Operating RisksThe following is a summary of risks that could affect the LINTEC Group’s operations. This summary provides specic examples of major risks that are anticipated, but it does not include all risks.1. Changes in Economic ConditionsThe Group’s operations include development in a wide range of industries. Therefore, domestic and overseas economic conditions affect the Group’s operations directly and indirectly. As a result, future trends in economic conditions could affect the Group’s business results. Furthermore, global trends in the electronics industry affect the Group’s new businesses in the eld of electronics-related products. Future electronics industry trends could affect the Group’s business results.2. Changes in Selling PricesDue to intense competition in both the domestic and overseas markets in which the Group operates, the Group may be unable to maintain selling prices to preserve sufcient earnings or sales share. Furthermore, the Group’s business results could be affected by difculties related to cost reductions aimed at maintaining prots and recovering its share by rening customer services.3. Changes in Raw Material PricesThe Group uses a large quantity of pulp for paper and petrochemical products as raw materials and fuel. The prices of these materials and fuels uctuate in accordance with market conditions, such as inven-tories and the supply–demand balance. The Group purchases raw materials in light of careful monitoring of market trends. However, a dramatic change in raw material prices could affect the Group’s business results.4. Changes in Foreign Exchange RatesThe Group conducts foreign currency-denominated procurement and sales overseas as well as nance transactions between both domestic and overseas Group companies. Therefore, changes in foreign exchange rates could affect the Group’s business results. 5. Overseas OperationsThe Group conducts manufacturing and business operations in markets worldwide. In these countries, the following events could affect the Group’s business results.(1) Political instability or a deterioration in security due to such factors as terrorism, a political change, or a coup d’état(2) Labor disputes, such as those involving strikes or boycotts(3) Infrastructure failures, such as those related to electric power, water, or communications(4) Outbreaks of contagious diseases(5) Unpredictable changes in laws and regulations, such as those involving tax systems, foreign exchange, or customs(6) Problems arising between the Group and its business associates or in the collection of accounts receivable due to differences in cultures or business practices6. New Product DevelopmentThe Group pursues R&D activities with a view to realizing comprehensive technological capabilities that cater to market demand and bringing to market competitive, high-value-added products. Accordingly, the Group is stepping up allocations of management resources to increase its number of researchers and to pursue such initiatives as joint research with other companies and academic institutions. However, there is no guarantee that such investment of management resources in R&D will result in the development of new products or increase operating income. Due to such factors as extended development periods, it could become necessary to discontinue development, and if product development costs cannot be recovered, it could affect the Group’s business results.7. Intellectual Property RightsThe Group takes necessary measures to protect intellectual property rights in Japan and overseas for various original production technologies that it has developed. However, legal measures alone do not provide complete protection, possibly preventing the Group from effectively protecting the rights it has obtained. Furthermore, in the event that a lawsuit is led by a third party regarding intellectual property rights infringement associated with the Group’s products, the Group’s business results could be affected.8. Signicant LawsuitsIn conducting business in Japan and overseas, the Group may be subject to lawsuits or other claims related to product liability, environmental, or intellectual property rights issues. Lawsuits or claims, depending on their content, could affect the Group’s business results.9. Legal and Regulatory SystemsIn the countries in which it conducts business operations, the Group is subject to various legal and regulatory systems, and as such is working to ensure rigorous compliance with these systems. In the event that the systems are strengthened or changed, the Group’s business activities could be restricted or the Group’s business results could be affected.43LINTEC ANNUAL REPORT 2016


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