The following are the major risk factors recognized by senior management that could have a significant impact on the financial position, business performance, and cash flows of consolidated companies.

Forward-looking statements in the text are based on the Group’s judgment as of the end of the current consolidated fiscal year.

Credit Risk

The Meiwa Group conducts sales by extending credit to domestic and overseas customers through a broad range of transactions. Therefore, any deterioration in the credit worthiness or a business failure of a customer could have an adverse impact on the Group’s business performance and financial position. The Group reduces credit risks by regularly checking the credit worthiness of customers and Executive Committee discussions on whether or not to extend more credit to customers that exceed the criteria for their credit amount.

Market Risk

The Group handles a wide range of materials, raw materials, and products in Japan and internationally. Sales and profits from these transactions could be significantly affected by material changes in commodity market conditions, the supply and demand balance, and foreign exchange rates. The Group works to deal with these types of risk by obtaining and analyzing information on commodity market conditions and trends in related industries. Although the Group uses forward foreign exchange contracts to minimize foreign exchange risk, instability in market conditions and the supply and demand balance could have an adverse impact on the Group’s business performance and financial position. In addition, a decline in the market prices of listed shares that the Group holds could affect the Group’s business performance and financial position; therefore, the Group works continually to reduce risk, including by reviewing the significance of shareholdings.

Business Investment Risk

The Group makes business investments in multiple companies to improve corporate value on a consolidated basis by expanding the trade area and by obtaining capital gains. A significant drop in the value of businesses invested in could make invested funds unrecoverable and lead to additional losses when withdrawing from that business, which in turn could have an adverse impact on the Group’s business performance and financial position. The Group has established a business investment management structure and works to minimize risk by effectively managing investments.

Country Risk

The Group is striving to strengthen business in China and other countries in Asia. When conducting business, the Group monitors and responds to political and economic trends in each country. However, unpredictable situations that occur due to changes in local laws and regulations or political factors could have an adverse impact on the Group’s business performance and financial position.

Legal Risk

The Group handles many kinds of products and is subject to the laws and regulations of Japan and other countries. Therefore, although the Group makes every effort to strengthen compliance, failure to fulfill legal and regulatory obligations could affect the Group’s business performance and financial position.
Further, if the Group’s business activities in Japan or overseas become the subject of significant litigation, the Group’s business performance and financial position could be affected.

Disaster Risk

The Group operates across a wide geographic area in Japan and overseas. A major natural disaster or an infectious disease pandemic could have an impact on the Group’s business performance and financial position due to suspension of business or loss of opportunities. If a natural disaster occurs, an emergency response headquarters, led by the President and Chief Executive Officer, is set up to quickly assess the situation and take effective action.