MISUMI Group Inc.

In the FA (Factory Automation) business and mold components business, the automotive and electrical/electronics (including LCD and semiconductor) industries are the main customers, and the VONA business also targets customers utilizing automation equipment. As a result, the Company is directly affected by capital expenditure trends and production/operational trends in these industries. If changes in the industry environment exceed expectations, this could affect business results and financial condition. In response, the Company continuously monitors market trends and implements measures such as optimization of capital expenditure, personnel allocation, and inventory.

As the Company strengthens its business operations in China, Asia, Europe, and the Americas, uncertainty is increasing due to political, economic, and security disruptions such as US-China relations, trade policies of various countries, and the situations in Ukraine and the Middle East, as well as the progressing regionalization of global supply chains. The Company monitors political and economic conditions in each region and works to understand and respond to legal systems in each country, but sudden changes could affect business results and financial condition.

In procuring a wide variety of products from domestic and overseas suppliers, there is a risk of supply chain disruption and energy price surges due to supply-demand tightness, trade policies, and geopolitical risks (such as the situation in the Middle East). Concerns include procurement difficulties, deteriorating profitability due to rising purchase prices, and decreased product sales to customers. The Company is strengthening its IT, production, and logistics business infrastructure and enhancing supply chain resilience, but may not be able to fully respond to changes exceeding expectations.

The Company exports and imports a wide variety of products between numerous countries, and is subject to compliance with import/export regulations in each country and the effects of tariffs. Globally, trade conditions remain unstable, with stricter security trade control regulations against the backdrop of US-China relations, and US tariff policy along with resulting changes in other countries' tariff policies. The Company has established a compliance framework for trade control and import/export regulations and continuously monitors regulations and tariffs in each country, but if regulations or tariff changes exceed expectations, this could affect business results and financial condition.

The Company holds confidential information related to orders, sales, procurement, and manufacturing, as well as customer information and personal data, as electronic data, and utilizes various information systems in its business operations. This creates risks of information leakage and disruption of customer services due to cyberattacks or system failures. While no major information security incidents or significant system outages occurred during the consolidated fiscal year under review, the risk of information leakage and business disruption continues to exist due to increasingly sophisticated attack methods. The Company is working on establishing an information security basic policy, conducting internal training, raising security standards including at overseas locations, and strengthening monitoring systems.

As the Company provides a wide range of products to customers, requirements regarding chemical substance management and reduction of environmental impact are becoming stricter globally each year. If product defects or violations of various regulations (including hazardous constituent substances and import/export regulations) occur, this could affect business results and financial condition due to product recalls, sales suspensions, and various costs incurred. The Company has established a quality control system, promotes procurement in line with Green Procurement Guidelines, and conducts product development and production activities with reduced environmental impact.

The Company conducts transactions in various currencies and under various conditions, and is affected by foreign exchange fluctuations on foreign-currency-denominated transactions and receivables/payables balances. While measures such as forward exchange contracts reduce this risk to some extent, it is difficult to completely avoid the effects of foreign exchange fluctuations, and if fluctuations exceed expectations, this could affect business results and financial condition.

Responses to climate change (such as greenhouse gas emission reduction) and human rights issues are required across the entire value chain, including suppliers, and inadequate responses could lower social credibility and affect business results and financial condition. The Company is implementing measures such as identifying risks and opportunities under climate change scenarios and assessing business impacts, establishing and disseminating the "MISUMI Group Human Rights Policy," and formulating the "Sustainable Procurement Guidelines" and promoting agreement with major suppliers.

Recruiting and developing excellent personnel domestically and internationally is important for medium- to long-term global growth, but intensifying competition for talent may prevent this from proceeding as planned. There are particular concerns about constraints on the creation of new businesses and expansion of overseas operations. The Company is promoting the recruitment and development of digital technology talent, including AI, as well as the development of local personnel, but insufficient talent acquisition could affect business results and financial condition.

The Company undertakes M&A and alliance investments for non-continuous business growth and expansion, which carries risks such as deterioration in the performance or valuation of investee companies, failure to achieve expected synergies, and governance issues. While the Company conducts careful selection of investment targets through due diligence and monitors post-investment performance and synergy effects, it is difficult to completely avoid post-investment performance fluctuations, and if fluctuations exceed expectations, this could affect business results and financial condition.