Risk factors

The Group mitigates risks associated with economic fluctuations by operating businesses across a wide range of industries that are subject to different economic cycles. In addition, the Group seeks to minimize the impact of economic fluctuations on its financial performance by expanding its MRO (Maintenance, Repair and Overhaul) business, which is less susceptible to economic cycles.
Furthermore, as one of the basic policies of the Medium-Term Management Plan launched in 2025, the Group has set forth the evolution of its core strength in “motion control” into “smart motion control” (electrification, integration, and data utilization). Through this initiative, the Group is working to create new value by addressing social issues related to its business domains. By responding to increasingly diverse and sophisticated customer needs and providing new value-added solutions, the Group aims to expand its businesses.
With regard to the impact of fluctuations in foreign exchange rates, the Group implements risk hedging measures, including the use of forward exchange contracts.

The Group regularly monitors political and social conditions, public security, and other relevant factors at and around the locations of its business sites, and strives to implement appropriate measures as necessary.
In addition, the Group holds regular compliance liaison meetings and security trade control liaison meetings for operationally responsible personnel at its domestic and overseas group companies, through which it shares information across the Group on developments in new laws and regulations in each country, economic sanctions, and export control regimes.
With respect to risks such as procurement disruptions arising from geopolitical risks, the Group is advancing initiatives including multiple sourcing, as described in the section “Risks Related to Procurement” below.

Within the Group, the ESH Committee, which serves as a CEO-direct reporting body responsible for promoting ESH management, collects important information related to the environment, safety, disaster prevention, and health, including risks and opportunities associated with climate change. The Committee deliberates on the assessment of materiality and on measures to address matters assessed as material.
As part of its initiatives to address global climate change, the Group has set long-term greenhouse gas emission reduction targets on a Group-wide basis and is advancing activities at its business sites in Japan and overseas to achieve CO₂ emission reduction targets. Through these initiatives, the Group is promoting activities to fulfill its social responsibilities related to climate change.
In response to the increasing severity and frequency of natural disasters in recent years, the Group is committed to implementing consistent measures for initial response at the time of a disaster and for business continuity, as well as to conducting ongoing education and training during normal times. Specifically, the Group is systematically and organizationally implementing initiatives such as: (i) conducting voluntary drills at each site in addition to legally required drills to verify and improve the effectiveness of manuals; (ii) enhancing the knowledge and decision-making capabilities of all domestic employees through e-learning programs; (iii) promoting the assignment of personnel certified under the BCAO (Business Continuity Advancement Organization) qualification; and (iv) supporting the establishment of site-level frameworks for business continuity and resumption in the event of a disaster.
In preparation for large-scale earthquakes and similar events, the Group is thoroughly implementing seismic retrofitting of existing buildings, ensuring seismic resistance in the construction of new factories and facilities, and carrying out measures to prevent the overturning of shelves, cabinets, and similar fixtures at all business sites. In addition, through annual ESH audits and regular safety patrols conducted at each site, the Group continues to rigorously promote initiatives to prevent human-caused accidents.

The Group has established a framework to promote supply chain BCP (Business Continuity Planning) activities to address large-scale disasters and risks in general, and is working to enhance the resilience of the entire supply chain by encouraging its suppliers to obtain resilience-related certifications. With respect to cyberattacks, the Group regularly assesses the information security levels of its suppliers and continues to provide support for improvement. In addition to these initiatives, the Group maintains regular communication with its suppliers through measures such as questionnaire surveys.
Furthermore, the Group regularly conducts risk assessments and monitoring of major components and raw materials, and promotes multiple sourcing to establish a procurement structure that does not rely on specific supply sources.

The Group conducts its product development, manufacturing, and sales activities in accordance with ISO 9001, the international standard for quality management systems. In addition, where required, the Group has obtained certifications for industry-specific quality management systems (QMS), such as IATF 16949 and JIS Q 9100, and has established management frameworks tailored to the requirements of each industry.
To ensure the quality and safety of products shipped to the market, the Group conducts rigorous quality and product safety reviews during the development and design stages prior to product launch. Furthermore, the stability of manufacturing processes is continuously monitored, and appropriate inspections are conducted prior to shipment, enabling the Group to provide products that meet customer expectations.
In addition, the Group has established the Quality and Product Liability (PL) Committee as a body reporting directly to the CEO to promote quality and PL management, and is working to enhance quality and safety standards across the Group.

