NIHON DENKEI CO.,LTD.

Demand for electronic measuring instruments is highly dependent on the business trends of the automotive and electrical/electronics industries, and there is a risk that a contraction in capital expenditure plans due to an economic downturn could adversely affect business performance. The Company seeks to minimize this risk by actively conducting sales activities that capture new technology development needs in fields such as autonomous driving, safety testing, AI, data centers, GX (green transformation), and defense-related areas.

In the automotive and electrical/electronics industries, production of products and components is dispersed globally, and supply chains are being reviewed against the backdrop of U.S. tariff policies and conflicts occurring around the world. The Company strives to minimize this risk by establishing local subsidiaries in China, ASEAN, India, the U.S., Germany, and other regions, and by building a sales network that can flexibly respond to users' shifts in overseas production bases.

In the event of a large-scale natural disaster, pandemic, or similar occurrence, business operations may become difficult, potentially having a significant impact on business performance and financial condition. In addition to measures such as decentralizing head office locations, staggered work hours, and commuting by private car, the Company has established a BCP (Business Continuity Plan) to build a system that minimizes disruption to critical operations.

There is a risk that intensifying competition in the electronic measuring instrument industry could make it difficult to maintain profitability. The Company secures profitability by proposing optimal combinations of diverse products and technologies, enhancing added value through on-site problem-solving services, expanding its handling of overseas products with relatively high gross margins, and strengthening businesses that require specialized expertise.

In business operations in China, ASEAN, India, and other regions, unforeseen events arising from changes in local legal regulations, customs, and international circumstances could affect business performance and financial condition. The Company continues to gather information from local tax consultants, audit firms, and law firms, and strives to build a system capable of responding swiftly to unforeseen events.

As overseas business expansion often results in accounts receivable and payments being denominated in U.S. dollars, sharp fluctuations in the yen/U.S. dollar exchange rate could generate foreign exchange losses, affecting business performance and financial condition. The Company seeks to reduce foreign exchange risk through measures such as adapting its core system to exchange rate fluctuations, shortening the validity period of quotations, and operations utilizing foreign currency deposits to secure foreign exchange gains.

The Company procures a certain level of interest-bearing debt as working capital, and if interest rates rise due to domestic monetary policy or other factors, this could affect its financial condition. The Company has implemented measures to fix interest rates on borrowings from financial institutions, and intends to continue doing so while also examining measures to reduce working capital.

Sales destinations number approximately 10,000 companies, ranging from large corporations to small and medium-sized enterprises, and since nearly all transactions are conducted on credit, an increase in corporate bankruptcies amid an economic downturn could give rise to non-performing receivables, adversely affecting business performance and financial condition. The Company strives to reduce the risk of non-performing receivables through thorough management of accounts receivable with credit limits set for each company, as well as individual collection efforts and review of transaction terms for large transactions.

The Company routinely uses computers to conduct operations such as sales and payment management, and there is a risk that a system outage caused by a cyber attack or similar event could force a halt in business operations, affecting business performance and operating results. The Company has migrated from in-house servers to the data center of a major system integrator, and strives to avoid and mitigate this risk through daily data backups and ongoing review and strengthening of its information security posture.

Export control regulations under the Economic Security Promotion Act, the Foreign Exchange Order, the Export Trade Control Order, and other laws have been strengthened, and there is a risk that regulations may change irregularly, such as products and destinations eligible for export being suddenly restricted against the backdrop of U.S.-China trade friction. If a legal violation were to occur, it could disrupt trade operations and adversely affect business performance and financial condition; accordingly, the Company has built a system for swift and accurate response by strengthening the staffing and expertise of its trade control department and enhancing training for personnel engaged in trade operations.