Risk Management

The group has established an Internal Control Committee and a risk management system under the supervision of the president. In normal times, each committee and each division works on the reduction, etc., of risks in accordance with the Management Risk Management Regulations. We have established a system to respond in accordance with the Emergency Response Guidelines in the event of an emergency and are promoting a risk management system. In addition, we also receive reports related to risk management activities from major group companies.

The main risks that could exert an impact on the group's financial position and business results are as follows. The group has judged any matters concerning the future in this document as of the end of the consolidated fiscal year under review (March 31, 2026). The group is aware of these risks and intends to make every effort to avoid their occurrence and to respond if they do occur.

(1) Risks related to business activities

Risk	Details of risk	Countermeasures against the risk
Business environment	Demand for the group's products is largely related to the number of private non-residential buildings and machinery orders in Japan, and ultimately is influenced greatly by domestic economic trends. In addition, products in the information and communications and electronic parts fields face risks such as obsolescence of inventories as technological innovation is fast. Moreover, the group's financial position and business results could be affected by an indirect deterioration in the business environment, etc., caused by international political and economic conditions or market trends.	・We are aware that in the group's business environment, there is always the possibility that such risks may materialize. We will strengthen the foundations of our core business further and promote various measures such as the expansion of our business domains, the establishment of overseas business foundations centered on Southeast Asia, and the establishment of new businesses.
Quality	The group manufactures products under appropriately managed manufacturing processes. In the event that a group product does not meet customer or legal requirements, etc., the group's financial position and business results could be affected due to the payment of costs or a decline in social credibility, etc.	・To ensure product quality, we will improve design quality further, manage production processes, and expand our inspection systems. ・We have established an educational system on our quality policy and quality control.
Information systems and information security	The group uses information systems in business activities and holds and manages confidential information and personal information relating to business partners, executives, employees, etc. If there is an information system failure due to a cyber attack, malware, etc., a long-term outage of an information system due to internal or external factors, or a leak of confidential information or personal information, the group's financial position and business results could be affected.	・We have implemented various security measures to protect information systems, confidential information, etc., from increasingly sophisticated threats. ・We implement education and training regularly on information management and the use of information systems, while issuing cautions to officers and employees concerning cyber attacks, etc.
Labor environment	If an industrial accident or labor compliance problem caused by a continuous shortage of personnel or the labor environment occurs, the group's financial position and business results could be affected by factors such as a decline in our social evaluation, the occurrence of damages for compensation or a decline in the moral of officers and employees, etc.	・The group is implementing various measures to increase employee engagement under the slogan "job satisfaction reform." ・We are working on the improvement of safety and health management and the workplace environment, etc., towards the prevention of industrial accidents and health problems. ・We have established a consultation service and a system for the early detection and correction of problems.
Supply chain	The group manufactures products using raw materials such as steel, stainless steel, resin and copper, as well as purchased equipment, and purchases and sells information and communications equipment. The group's financial position and business results could be affected if prices soar or it becomes difficult to secure supplies in the procurement of raw materials, parts, products, etc., due to international political and economic conditions or market trends.	・We are promoting measures such as the diversification of suppliers, including overseas procurement, the securing of flexible inventories, and changes to the specifications of materials used. ・We are striving for stable procurement through the continuous monitoring of market trends and the strengthening of cooperation with suppliers. ・We are promoting procurement cooperation among group companies aimed at increasing our purchasing power as a group. ・We are striving to build a sustainable supply chain while taking into consideration factors such as environmentally conscious procurement and the NITTO KOGYO Group Human Rights Policy. ・In logistics, we are promoting various measures such as the greater efficiency of deliveries.

(2) Management strategies and risks that may materialize over the medium to long term

Risk	Details of risk	Countermeasures against the risk
Securing and development of human resources	Securing and developing talented human resources is essential to the group's sustainable growth. If securing the human resources necessary for business development becomes difficult, the group's financial position and business results could be affected.	・We are enhancing education and training systems that support independent career formation. ・We are promoting initiatives for the diversification of human resources and the improvement of engagement, the development of work environments that are easy to work in, and the realization of attractive compensation.
Evolution of digital technology	We recognize that the flow of the digital revolution will have further impacts on prompt management decisions, business competitiveness, etc. If our response to this is slow or maintaining our current competitive superiority becomes difficult, the group's financial position and business results could be affected.	・We are promoting the use of digital technology and striving for the maintenance of our competitive superiority in business through the promotion of superior sales systems, greater production efficiency in manufacturing, etc. ・We will strengthen the group's management foundations through the building of solid ICT infrastructure. ・We have established company-wide safety standards and are advancing organizational reforms to promote, educate and monitor the use of AI aimed at preventing risks associated with the use of AI.
Business portfolio	The group has three business segments: manufacturing, construction and services business in the electrical and telecommunications infrastructure-related field; distribution business; and manufacturing business in the electronic parts-related field, and promotes business strategies individually in each respective segment. The sluggishness of business in each respective segment could affect the group's financial position and business results.	・We monitor and analyze the results of each segment and individual business strategy as a business portfolio, and are promoting growth strategies for business in each segment through the allocation of appropriate resources. ・Apart from the core business strategies of each segment, we promote overseas business and business and technology domain expansion strategies, and develop new pillars of growth through investment.
Overseas business development	The group is developing its overseas business centered on Southeast Asia. The group's financial position and business results could be affected by the sluggishness of business overseas, international political and economic conditions, war, terrorism or large-scale natural disasters, etc.	・We are promoting cooperation among group companies in overseas business and the strengthening of marketing functions. ・We are promoting initiatives to strengthen the group's governance system and to strengthen the management foundations at overseas bases further.
Intellectual property	The group owns and uses intellectual property rights. If these rights are not protected sufficiently or intellectual property right infringement problems occur with other parties, the group's financial position and business results could be affected.	・We recognize that avoiding the infringement of the intellectual property rights of other parties is essential in our business activities in Japan and overseas, have established a management system, and are striving for the reduction of risk through surveys of intellectual property rights, etc. ・To promote our business further, we are strengthening our analysis of intellectual property rights related to our business areas.
Environmental problems	As part of its environmental initiatives, the group is promoting the rationalization of energy use in business activities, handling associated with regulations on hazardous chemical substances contained in products, the switchover to renewable energy, etc. The evaluation, etc., of such environmental initiatives, particularly for climate change risks, could have an impact on the group's financial position and business results.	・We have established a Sustainability Committee to monitor risks and opportunities related to climate change, and are formulating strategies and promoting initiatives to address these issues. ・We have set targets for the reduction of GHG emissions as a group and are promoting initiatives for their reduction throughout the supply chain. ・We are promoting initiatives such as the reduction of waste in manufacturing processes and the development of environmentally friendly products.

(3) Other

Risk

Details of risk

Countermeasures against the risk

Large-scale natural disasters

If a large-scale natural disaster such as an earthquake or flood occurs, the safety of officers, employees and their families may be threatened, and significant disruption to production capacity and logistics functions could be caused by damage to factory buildings and production facilities, the severing of supply chains, the suspension of lifeline infrastructure, etc., which could have an impact on the group's financial position and business results.

・We are promoting disaster prevention drills, safety confirmation drills for officers and employees, and disaster prevention measures aimed at mitigating damage at places of business, production facilities, etc.

・We have formulated a business continuity plan and have established a quick recovery system in the event of an emergency.

・We are promoting support for the formulation of business continuity plans in the supply chain.