Investor Relations

(1) Basic policy on Management of the Company

At the Okamura Group (the “Group”), our mission is to “Contribute to society by creating environments where people can thrive with rich ideas and reliable quality.” Under this mission, we aim to realize a society in which all people can work and live with vitality and smiles in line with our purpose of “Realizing a society where people can thrive.”
In 1945, Okamura Seisakusho (Okamura) was founded jointly by engineers who embraced its founding purpose, each providing funds, expertise, and labor. The spirit of the founding members took hold as our corporate culture guided by our Basic Policy, a corporate philosophy composed of Innovative Creation, Cooperation, Being Cost Conscious, Saving for Future, and Social Responsibility. Under the motto of “Quality Pays for Itself,” we have been working to provide society with high-quality products and services that precisely address our customers’ needs. This endeavor has become Okamura’s corporate DNA and passed down to the Okamura Group’s present management and business activities.
Okamura Way, our corporate philosophy, comprises Okamura’s Mission (our management approach), the Okamura Declaration (what we want to be), and Okamura Basics (the values we hold dear). At the core of all of these is our perspective “Where people can thrive.”
In today’s changing value system, one in which sustainability is becoming ever more important, the vitality of every individual will lead to solutions to social issues. Based on this belief and our sense of corporate purpose, we at the Okamura Group aim to contribute to the realization of a society in which all people can work and live with vitality and smiles. Our activities and initiatives linked to Okamura Way are presented on our corporate website:https://live.okamura.co.jp/ (in Japanese).
We will strive to create new demand and strengthen our management base to respond to change while working to resolve social issues through our businesses.

Social Issues to Tackle and Value Propositions

The Okamura Group tackles social issues through its business activities, helping realize a society where people can thrive through customer and social value it supplies.

The Okamura Group’s Materiality (Material Management Issues)

The Okamura Group identifies material issues and promotes initiatives in four areas to help realize a society where people can thrive.
Based on our management principle of responsible corporate behavior, we are committed to reducing the environmental burden throughout our supply chain. This is possible by motivating our employees and ensuring their lives are fulfilled through pursuing employee engagement, and by implementing our global environmental initiatives.
Through our business activities, we will contribute to the realization of a society where people can thrive.

Value Creation Story Overview

To realize a society where people can thrive, as set out in the Okamura Group’s Purpose, we leverage our unique values and strengths while creating new value, based on the foundation of the Okamura Way, our philosophy cherished and shared by all employees.

(2) Corporate Management Strategies for the Medium and Long Term

We have formulated the Midterm Management Plan 2025, spanning the three years from the fiscal year ended March 31, 2024 to the fiscal year ending March 31, 2026.
Under the Midterm Management Plan 2025, we will accelerate our transformation to a “demand creating company.” While reaping the rewards of our strategic investments under the Midterm Management Plan 2022, we will work on strengthening the business base to meet the needs of the future. In addition, we will push ahead with further investment in developing human resources and changing mindsets to enhance the engagement of employees for supporting sustainable growth. We aspire to build a “Strong Okamura” by enabling all of our employees to work with vitality in their own individual styles.

1) Aims of Midterm Management Plan 2025

• ·Creating new demand
  Grasping the flow of the times, accelerate the transformation to a demand creating company by refining our ability to make proposals and products
• ·Strengthening our management foundation to respond to change
  Human resource development and improving employee engagement:Support career development, promote human resource development and employee engagement improve
  Accelerating the digital transformation:Accelerate the Digital Transformation in management, business, and work and promote DX human resources development
  Enhancement of highmix, variable-volume production system:Maintain and strengthen competitive advantage by utilizing a transformative production system that responds to environmental changes
  Development of overseas business rooted in the local market:Development of local production for local consumption business through M&A and partnerships and joint ventures with leading local partners
• ・Initiatives to address social issues through business
  Continuous initiatives to address social issues and steady progress of long-term global environmental initiatives toward realizing carbon neutrality by 2050

2) Financial targets for the fiscal year ending March 31, 2026 (revised upwards on May 10, 2024)

・Net sales:	325.0 billion yen or more(Initial target: 300.0 billion yen or more)
・Operating profit:	27.0 billion yen (Initial target: 24.0 billion yen)
・Operating profit ratio:	8.0 ％
・ROE:	10.0 ％

