NICHIDEN Corporation

The Group handles capital goods such as power transmission equipment, industrial machinery, and control equipment, and is highly correlated with the Index of Industrial Production and the capacity utilization index (manufacturing). Business performance may be affected by supply-demand imbalances in the manufacturing sector, economic fluctuations, and inventory adjustments. While diversified sales across a variety of industries mitigate this risk to some extent, a direct impact on net sales is a concern in a macroeconomic downturn.

The Group has local subsidiaries in China, Thailand, Vietnam, and the United States, and business operations may be disrupted by changes in the political and economic conditions of each country, changes in laws and regulations, or social unrest such as terrorism or war. As a countermeasure, the Company dispatches officers or staff to local subsidiaries to monitor overseas conditions and respond to regulatory changes.

Since the Group translates the foreign-currency-denominated financial statements of overseas local subsidiaries into yen, fluctuations in exchange rates affect business performance. The same risk also exists in foreign-currency-denominated transactions conducted by the Company and its overseas subsidiaries. The Company's policy is to hedge material foreign-currency-denominated transactions using forward exchange contracts when they arise.

Although customers are diversified across many small accounts, domestic and overseas economic conditions could necessitate an increase in the allowance for doubtful accounts. Since the Group's main products are capital goods, there is a risk that the creditworthiness of business partners could deteriorate when the manufacturing sector's business conditions worsen. As a countermeasure, the Company sets credit limits for each business partner and continuously monitors their creditworthiness to prevent the occurrence of non-performing receivables.

The Group is subject to a wide range of laws and regulations related to its business activities, and business performance may be affected by significant changes in laws and regulations or by unexpected application or differences in interpretation. The Group has established a Compliance and Risk Management Committee and developed a Compliance Action Guidebook to prevent legal violations, but states that such risks cannot be completely eliminated.

There is a risk of leakage of personal information or confidential corporate information due to unauthorized external access or computer virus intrusion, or of information systems becoming inoperative due to damage to information system equipment or communication line trouble caused by natural disasters or accidents. This could affect business performance through opportunity losses from business suspension and loss of social credibility, and the Group addresses this through the development of an Information Management Regulation and the establishment of backup systems.

In the event of abnormal weather caused by climate change or disasters such as earthquakes, branches, sales offices, and distribution centers dispersed nationwide could be affected, and damage to suppliers could disrupt the supply of products. The Group mitigates physical risk through the nationwide dispersion of its business locations and has implemented measures to minimize damage and ensure business continuity in the event of a major disaster.

If a new serious infectious disease were to spread widely, net sales and other results could be significantly affected through restrictions on business activities, suppliers becoming unable to continue operations, or disruption to product supply caused by large-scale infection at logistics facilities. In addition to risk mitigation through the dispersed placement of business locations, the Group works to reduce the impact of an outbreak by promoting telework and staggered commuting times.