CAPCOM CO., LTD.

With overseas sales accounting for approximately 70% of consolidated net sales, country risks such as market trends, political, economic, legal, and cultural factors in each country, as well as difficulties in securing personnel, may adversely affect business strategy, operating results, and financial condition. There is also a risk that changes in regulations such as tax rates and tariffs accompanying the expansion of overseas transactions could increase losses or costs. As countermeasures, the Group is strengthening information sharing with overseas subsidiaries, responding to local needs, and implementing localization through specialized teams.

Since a large portion of overseas sales is denominated in local currencies and the Group holds substantial foreign currency-denominated trade receivables, significant exchange rate fluctuations beyond expectations may affect operating results and financial condition. In particular, during periods of yen appreciation, the yen-converted amount of overseas earnings decreases, creating a risk of pressure on profits. As a countermeasure, the Group utilizes forward exchange contracts to minimize the impact of exchange rate fluctuations.

Development costs tend to rise as home video game consoles become more sophisticated and multifunctional, and titles that fail to meet sales plans may be unable to recover development funds. The Group focuses on controlling development costs through building proprietary development engines and efficient allocation of development personnel, but concentrating investment in major titles carries inherent risk. The Group aims to secure long-term profitability by increasing unit sales and improving profit margins through strengthened global sales.

Although the Group releases numerous game titles, popularity tends to concentrate on certain titles, and there is a risk of user attrition if market conditions change or if defects occur in popular titles. While series titles contribute to stabilizing business performance, dependence on specific IP creates vulnerability in earnings. As countermeasures, the Group strives to steadily release major titles leveraging core IP, create new IP, and enhance global brand value.

The Group's home video game software depends on specific platforms such as SIE, Nintendo, Microsoft, and Valve, and trends in the adoption of these platforms, malfunctions, or changes in licensing agreements may adversely affect business strategy, operating results, and financial condition. During hardware transition periods, there is also a risk that sales may stagnate due to users holding off on purchases. As countermeasures, the Group is diversifying revenue risk through multi-platform deployment and extending the sales period by increasing the digital sales ratio.

If confidential information such as personal information or game development information is leaked due to unauthorized access, computer viruses, or similar causes, this could result in liability for damages, damage to corporate image, or discontinuation of game development. Responding to increasingly sophisticated cyber risks both domestically and internationally is recognized as an important management issue. As countermeasures, the Group regularly convenes a security oversight committee involving outside experts, maintains and strengthens its information security management system based on the PDCA cycle, and conducts education and training for officers and employees.

The game industry has relatively high employee turnover, and if a large number of talented personnel resign or move to competitors, this could disrupt business activities and adversely affect operating results and financial condition. Continuously securing highly specialized personnel is essential to maintaining and improving development capabilities. As countermeasures, the Group has established a Human Resources Committee, built a cross-functional HR system led by the CHO, is developing an environment where diverse talent can thrive, enhancing support for childcare and family care, and expanding development environments and facilities.

The development and sale of game software, pachislot machines, and similar products involve intellectual property rights such as patents and copyrights, and failure to obtain such rights may make development and sales difficult. There is also a risk of infringing third-party intellectual property rights, and litigation or damages arising from such infringement could adversely affect operating results and financial condition. As countermeasures, the Group manages intellectual property rights in each country and region and conducts internal awareness activities.

The Amusement Facilities business is subject to regulations such as the Act on Control and Improvement of Amusement Business, and legal amendments or stricter examinations and inspections by regulatory authorities may narrow the scope of business activities. In the sale of pachislot machines as well, only models that have passed type testing are permitted for sale, so regulatory trends significantly affect sales. As countermeasures, the Group gathers information from police and administrative authorities, monitors regulatory trends through membership in industry associations, and thoroughly ensures legal compliance.

The occurrence of unforeseen events, whether domestic or international, such as natural disasters (typhoons, earthquakes, tsunamis, etc.), pandemics, economic crises, or terrorism, may adversely affect the Group's operating results and financial condition. Suspension of game development and sales activities or sudden changes in market conditions directly impact earnings. As countermeasures, the Group has established Risk Management Regulations and Crisis Management Regulations, and works to prevent crises before they occur and minimize their impact through a cross-organizational risk management structure.