Operating Risks

The Group’s operations span a wide range of industries. Business results are subject to global economic developments and geopolitical risks; domestically, results are subject to declining birthrates and the aging population, as well as consumption trends, natural disasters, and other factors. Of particular concern are fluctuations in demand related to semiconductors and electronic components, as well as soaring raw material prices and higher logistics costs. Nevertheless, the Group is working toward sustainable growth by increasing market share in existing businesses, creating new markets, strengthening global competitiveness, and advancing sustainability management.

Due to intense competition in both domestic and overseas markets and fluctuations in raw material prices, the Group may face difficulties in maintaining selling prices and market share, and there are concerns about profitability declining over the medium term. To address this issue, the Group is working to develop high-value-added products, implement appropriate price pass-through, and strengthen relationships with customers. The Group is also striving to secure stable profits through differentiation strategies and cost reductions and by accurately responding to customer needs.

The Group uses large quantities of paper and petrochemical products and other raw materials that are susceptible to impacts from changing market conditions. International market conditions, exchange rates, and price fluctuations stemming from environmental regulations may affect the Group’s business results. In response, the Group is working to strengthen risk management by establishing a stable procurement structure and through measures including optimizing order timing, diversifying suppliers, and adjusting inventory levels, with the aim of advancing a sustainable procurement strategy.

The Group’s overseas sales ratio is high. Political, economic, or social developments and the tightening of laws and regulations in each country or the spread of infectious diseases and sudden changes in exchange rates may affect business activities or profits. The Group is working to minimize impacts through means including diversifying investments, strengthening business continuity plans (BCPs), gathering information on the ground, and making use of forward exchange contracts.

The Group is strengthening its R&D structure and expanding its human resources with a view to exporting high-value-added products. However, prolonged development timelines or the discontinuation of projects may make it difficult to recoup investment expenditures, with the associated risk of consequences for business results. To guard against this risk, the Group seeks to make effective use of management resources by working to improve precision in selecting development themes aligned with user needs and to ensure that progress is rigorously managed.

The Group takes steps to protect its intellectual property rights in Japan and overseas. However, due to differences in the legal systems in each country and the risk of technologies being copied, rights infringements or lawsuits may emerge over the medium term, with adverse business results due to legal expenses or business restrictions. To guard against this, the Group seeks to mitigate and minimize intellectual property risks by, for example, reviewing the scopes of rights, establishing a framework for responding to infringements, and stepping up investigations of third-party rights.

In its business efforts in Japan and overseas, the Group may, over the medium to long term, be subject to lawsuits or other claims related to product liability, environmental issues, intellectual property rights, labor issues, or other matters. Business results may be adversely affected by the payment of damages and legal fees or by harm to corporate reputation. To safeguard against such factors, the Group seeks to ensure legal compliance and strengthen internal control and risk management systems.

The Group complies with all applicable laws and regulations in the countries in which it operates. Business results are subject to the consequences of restrictions on production and sales activities resulting from changing laws and regulations related to the environment, safety, trade, and other aspects over the medium term. The Group seeks to take timely and appropriate action to guard against such risks, including establishing systems for grasping regulatory trends in each country and responding internally to new developments.

The Group continuously seeks to improve business continuity plans (BCPs) and business continuity management systems (BCMS) to prepare for business impacts attributable to climate change, natural disasters such as earthquakes, and major accidents. In the event of a disaster, the Group will establish a rapid response team to ensure business continuity and assure stable product supply. The Group is also working to enhance resilience through such various measures, including reviewing disaster risk assessments, distributing operations across multiple locations, and developing alternative supply arrangements. The effectiveness of these measures is verified through drills and internal audits, and the Group maintains readiness to adapt flexibly to the changing environment.

The Group is strengthening security by rigorously managing confidential information, improving information infrastructure, providing training and education, and undertaking audits. However, as cyber-attacks become more sophisticated, the risk of incidents such as information leakage and system failures continues to grow. Such risks may adversely affect business results through loss of trust or business interruption, thus the Group is committed to the continued reinforcement of countermeasures.