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General View of Corporate Governance

In light of the situation of stakeholders including shareholders, our company holds the belief that the most important management issue is to sustainably increase corporate value, based on ensuring management transparency, equity and healthiness.
By the execution of various measures which contribute to reinforcement of corporate governance, we will establish strong relationship of trust with shareholders and other stakeholders.

Business Risks

We are aiming to be the “Electronics Value Platformer”, based on the policy “We help society evolve by leveraging information and technology to create and deliver new value and services.”
We have some risks as follows that may affect our financial situation and operating results, preventing sustainable growth and evolution.
The future estimates in the text are based on the judgment as of the date of the submission of this document, and the risks are not limited to these.

① Risks relating to competitors

The electronics industry to which we are belonging is now undergoing major environmental changes such as “market maturity and entry of start-up companies”, “progress of IoT/AI”, “diversification and sophistication of needs” with severe competition.
Therefore, factors such as intensifying price competition and delays in providing products and services in technological innovation may affect our business results.
We are aiming to further increase added value by improving operational efficiency, enhancing technical capabilities, and promoting the provision of one-stop services as well as new business models.

② Risks associated with global expansion

We are developing business in various countries and regions. Therefore, changes in political and economic conditions in related countries/regions, changes in laws and tax systems, social disorders due to terrorism or war, risks relating to debt collection, labor shortages, and rising personnel costs, etc. will affect our performance.
We are trying to grasp the risks in each country in advance, communicate with local experts and partner companies, and take every possible measure to implement risk management.

③ Risks relating to fluctuation in exchange rate

Since we are working with global business activities as well as in Japan, we are affected by the fluctuations in the exchange rate, and significant fluctuations may affect our performance.
Although it is difficult to completely eliminate these risks, we are making the best effort to hedge the risks by matching sales and purchase currencies and by making exchange reservations.

④ Risks associated with new business launch and investment

Upon launching a new business or an investment, we make decisions after thoroughly verifying its marketability and profitability, etc. However, in the event of a discrepancy in the initial plan due to sudden changes in the market environment or unexpected situations, etc., it may affect our performance and financial situation.
We are trying to enhance the verification in advance, such as the appropriateness of the purpose and the quantitative verification, through the discussions at the Investment Committee and the Board of Directors, while considering after investment whether to continue the business or investment through the verifications of each progress at the Investment Committee.

⑤ Risks relating to human resources and development

We recognize that it is important to recruit and develop human resources with excellent skills and know-how. In case we cannot secure or develop necessary human resources, it may affect our business development and operational results.
We are under review of our human resources to visualize their skills before proceeding with the recruiting activities. We are also developing an evaluation/reward system as well as an education system.

⑥ Risks relating to natural disasters and accidents

We are developing various businesses, and in the event of natural disasters such as earthquakes, floods, typhoons, accidents such as fires, or infectious diseases, it may affect our performance by making our business activities stagnated along with the suspension of operations of our suppliers and customers, in addition to direct damages on our employees and related facilities.
We are thoroughly implementing operation manuals to prevent accidents and infectious diseases, while trying to hedge the risks by promoting disaster prevention measures and BCP centered on the continuation of the supply chain, and taking out non-life insurance.

⑦ Risks associated with our business

・Risks relating to customer’s demand trends

The semiconductor and electronic components that we are selling are installed in the customer’s (set manufacturer) products, and the equipment is incorporated and used as part of the customer’s operational process. Therefore, in the event of a change in the customer’s capital investment trends triggered by the demand trends and installed functions of customer’s products, change in the economic environment, or economic fluctuations, it may affect our performance.

・Risks relating to customers and suppliers

We are making transactions with a wide variety of companies inside and outside Japan. As to the sales of semiconductor and electronic components as well as the procurement, we are highly dependent on certain companies of which components we are selling. Therefore, any change in the company’s policy may affect our performance. In addition, in the event of a change in our commercial rights due to reorganization (e.g. M&A) of the supplier or revision of sales channel and territory policies, etc., it may affect our performance and financial situation.

・Risk relating to seasonal factors of business

Based on the characteristics of the business that it is mainly targeting the broadcasting-related market and corporate/school/government market, the sales of our electronic equipment business tend to concentrate in March and September due to the budget execution of the customers. Therefore, in case we overestimate the sales forecast for the end of the month, it may affect our performance forecast.

・Risks relating to policy changes

The energy business that we are developing is highly relevant to various laws and regulations such as national policies and environmental regulations. Therefore, in the event of a change in the national policies or environmental regulations, it may affect our performance.

・Risks relating to fluctuations in electricity market price

A large fluctuation in the market price of electric power due to factors such as a rise in crude oil prices, large fluctuation in the exchange rate, and the shutdown of nuclear power plants caused by natural disasters may affect the profitability of our new electric power business as well as our performance.

・Risks relating to vegetable factory business

In the vegetable factory, In the event of an equipment failure, plant disease, insect damage, or infectious disease is occurred in the vegetable factory, it is necessary to suspend the operation of the factory and solve the problem, which may affect the production plan. In addition, it may also affect our performance in case we are claimed for compensation by a third party due to issues relating to our products of which responsibility is deemed as attributable to us.

As to individual business risks, we are trying to promptly collect information, and expand the lineup as well as develop new suppliers and customers so as not to rely on a specific business, while promoting wide business development as a group strategy to diversify the said risks.

In addition, we have entered into a syndicated commitment line agreement to strengthen our financial base in preparation for the risks of future changes in the financial environment and the increasing demand for funds in our group policy. This enables flexible, stable, and efficient financing in wide business development and swift response to the changes in the financial environment.