3) Basic policy on investment and shareholder returns

• ・Investment for growth
  We have set aside up to 50.0 billion yen for strategic investment and will implement investments with a good balance between maintaining and enhancing the strengths of existing businesses and developing new markets and businesses
• ・Shareholder returns
  We will maintain a stable dividend payout ratio of at least 40%, raising it from the level of the previous Midterm Management Plan
  We will flexibly implement the purchase of treasury shares based on factors such as the status of investment and the external environment

(3) Business Environment and Issues to be Addressed

1) Changes in business environments

The outlook for the Japanese economy is extremely uncertain due to factors such as geopolitical risk surrounding the situations in Ukraine and the Middle East, soaring materials and parts prices, and the sharp depreciation of the yen in response to the United States’ monetary tightening policy amid prolonged inflation. As other factors such as the price hike of various materials and cost increases associated with human capital management are also anticipated, responding to the inflationary economy is now a key management issue.
In this business environment, we aim to create new demand by capturing major social and market
changes caused by the shift to new type of offices in the hybrid working era and the response to labor shortages in the logistics industry.

2) Issues to be addressed in each business

Office Furniture business
In the mainstay Office Furniture business, the demand for creating offices that make people want to go to work is spreading across the country and is expected to remain strong, as customers are seeking to solve management issues such as securing of human resources and insufficient communication.
Under these conditions, we will leverage our proposal capabilities based on the insight we have gained from the results of research into future working styles, one of our strengths, and our extensive delivery record, as well as our product development capabilities to anticipate changes of the times. In this way, we aim to create new demand, thereby boosting net sales and operating profit.

Store Displays business
In the Store Displays business, vigorous demand is expected to continue for personnel savings and labor savings amid personnel shortages at stores, regardless of region or business category. In addition, solutions to social issues in the retail industry, such as environmental considerations, are becoming increasingly important in our proposals.
Under these conditions, we aim to expand net sales and operating profit by solving various social
issues faced by retailers and supporting future store creation through leveraging our strength in display fixtures, refrigerated showcases, and our extensive lineup of other products, as well as our integrated service functions spanning proposals to after-sales service and our design, research and development framework for store creation.

Material Handling Systems business
In the Material Handling Systems business, demand related to personnel savings and labor savings is expected to expand strongly amid a shortage of workers at logistics facilities.
Under these conditions, as a line builder of logistics systems, the Company aims to expand the scale of its business and secure profits by enhancing its integrated system from consulting services for solving business issues to maintenance services. In addition, we will engage in research and development of differentiated products using advanced technologies.

Enhancing productivity and efficiency
We will enhance productivity and efficiency by strengthening our production and supply systems to aim for the smart factory to respond flexibly to changing demand. Through effective capital investment and continuous improvement activities, we will engage in boosting productivity while also ensuring efficiency and stable supply. We will also strive to improve our competitiveness by building on our foundation of creating a safer and healthier workplace, implementing company-wide human resource development and improvement of engagement, and further strengthening our efforts to improve operational efficiency, including digital transformation.

Sustainability Promotion

(1) Views and Initiatives Concerning Sustainability

At the Okamura Group, our mission is to “Contribute to society by creating environments where people can thrive with rich ideas and reliable quality.” Under this mission, we aim to realize a society in which all people can work and live with vitality and smiles in line with our purpose of “Realizing a society where people can thrive.” Recognizing the importance of pursuing business activities centered on sustainability, to “Contribute to society by creating environments where people can thrive with rich ideas and reliable quality,” as well as the economic, social, and environmental impact of our business activities, we are working to fulfil our corporate social responsibility based on the Okamura Group Sustainability Policy.

*Okamura Group Sustainability Policy (in Japanese)
https://www.okamura.co.jp/corporate/sustainability/policy/sustainability_policies.pdf

1) Governance

The Sustainability Committee is chaired by the Representative Director, and consists of Executive Officers who oversee each business division and corporate department. Based on our annual plans concerning the Materiality (material management issues), the Committee promotes and supports initiatives across the Group, monitors progress, and formulates response policies.
The Sustainability Promotion Department operates the Sustainability Committee as its secretariat, develops items approved by the Committee into business activities, and regularly conducts follow-ups.
In addition, for company-wide sustainability projects, we follow up on the progress of each business division and spread awareness of our activities among employees.
The results of these initiatives are regularly reported to the Board of Directors, which manages and supervises the reported matters.

