operates globally and engages in transactions denominated in foreign currencies, significant fluctuations in exchange rates may affect business performance and financial condition. In addition, since part of working capital is procured from financial institutions, an increase in procurement interest rates would also be a cost-increasing factor. The Group works to reduce risk through the use of hedging measures such as forward exchange contracts and interest rate swaps.

Personnel with specialized knowledge and experience regarding a wide range of business partners and products handled are the most important management resource, and if the Group is unable to secure and retain excellent personnel, it may affect its business plans. The Group addresses this by strengthening new graduate and mid-career recruitment, and by establishing diverse educational systems such as on-the-job training, rank-specific training, and global talent development. Improvements to the workplace environment based on the internal environment improvement policy are also being promoted as a measure for personnel retention.

In the course of business operations, there is a risk of various legal violations and litigation, and the number of lawsuits has been increasing due to recent changes in litigation awareness. Depending on the filing of lawsuits and the content of rulings, business performance and financial condition may be affected. The Group addresses this through the establishment of a Compliance Committee, strengthening of internal management systems, and obtaining timely advice from lawyers and audit firms.

Risks exist such as unauthorized access, external leakage of confidential and personal information, cyberattacks via the supply chain, ransomware, and malware intrusion, and if these risks materialize, they may affect business performance and financial condition. The Group implements measures against system vulnerabilities, access rights management, safety measures for terminals and communications, and data protection measures, and regularly conducts vulnerability diagnostics, targeted attack drills, and internal education.

If quality defects occur in products handled, claims for compensation from customers may affect business performance. The Group works to reduce the amount of claims through consultation with related parties including suppliers and negotiates compensation from manufacturers, while also taking out product liability insurance (PL insurance) to reduce losses in preparation for defects in products, including imported goods from overseas.

The Group holds a certain level of inventory to ensure stable supply to customers, but if changes in customers' production plans or decreases in expected requirements result in stagnant or excess inventory, this may affect cash flow as well as business performance and financial condition due to the recording of losses on disposal and valuation losses of inventory assets. An inventory management department has been established within the Business Administration Division, which holds regular meetings with dedicated inventory management personnel in each department to manage progress toward appropriate inventory targets.

If impairment processing of fixed assets held becomes necessary due to a decline in profitability, etc., business performance may be affected. As of the end of the current consolidated fiscal year, the Group recorded goodwill of ¥582 million, and if it is determined that excess earning power has been impaired due to future changes in the business environment, etc., impairment processing will be carried out, which may have a material impact on business performance and financial condition.

The Group operates in 15 overseas subsidiaries (40 locations), and if political, economic, or social changes occur in relevant foreign countries, or if there are revisions to laws and tax systems, or deterioration of security due to terrorism, etc., this may affect business performance and financial condition. The department in charge of overseas subsidiaries works with local managers to regularly gather the latest information, and in the event of an emergency, a system is in place to establish a countermeasures headquarters based on the "Crisis Management Regulations" to enable swift response.