Business Risks

Our group conducts business in fibers, industrial materials, real estate, and services and offers products and services to various markets. We accurately respond to changes in the market and maintain and expand our competitiveness. However, if business worsens and the market situation fluctuates due to things such as sudden changes to the state of the global economy, there is a risk that our financial situation, business results, and cash flow situation could be affected.

We use petrochemicals like synthetic fibers and heavy oil as our primary and secondary raw material and fuel. So, if sudden fluctuations in the price of crude oil or natural disasters make procurement difficult, our financial situation, business results, and cash flow situation could be affected.

We import raw materials and products from overseas. To hedge against risks through exchange rate fluctuations, we form forward exchange contracts. While risk hedging can mitigate the effect of exchange rate fluctuations, it is impossible to eliminate the effect completely. Additionally, the yen conversion of financial statement items for foreign subsidiaries will be affected by exchange rate fluctuations. This means that significant fluctuations in the exchange rate could affect our financial situation, business results, and cash flow situation.

We raise funds through interest-bearing debt. Regarding attempts to compress the interest-bearing debts, or, borrowing from financial institutions, we are attempting to compress interest fluctuation risks through interest swap transactions. However, sudden changes in the interest market change could affect our financial situation, business results, and cash flow situation.

We have tangible fixed assets like our production facilities including land, and intangible assets. If we are forced to record an impairment loss due to a drop in market value of each asset, significant change to the business environment, or a loss in profitability, our financial situation and business results could be affected.

Various legal regulations are applied to our company, both domestically and abroad. To clarify our stance on compliance with laws and ordinances and conducting business with ethics, we established scope and standards for behavior, ensuring that this takes root with all directors and employees. Additionally, as an organization that integrates compliance activities, we established the Shikibo Compliance Committee, with the representative director president as the chair, and our directors, executive officers, management staff, and representatives from each subsidiary of the Shikibo Group as members. We regularly hold the compliance committee meetings, and we hold the compliance subcommittee for those in charge of subsidiaries. Further, in addition to checking the maintenance and operational situation of the group's overall compliance structure, we thoroughly educate everyone about legal and internal stipulations. However, legal regulation changes could affect our financial situation and business results.

We retain confidential information, customer information, and personal information for business purposes. We maintain rules for handling this information and are working to strengthen and ensure our information security. However, in the event that our business operations are affected by the increasingly complex threats from outside of our company, like viruses and cyberattacks, there is a risk that it could affect our financial situation and business results due to a loss of societal trust in our company.

It is clear that climate change is causing an increase in natural disasters, and our financial situation, business results, and cash flow situation could be affected by the introduction of policies, legal regulations, and carbon taxes related to the emission of greenhouse gases like CO2. On the other hand, the strengthening of policies related to carbon change may lead to an increase in business opportunities for our group, as it is forecast that demand will increase for technologies, products, and services that contribute to energy conservation and reductions to emissions of greenhouse gases.

We have offices and factories both domestically and abroad. We have devised a Business Continuity Plan (BCP) to ensure that we can carry on with important business activities. However, there is a risk of affecting our financial situation, business results, and cash flow situation if production activities stop through direct damage to our facilities or employees or through indirect damage through disruptions to procurement of raw materials and to logistics, due to the occurrence of large-scale natural disasters like earthquakes or flooding.
Additionally, safety management for our employees is handled with daily, thorough safety management, and a variety of countermeasures to prevent accidents and occupational hazards. However, if there is harm to an employee or a large amount of damage to facilities through a workplace accident that occurs in the course of business, there is a risk of affecting our financial situation, business results, and cash flow situation.
Additionally, the spread of COVID-19 is affecting our profit and loss, even as of March 2022. The COVID-19 pandemic has not ended, and the future of business is still unclear. Moving forward, if the COVID-19 pandemic spreads further or drags on, there is a risk of affecting our financial situation, business results, and cash flow situation.

We know that securing talented human resources is a vital management resource if we want to continue growing. The drop in the birth rate has intensified competition in the labor market, and if we cannot hire and foster human resources that can be active globally and human resources that have a high degree of specialization, it could affect our future business operations.

We run production in countries such as Indonesia, China, and Vietnam. This is why changes to the state of society and changes to laws and regulations in each country dramatically affect our business operations.
Additionally, through the changes in the international situation surrounding the Russian invasion of Ukraine, price increases for raw materials and energy, as well as disruptions to distribution, are significantly affecting our business operations.
If these situations occur, there is a risk that they could affect our financial situation, business results, and cash flow situation.

Further, there are a variety of risks in addition to those above, and that which is listed here is not all-encompassing.