2) Strategies

The Okamura Group will further hone the three core strengths it has developed through loving people: “relationships of trust with customers,” “ability to solve customers’ issues,” and “reliable manufacturing.” In this way, we will “Contribute to society by creating environments where people can thrive with rich ideas and reliable quality.” Under the Midterm Management Plan 2025 announced in May 2023, we have clearly set forth our aim of contributing to society through business while sustainably enhancing corporate value.
We recognize the importance of pursuing business activities centered on sustainability to “Contribute to society by creating environments where people can thrive with rich ideas and reliable quality.” Based on this recognition, we have identified the Materiality (material management issues) and are promoting initiatives in four areas.
Based on our management principle of responsible corporate behavior, we are committed to reducing the environmental burden throughout our supply chain. This is possible by motivating our employees and ensuring their lives are fulfilled through pursuing employee engagement, and by implementing our global environmental initiatives. Through our business activities, we will contribute to the realization of a society where people can thrive.
We will promote activities to address the material issues, aiming to contribute to society while sustainably enhancing corporate value.

3) Risk Management

As described in “Business and Other Risks,” the Group reasonably controls its overall risks, and makes a deliberate promotion for its risk management to minimize losses and maximize opportunities presented by risks, by ensuring organic links between its sustainability activities and risk management.
The Sustainability Promotion Department, which is the secretariat of the Sustainability Committee, is also involved in supporting and promoting the operation of risk management as the Risk Management Bureau.
We are engaged in addressing climate change risks as part of our “global environmental initiatives,” one of the material issues. We have established science-based greenhouse gas emissions reduction targets that are in line with the Paris Agreement’s goal to limit global temperature rises to 1.5°C compared to pre-industrial levels. These targets received certification from SBTi (The Science Based Targets initiative), an international initiative, in October 2022. Under the Midterm Management Plan 2025 announced in May 2023, we have committed to ongoing engagement in social issues through business and we will pursue a variety of initiatives to achieve this.
The Okamura Group perceives the implementation of global environmental initiatives as a business opportunity, and has developed the idea of “circular design” based on the concept of a circular economy. We will steadily implement this approach as we aim for carbon neutrality by 2050. While reducing the volume of resources used and consumed throughout the product’s entire lifecycle and making effective use of stockpile, we will generate added value through the creation of services, maximize the value of resources and products, minimize resource consumption, reduce the generation of waste, and proactively engage in other circular activities.

*Information disclosure on climate change by the Okamura Group
https://www.okamura.co.jp/corporate/sustainability/report/pdf/2024/TCFD_open_240625.pdf

4) Indicators and Targets

We recognize the importance of pursuing business activities centered on sustainability to “Contribute to society by creating environments where people can thrive with rich ideas and reliable quality.” Based on this recognition, we have identified Materiality (material management issues) and are promoting initiatives across four areas: “Creating environments where people can thrive,” “Pursuing employee engagement,” “implementing global environmental initiatives,” and “Responsible corporate behavior.”
We integrated various perspectives, including various sustainability-related guidelines, items subject to inspection by evaluating organizations, inhouse policies and standards, and questionnaires and interviews inside and outside the Company, and identified the material issues by quantitatively and qualitatively analyzing their importance to stakeholders and the Group.
Additionally, in order to consistently implement measures for the identified material issues, we set KPIs and annual targets for each issue that we strive to undertake and pursue efforts to achieve these targets. Sustainability Committee and the Sustainability Promotion Project monitor the progress of initiatives.

*The material issue “Creating environments where people can thrive” is focused on our business activities. It is not presented here as KPIs and annual targets have been set in the Midterm Management Plan.

