Nippon Yusen Kabushiki Kaisha(NYK Line)

Amid a global trend toward stronger rules, there is a risk of violations related to antitrust laws, bribery-related laws and regulations, economic sanctions, and other legal requirements. If a legal violation occurs, business performance and financial condition may deteriorate due to a decline in social credibility and brand image and the payment of damages. As countermeasures, the Company holds Compliance Committee meetings twice a year, has established a Committee for Thorough Compliance Activities, and conducts training by lawyers, but complete elimination of the risk is considered difficult.

If a major accident occurs, such as oil pollution, environmental contamination, crew death or injury, or loss of or damage to a vessel, the Group may face situations such as delay or impossibility of cargo transportation, cancellation of transportation contracts, fines and lawsuits, increases in insurance premiums, and deterioration of customer relationships. Piracy, terrorism incidents, and enhanced quarantine measures due to infectious diseases may have similar effects. The Group addresses this risk through assessments based on its proprietary safety standard "NAV9000 Plus" and regular reviews by the Safety and Environmental Management Promotion Committee, but if insurance does not provide adequate coverage, business performance and financial condition may be affected.

As cyberattacks become more sophisticated and elaborate, there is a risk of business disruption due to system outages, leakage of customer information, loss of trust, damages, and sanctions from regulatory authorities. In addition, with the incorporation of AI into information systems, new risks such as legal violations, ethical issues, and privacy issues are also emerging. The Group has built multi-layered countermeasures based on a zero-trust security model and a global information security management framework, but complete elimination of the risk is considered difficult.

Although the Group has set GHG reduction targets in line with the 1.5°C target level, the practical application of zero-emission fuels such as ammonia and hydrogen requires significant technological innovation and considerable time and cost, resulting in high uncertainty regarding achievement of the targets. If the response to climate change risk is insufficient, this may lead to customer attrition, deterioration of relationships with local communities, and difficulty obtaining financing for vessels. In November 2023, the Group published the "NYK Group Decarbonization Story" and is promoting its response by positioning EX (Energy Transformation) as a management strategy in its medium-term management plan.

There is a risk that freight revenue and charter hire income may fluctuate significantly due to factors such as global economic trends, international cargo movements, intensifying competition, and the balance of vessel supply and demand. When vessel supply exceeds demand, charter hire levels decline, and in the Logistics Business as well, freight rates may fluctuate significantly due to imbalances between space supply and demand. The Group strives to mitigate the impact through securing long-term stable contracts and appropriately managing fleet size, but unpredictable fluctuations may arise from external factors such as global conflicts, the spread of infectious diseases, and supply chain restructuring.

As a large portion of the Group's revenue is derived from foreign-currency-denominated transactions, exchange rate fluctuations directly affect profit and loss, and also affect the yen conversion of the financial statements of overseas subsidiaries. In addition, external financing for capital expenditures related to vessels and transportation-related facilities includes a mix of floating and fixed interest rates, and future interest rate fluctuations may affect business performance and financial condition. The Group strives to mitigate the impact through hedging transactions such as forward exchange contracts and currency swaps, matching of revenue and expense currencies, and monitoring of interest rate ratios.

Fuel costs account for a large proportion of expenses in the Liner Trade Business, Automotive Business, Dry Bulk Business, and Energy Business, and price forecasting is difficult due to factors such as crude oil and natural gas supply and demand, exchange rate fluctuations, the actions of oil-producing countries and OPEC, environmental regulations, and war in the Middle East region. The Group is implementing measures such as diversifying fuel procurement regions, applying fuel surcharges, utilizing derivative transactions, and reducing fuel consumption, but the impact may not be sufficiently mitigated in the event of price fluctuations or supply shortages.

Uncertainty in the global economy is increasing due to geopolitical tensions such as the situations in Iran, Russia, and Ukraine, suspension of navigation in the Red Sea and Gulf of Aden, piracy and terrorism, stricter regulations and sanctions by various countries, and trade policy under the Trump administration in the United States, which took office in January 2025. These events may lead to fluctuations in insurance premium rates, increased costs from route changes, and reduction or withdrawal of business in certain regions. The Group strives to prevent and avoid such risks through information gathering from relevant organizations, engagement of external consultants, and formulation of business continuity plans (BCP), but there are limits to how it can respond to sudden and unforeseen events.

As it takes several years from ordering a newbuilding vessel to its completion, there is a risk that investment plans may not proceed as planned due to changes in the global economy, shipping market conditions, and public regulations. During market downturns, the Group may be forced to sell vessels that have not yet been fully depreciated at below book value, or, if no market recovery is anticipated, impairment losses on vessels and fixed assets may occur. In addition, if increases in newbuilding vessel prices due to soaring steel prices cannot be appropriately passed on through freight rates and other charges, business performance and financial condition may also be affected.

If human rights issues such as forced labor, child labor, or environmental destruction occur across the supply chain, there is a risk that business performance and financial condition may deteriorate due to a decline in social credibility and brand image. In addition, class action civil lawsuits (ongoing since September 2012) concerning a freight cartel related to ocean transportation of finished vehicles are continuing in some regions, and the outcome of such litigation may affect business performance and financial condition. The Group is promoting its response through human rights due diligence based on the "NYK Group Human Rights Policy" (established in November 2022) and through the development and dissemination of its "Supplier Code of Conduct."