RIKEI CORPORATION

If manufacturing schedule delays or product defects occur at overseas manufacturers that are key suppliers, this may affect the performance of the Group. In particular, subsidiaries make advance payments to overseas suppliers to secure delivery dates, and there is a risk that these advance payments may become unrecoverable. As countermeasures, the Group is strengthening information sharing with suppliers, concluding contracts and MOUs, considering the application of insurance, and working to curb the occurrence of advance payments.

There is a risk that sales agency agreements with domestic and overseas manufacturers may be unilaterally terminated due to circumstances on the manufacturer's side, or that procurement and recovery of advance payments may become difficult due to the bankruptcy of a supplier. Termination of a sales agency agreement for a core product would directly affect performance. As countermeasures, the Group is developing products in new fields to avoid over-reliance on specific manufacturers and managing the financial and business conditions of suppliers using a partner company evaluation ledger.

Due to the rapid pace of technological change and innovation in the IT and electronics industry, there is a possibility of existing products becoming obsolete, reduced salability, and failure to meet specifications due to increasingly sophisticated customer demands. The emergence of new entrants and new products based on new technologies may intensify competition, leading to a risk of declining profitability. As a countermeasure, the Group strives to gather the latest information on domestic and overseas market and technology trends and to introduce competitive, cutting-edge products.

There is a risk that valuation losses may occur on inventory ordered in anticipation of sales plans by customers and sales partners, if sales do not proceed as originally planned. Excessive inventory buildup would directly and adversely affect the Group's finances. As countermeasures, the Group conducts monthly inventory reviews through a budget committee, makes disposal decisions twice a year through an idle inventory evaluation committee, and has established criteria for ordering inventory based on projected sales.

It is not possible to completely eliminate foreign exchange fluctuation risk in foreign currency transactions related to domestic and overseas imports and exports, and exchange rate fluctuations may affect the performance of the Group. In particular, given the business structure with a high ratio of overseas procurement, a weaker yen would increase procurement costs and pressure profitability. As countermeasures, the Group utilizes forward exchange contracts, diversifies procurement sources domestically and overseas, and works to strengthen its business foundation to improve resilience to exchange rate fluctuations.

Securing and developing sales staff with negotiation and sales capabilities, as well as engineers and specialists with technical expertise, is a key element of business growth, and the loss of capable personnel could affect growth and performance. Competition for talent in the IT and electronics industry is intense, and there is a risk that difficulty in recruiting specialized personnel will continue. As countermeasures, the Group is developing an environment that emphasizes work-life balance, regularly conducting hierarchical group training, and strengthening recruitment of new graduates and second-time job seekers.

As the IT and electronics industry undergoes rapid transformation driven by intense technological innovation, the performance of the Group, which mainly engages in order-based sales, may be significantly affected by various factors including economic conditions during the fiscal period. During economic downturns, customers' restraint on capital expenditure could directly lead to a decline in orders. As a countermeasure, the Group aims to build a corporate structure less susceptible to economic trends by strengthening and stabilizing its business foundation.

In the event of natural disasters such as major earthquakes or typhoons, or a global infectious disease outbreak, there is a possibility of extremely significant impact on the Group's performance through large-scale disruption to logistics and economic activity. Restrictions on the movement of people and goods pose a risk of stagnating both procurement and sales activities. As countermeasures, in addition to developing a BCP (Business Continuity Plan), the Group is advancing the development of internal IT infrastructure and reviewing operational formats and systems.

If domestic manufacturing customers relocate their production bases overseas, it may become difficult to continue sales activities due to restrictions on the commercial flow arising from relocation outside the Group's sales activity scope. In addition, the acquisition or bankruptcy of a customer poses a risk of loss of sales or inability to collect accounts receivable. As a countermeasure, the Group continuously works to develop new customers in order to avoid over-reliance on sales to specific customers.

Amid the occurrence of large-scale damage from ransomware within Japan, if the Group were to suffer similar damage, it could affect its business and performance. Information leaks and system outages caused by cyberattacks pose a risk to business continuity. As countermeasures, the Group ensures the reliable operation of ISMS, conducts website vulnerability diagnostics for three Group companies, and manages IT asset risk through ASM (Attack Surface Management).