(2) Approach to and Initiatives for Human Capital

1) Approach to human resources development (strategies)

Since its founding, Okamura has always regarded its employees as collaborators and team members who work together to make the company prosperous, and has pursued a management style centered on people, based on the company creed of “creativity, cooperation, frugality, savings and service.” In keeping with the founding spirit of the company and upholding the management philosophy of “making people thrive,” we will further nurture talent and accelerate employee engagement improvement to improve employee satisfaction that in turn will support sustainable growth, based on the approach outlined below. We aim to become a “strong Okamura” that can respond to changes in the surrounding environment by enabling each and every employee to thrive in his or her work.

• ・Increase corporate value by creating an environment where each and every employee can thrive and achieve WiL-BE*, thereby enhancing engagement and maximizing results.
• ・Build a human capital portfolio needed to realize management strategies, and promote the growth and career development of each employee through the human capital cycle of recruitment, development, evaluation, treatment, and appointment.
• ・Achieve management targets by building an organization and allocating human resources in a way that allows for maximized performance across the entire company, along with the promotion of the Okamura Way and the strengthening of teamwork.

*:“WiL-BE” is the name of the work style reforms that we are promoting at Okamura. “WiL-BE” is derived from “Work in Life” proposed by Okamura, which in turn is based on the idea that “life is composed of many parts, of which work is one.”

2) Two pillars of our initiatives: Human resource development and employee engagement improvement

・Human resource development
We will focus on developing employees with the ability to find solutions to problems without clear answers in today’s ever-changing society. We will invest more time and money on their development than ever before, and at the same time, promote the appointment and selection of young employees for important positions. Specifically, we have defined the Okamura Career Journey, through which each employee continues to shape their future career and achieve continuous growth through diverse experiences, and we have introduced a talent management system for the utilization of employees’ diverse expertise, skills, and other important human resource information which we consider to be management assets. By further improving this system in the future, we will maximize the performance of our employees and the organization and improve talent liquidity to ensure every employee is assigned in the right place. We will also use the system to enable employees to view this information at any time in order to regularly review their careers to date, be it their transfers, promotions, roles, or achievements, and independently think about how they want to achieve growth going forward.

・Employee engagement improvement
Aiming to enable each employee to work with vitality in their own unique way, we have evolved our WiL-BE workstyle reform that we have been promoting since June 2018, into WiL-BE 2.0 Project for Improving Employee Engagement. Specifically, in FY2022, we conducted activities to create a trend to improve employee engagement and a trend to support employee engagement. In FY2023, we held Employee Engagement Meetings as a place for enhancing mutual understanding regarding employee engagement, with department managers responsible for implementing the meetings. Moreover, as a system for facilitating dialogue between employees and management, in January 2023, we began the “Tell me, Masa-san!” initiative, in which Representative Director, President and Chief Executive Officer responds directly to employees’ questions. In April 2023, we launched a new proposal system, allowing a wider range of employees to make proposals on operational reforms and other matters. In these ways, we have worked to revitalize in-house communication. In August, we also introduced an engagement survey for all employees. Going forward, we will aim to solve workplace issues and improve employees engagement.
We will continue to roll out various initiatives as we aim for employee and company growth with our two pillars of human resource development and employee engagement improvement.

3) Initiatives

See “(1) Views and Initiatives Concerning Sustainability 4) Indicators and Targets b. Area: Pursuing employee engagement” for indicators and targets.
Details have also been presented in the “Sustainability Report” and published on our website (in Japanese).
https://www.okamura.co.jp/corporate/sustainability/

Business and Other Risks

(1) Risk Management System

The Okamura Group regards matters that may impact the achievement of business objectives (either favorably and unfavorably) as risks, and after identifying, analyzing and evaluating such risks, we work systematically to control risks to a reasonable extent, and to minimize the losses or maximize the opportunities that the risks may bring.
In order to improve the effectiveness of risk management by organically linking risk management, a systematic approach for risk outlined above, with the Group’s sustainability activities, the Sustainability Committee, which has been established to deliberately promote sustainability activities, determines the Group’s basic policy on risk management, priority risks and response measures, and evaluates the effectiveness of risk management.
An overview of the Sustainability Committee and risk management is presented below.

