MORITO CO., LTD.

The Group has established legal compliance and ethical conduct as core management principles and strives to ensure thorough adherence by all officers and employees. However, if a compliance violation occurs, the Group may be subject to disciplinary action by regulatory authorities, litigation, or loss of social credibility, which could adversely affect business performance. Although a code of conduct compliance framework has been established across the entire Group, complete elimination of such risk remains difficult.

The Group has established protective frameworks to avoid infringing third-party intellectual property rights and to prevent infringement of its own intellectual property rights, but it is not possible to completely eliminate the risk of infringement in either direction. If litigation is filed on grounds of intellectual property infringement, this could adversely affect business performance.

The Group has established a management framework based on quality control standards and maintains product liability insurance, but the possibility cannot be excluded that litigation may be filed due to product defects or inadequate labeling on product packaging, resulting in large-scale product recalls or damages not covered by insurance. Should such circumstances arise, business performance could be adversely affected.

The Group manufactures some of its products overseas, and changes in the political and economic conditions in foreign countries, disruption to international society due to war or terrorism, or the occurrence of natural disasters may hinder the stable supply of products. If such risks materialize, business performance could be adversely affected through disruption of the supply chain.

Trade receivables arise from credit sales extended to business partners on a case-by-case basis, and although strict credit management is implemented, full collection is not guaranteed. If a business partner's creditworthiness unexpectedly deteriorates or it becomes insolvent, business performance could be adversely affected through the recognition of bad debt losses, among other effects.

Price competition with low-priced products such as those made in China is intensifying in both the Asian and domestic markets, raising concerns about declines in selling prices and sales volumes. The Group is working to strengthen cost competitiveness by expanding overseas production capacity and increasing the ratio of local procurement, but intensifying competition could adversely affect business performance.

The purchase prices of products sold are linked to fluctuations in raw material costs, and if rising raw material costs are passed through to purchase prices, this could adversely affect business performance through an increase in cost of sales. In a competitive environment where price pass-through is difficult, this could become a factor that compresses profit margins.

The Group's financial position and operating results have historically fluctuated due to changes in the fair value of held assets, among other factors, and there is no guarantee that losses will not be recognized in the future due to fluctuations in the fair value of held assets. If asset values decline, this could adversely affect the Group's financial condition and business performance.

The Group implements risk countermeasures such as the establishment of firewalls, but it is not possible to completely eliminate the risk of leakage of confidential corporate or personal information due to unauthorized external access or computer virus intrusion, or of system outages caused by damage to information system equipment or communication line trouble resulting from natural disasters or accidents. If such events occur, they may lead to reduced operational efficiency and adversely affect business performance.

For foreign exchange fluctuation risk related to import and export transactions, the Group enters into forward foreign exchange contracts within the scope of actual demand at the time of contract execution, but if exchange rates fluctuate beyond expectations, this could adversely affect business performance and financial condition. Damage to business offices or business partners due to natural disasters or the spread of infectious diseases is also recognized as a risk that could directly or indirectly affect sales and purchasing activities.