The Group is engaged in the development of differentiated products with cost competitiveness that accurately captures customer needs.
In addition to its core technologies—such as mechanical design, electrical and electronic design, and quality assurance—which have been accumulated and continuously enhanced through responding to customer needs, the Group possesses advanced elemental technologies including various analytical capabilities such as CAE and thermal analysis, as well as control technologies. By integrating these capabilities, the Group has established its proprietary motion control technologies. Furthermore, by leveraging cutting-edge elemental technologies and development methodologies strengthened through open innovation—such as advanced electronic control technologies, model-based development, and digital twins—the Group has built a development framework capable of responding to increasingly diverse customer needs and accelerating development speed.
Looking ahead, the Group will further advance electrification, system integration, and data utilization to accelerate the evolution toward smart motion control, and will promote the development and provision of products and services, including those for predictive maintenance.

In response to the increasing information security risks in recent years, the Group has established an Information Security Committee with the objective of enhancing information security levels across the Group. The Committee formulates basic policies on information security, works to strengthen security measures, and enables prompt responses to serious security incidents. In addition, the Group has established various management regulations to promote organizational and continuous implementation of security measures for information assets, ensures that these regulations are thoroughly communicated to all employees, and conducts regular education and training on the proper management of information assets.
To address risks to information assets such as unauthorized access, leakage, falsification, loss, destruction, and obstruction of use, the Group has implemented security systems designed to mitigate risks and enable the rapid recovery of operations, while continuously conducting vulnerability assessments and implementing countermeasures. Furthermore, the Group is establishing system management with strict access controls, including restricting access to data on a user-by-user basis. In addition, the Group conducts regular internal and external audits of its information security initiatives to ensure continuous improvement of information security management.

To ensure the sustainable competitive advantage of its intellectual property and intangible assets (core value), which serve as the source of the Group’s business competitiveness, the Group promotes close collaboration between its intellectual property division and business divisions. From the product and service planning and development stages, technologies that can be effectively analyzed are protected through intellectual property rights, while design know-how that is difficult to analyze and manufacturing know-how continuously generated during mass production are protected through rigorous management of confidential information.
In particular, with respect to confidential information management, in addition to strictly enforcing the execution of non-disclosure agreements prior to disclosure of confidential information to third parties, the Group has established a confidential information protection framework that enables it to demonstrate, both domestically and internationally, its legitimate ownership of such confidential information. Through this framework, the Group also addresses the risk of unintended leakage of confidential information.
Furthermore, in products, countries, and regions where counterfeit products are prevalent, the Group regularly conducts investigations into counterfeit products and undertakes elimination measures, utilizing local experts as appropriate. With regard to brand counterfeiting in particular, the Group places emphasis on preventing the distribution of counterfeit products in order to protect customers who may otherwise suffer harm by purchasing products they believe to be genuine.
At the same time, to prevent the occurrence of litigation and other significant business risks at an early stage, the Group has established a framework for intellectual property clearance in close collaboration between its intellectual property division and business divisions. This framework involves conducting investigations and analyses of third-party intellectual property rights—including not only patents but also trademarks and copyrights—not only during the product and service planning and development stages but also thereafter, as well as obtaining non-infringement opinions and licenses through internal and external patent attorneys and lawyers, as necessary.

The Group has established Group M&A Guidelines to clarify its acquisition processes. In addition, during the consideration stage of potential acquisitions, the Group conducts due diligence on target companies and reviews the post-acquisition operation and management of such companies.

To secure a diverse pool of talent, the Group is promoting initiatives such as adopting various recruitment methods, including alumni recruitment¹ and referral recruitment², as well as establishing a professional track system to attract and retain highly specialized professionals.
In addition, from the perspective of health and productivity management, the Group implements initiatives that contribute to maintaining employee health, including tailored support through the assignment of occupational health professionals and collaborative health promotion activities jointly undertaken by the health insurance association and the Company (collabo-health).
Furthermore, the Group operates an internal job posting system aimed at employee retention and is committed to fostering employee engagement and maintaining a vibrant organization by creating a workplace where employees feel motivated and energized.

1. Notes 1. Alumni rehiring: rehiring former employees (alumni).
2. 2. Employee referral hiring: recruiting candidates through referrals and recommendations from employees who are familiar with the company's business and corporate culture.