1) Sustainability Committee

a. Purpose:	The deliberate promotion of the Group’s sustainability activities
b. Role:	The Sustainability Committee undertakes the following roles related to risk management. ・ Making decisions on the basic policy on risk management ・ Making decisions on risks to be prioritized related to company-wide risks, countermeasures, and risk owners ・ Confirming the status of risk management, evaluating its effectiveness and guiding improvements ・ Reporting important matters related to risk to the Board of Directors
c. Meetings:	Two regular meetings in a year and an extraordinary meeting as necessary
d. Composition:	Chaired by the President and Chief Executive Officer and composed of Executive Officers from each business division, the Corporate Functional Officer, and others

2) Risk Management Bureau

The general manager of the Legal & Risk Management Department serves as the head of the Bureau, with the Legal & Risk Management Department, the Sustainability Promotion Department, the Corporate Strategies Department, and the General Affairs Department as members to support and promote risk management in the Okamura Group.

3) Risk management at the company-wide level

We conduct risk management with the Sustainability Committee as the decision-making body for situations that may affect the entire company or the Group.

4) Risk Management at the Business Unit Level

A business unit is the unit responsible for business activities within the Okamura Group, which collectively refers to the company’s business divisions and group companies, with the executive officer of the business division serving as the senior general manager in charge. For situations that can be handled by a business division or Group company, risk management is carried out with the business unit’s senior general manager in charge.

5) Risk owner

For each risk, we have designated a risk owner who is tasked with the responsibility to act to effectively control the risk, and is accountable for the actions and results. Risk owners have the authority to choose and apply appropriate risk response measures in light of business objectives and performance targets. Risk ownership for company-wide risks is undertaken by Executive Officers and determined by the Sustainability Committee.

The Group’s risk management system is described below.

To develop and operate this system, the Company has established Risk Management Rules to be followed as part of risk management during normal times, and Emergency Response Rules to be upheld as part of crisis management during emergencies.

(2) Risk Assessment Process

In risk assessment, risks are first identified, and then evaluated after analyzing the identified risks in terms of its likelihood of occurring and its degree of impact using risk maps.
The various risks identified are classified into five major categories: risks in the business environment, risks in business strategy, operational risk, financial risk, and risks pertaining to human rights, human resources, and labor. The major categories are further organized into three minor and sub-minor categories.

・Occurrence Scale

・Impact Scale

・Risk Map

Risk assessments are conducted twice a year at the company-wide level and once a year at the business unit level.
For risk assessment at the business unit level, the Group company first analyzes and evaluates the risks associated with its own company. Next, based on the results of the assessment by the Group company, the Senior General Manager in charge of the business unit determines risks to be prioritized for each business unit.
For risk assessment at the company-wide level, an assessment department designated by the Risk Management Bureau conducts a primary assessment by referencing the risk assessment of the business unit, and the Risk Management Bureau conducts a second assessment after comprehensively reviewing the results produced by each assessment department. Based on that assessment, risks that are positioned as “Serious” or “High” on the risk map, as well as risks that are deemed important in consideration of their projected changes in future impact or their importance given the social responsibility, are referred to the Sustainability Committee, which determines the risks to be prioritized on a company-wide basis.
For risks that have been identified as having priority, each risk owner analyzes their impact on business upon their materialization, and formulates and implements measures to counter them. When formulating such measures, the risks to be addressed in the short term and risks to be prioritized that have been specified by the Sustainability Committee are taken into account in the planning.
The risk owner and the Risk Management Bureau monitor how the risks are being addressed, and when problems arise, the risk owner works to correct and improve them.

(3) Priority Risks

Of the matters related to the status of business, accounting, and other information stated in the annual securities report, management recognizes that the following matters may have a material impact on the financial condition, results of operations, and cash flows of the consolidated companies. We endeavor to control and, as far as possible, avoid these risks. The items listed below do not cover all risks concerning the Group’s business. Forward-looking contained in this section are based on the judgment of the Group as of March 31, 2024. (The items listed below as priority risks represent risks associated with the four minor categories of material management issues, among the company-wide priority risks identified through the risk assessment process described above.)

1) Risks associated with creating environments where people can thrive

a. Develop products and services
The Group believes that our competitive superiority comes not from the difference in quality of our products and services compared to our rivals, but from our differing value proposition concepts, and recognizes that this constant search of differing concepts leads to the creation of entirely new markets. We leverage our reliable manufacturing backed by the advanced ability to solve customers’ issues, and the design capabilitiesand advanced production technologies that bring shape to the necessary products, to build strong relationships of trust with customers and expand our business domains. However, if our development of products and services does not keep up with the pace of change in customer preferences and we are unable to provide products and services that exceed customer expectations in a timely manner, we may be impacted by a resulting decline in customer satisfaction. Moreover, the Group belongs to a highly competitive industry, and the Group’s business performance may be adversely affected if our competitors copy the Group’s product designs or technologies and sell these at a lower price, or if they increase their market share through more sophisticated designs and technologies.
Priority risks: Development of products and services

b. Maintain and improve the quality of products and services
The quality of products and services is fundamental to our mission to “Contribute to society by creating environments where people can thrive with rich ideas and reliable quality.” We pursue safe, high-quality and innovative products and services. We always endeavor to ensure quality control in all our processes from procurement through production and logistics to installation work so that we can meet customer expectations.
The Group manufactures each product in accordance with a globally recognized quality standard (ISO 9001). However, there is no guarantee that all products will be free of accidents or future complaints. Although we have product liability insurance, there is no guarantee that insurance will adequately cover the Group’s total compensation liability. Product defects may affect the Group’s reputation and adversely affect the Group’s business performance and financial position. The quality control targets to be addressed are becoming increasingly diverse and complex due to business changes, such as the provision of new value to customers, the expansion of sales from goods to services, and the expansion of total sales not only for in-house manufactured products but also for externally-procured products, contracted construction, and services. Under the recognition that quality maintenance may not be able to keep up with the pace of business growth, and that quality control activities may be insufficient, we have established management systems for safety and product quality across the entire supply chain, including the establishment of the Quality Assurance Committee. We identify more detailed risks, including the possibility of serious accidents and defects, as well as promoting and supporting the formulation of annual plans and activities to address these risks and monitoring the progress of these plans and activities. We also provide practical quality control training, incorporating case studies, at each stage in the supply chain through cooperative relationships with our suppliers. We constantly review our quality control approach and activities to maintain a robust approach, striving to maintain and improve quality through ongoing quality control and improvement activities.
Priority risks: Quality of products and services

2) Risks associated with pursuing employee engagement

a. Human capital and diversity
Failure to effectively gather, develop, and secure the human resources needed to conduct and grow our business runs the risk of impeding the capabilities critical to executing, managing, and supervising our business activities, thereby hindering the achievement of our performance targets as planned. In the event that efforts to develop human resources are not adequately implemented due to lacking human capital investments, sufficient consideration is not given to the health and safety of employees, or the psychological safety of the workplace is not ensured and the workplace environment becomes unpleasant, this may lead to a decline in morale, poor physical health, or employee resignations. A decline in productivity may also adversely affect the Group’s business performance and financial position. Violations of laws and regulations related to health and safety may not only result in penalties and compensation payments, but also affect the Group’s reputation, which may adversely affect business performance and financial position. (See “Sustainability Promotion” for risk response measures.)
Priority risks: Human resources, health and safety, labor, human rights

3) Risks associated with implementing global environmental initiatives

a. Climate change
Delays in climate change measures, conflicts with relevant laws and regulations, or failure to shift business activities to the resource recycling-oriented approach demanded by society may not only hinder the Group’s contribution to the creation of a sustainable society, but may also damage the Group’s social credibility and adversely affect earnings due to exclusion from customer selection criteria. (See “Sustainability Promotion” for risk response measures.)
Priority risks: Climate change and the transition to a resource recycling-oriented society

4) Risks associated with responsible corporate behavior

a. Supply chain disruption
The Group’s business performance may be adversely affected by suspended business activities, lost business opportunities, and restoration cost burdens stemming from supply chain disruptions owing to natural disasters such as earthquakes and floods, fires and other accidents, epidemics of new infectious diseases, trade friction between the U.S. and China, and other policy trends in various countries. Moreover, if we are unable to adequately address issues such as higher material prices or difficulties procuring raw materials stemming from heightened geopolitical risks and rising energy prices, etc., this may result in the loss of opportunities for business activities and the incurrence of procurement cost burdens, which in turn may adversely affect the Group’s business performance.
In the Emergency Response Rules, we have set forth the Group’s response in the event of an emergency that may seriously affect society and or the Company’s business activities. We have also established manuals that describe detailed procedures and are prepared to prevent situations from spreading and bring them under control at an early stage through swift and appropriate action. Through mutual collaboration with suppliers, we are striving to improve business through mutual collaboration, as well as practice procurement that emphasizes sustainability.
Priority risks: Large-scale natural disasters, the spread of infectious diseases, procurement of materials and raw materials, accidents and man-made disasters

b. Governance and compliance
In addition to thorough compliance with laws, regulations, and other rules, the Group always endeavors to behave fairly, transparently, and honestly, based on a high standard of ethics. We also strive to build good relationships with our customers, suppliers, employees, local communities and various other stakeholders through timely and appropriate information disclosure and communication. In addition to the ongoing implementation of awareness-raising activities such as messages from senior management, activities to spread knowledge of the Code of Conduct, e-learning and other training, we have revised the Group management to further embed the corporate philosophy and management policy within the Group and clarify the responsibility for activities to enable a Group-wide unified approach to corporate activities.
Although we need to foster awareness of compliance and carry out thoroughgoing efforts across the Group, we cannot guarantee the appropriateness of all corporate activities or of the words and actions of officers and employees, or that problematic behavior will not occur in the future, including in cases where Group company controls do not function properly. Failure to meet the expectations of society may cause the credibility of the Group to decline, which may adversely affect our business performance and financial position. We also recognize that inappropriate behavior, deterioration in credibility, and deterioration in business performance across the Group may negatively impact suppliers as well and lead them to bankruptcy, and thus we may be supposed to take a social responsibility for it. Deterioration in communication and psychological safety within the organization may lead to delays in the detection of risks and problems, incorrect business operations due to misidentification or unilateral judgment, and misconduct or improper handling unreported, even if it is noticed. As such, we have established the internal, external, and overseas helplines to work to resolve concerns at an early stage, as well as regularly conduct awareness surveys of all Group employees to analyze changes in attitudes over time and carry out improvement activities.
Priority risks: Governance, credibility, legal and regulatory compliance, labor

c. Information security
The Group holds confidential information for business purposes. This includes customer information and personal information. We also use a variety of ICT systems in our manufacturing, sales, and other businesses. The level of information security risk to these systems is rising year by year. The Group has established the Confidential Information Management Rules on the handling of confidential information and holds in strict confidence all confidential information, including electronic data. We have also signed agreements with suppliers regarding the protection of confidential information to implement appropriate information management. We appropriately handle personal information in accordance with the PrivacyMark System. We are stepping up measures to prevent the occurrence of information security incidents, such as virus infections and unauthorized access due to cyberattacks, etc., based on the Information Security Policy we have established for the purposes of protecting critical information assets and maintaining their confidentiality, integrity, and availability. This includes establishing new rules concerning information security management. We are also implementing measures to minimize damage in the event of an information security incident through the Computer Security Incident Response Team (CSIRT) established in 2020. In addition, for employees, we have established appropriate information usage methods in our Rules for Using Internal Information Systems. We continuously conduct educational activities to raise awareness of information security risks in daily work by providing training via e-learning programs and targeted attack e-mail drills for employees, and by calling for attention when employees access the intranet and start up their PCs. However, if these countermeasures and response measures fail to keep pace with the increasingly sophisticated cyberattacks, etc., it could result in a serious information security incident that could lead to deterioration in our social credibility or the suspension of operations, thereby adversely affecting the Group’s business performance.
Priority risks: Information security

5) Risks associated with changes in financial position, operating results, and cash flows other than those stated above

a. Financial situation
The Group strives to obtain timely information on changes in the economic environment through communication with external stakeholders and internal meetings and reporting procedures. We collect and organize this information centrally, then analyze and assess the potential short-term and medium- to long-term impact on our business with an eye to flexibly reviewing our business activities. However, domestic sales account for over 90% of the Group’s total sales. Reduced capital investment, accompanied by a downturn in the domestic economy, could lead to decreased demand, thereby adversely affecting the Group’s business performance and financial position.
Priority risks: Changes in the economic environment