Business Risks and Challenges to Address

1.Sales Price

Kuriyama Group handles a wide variety of products and merchandise, but, due to the effects of rising prices caused by global inflation, there is an overall need to pass the costs onto customers.
In order to counter this risk, we are working with our manufacturing and sales subsidiaries to add value to our products, improve quality and shorten delivery time, and we are engaging in more robust communication with customers. All of this serves to facilitate market-wide awareness of the superiority of our products, thereby enhancing the level of trust that customers place in us.

2.Public Investment Trends

3.Raw Materials Price

The price of the resin which serves as the primary raw material in the plastic hoses Kuriyama Group manufactures is affected by changes in the price of crude oil. When procuring raw materials, Kuriyama Group makes sure to adequately investigate options for obtaining a stable supply and, based on this as well as the economic environment, market situation and other factors, engages in price negotiations with suppliers and works to reduce costs by ordering large quantities/in-bulk on an annual basis. Nevertheless, the variability in the price of resin and other raw materials is likely to affect Kuriyama Group's business performance. Within the Group we are working to dampen the impact of higher raw materials costs via such means as improving productivity and passing the costs on to the customer; however, there is no guarantee that any such measure will have the desired outcome.

4.Inventory Needs

Kuriyama Group performs manufacturing and purchasing in anticipation of customer orders in order to ensure we have a full product line-up to facilitate our effectiveness as a trading company, and this means that we must maintain our inventory at a given level. Thus, in the event that the Group is wrong about the level of demand for a product, our business performance will be impacted as a result of either missing sales opportunities due to insufficient supply, being forced to sell at a discounted price in order to get rid of excess supply, or, depending on the circumstances, writing off loss on the valuation or abandonment of products.

5.Distribution System

Consolidated subsidiary Kuriyama Japan Corporation has a 3PL agreement in place with an external logistics company for distribution services, thereby streamlining delivery through the integration of inventory and distribution functions; however, if the distribution center were to be damaged or otherwise rendered inoperable, it would be likely to impact the business performance and financial situation of Kuriyama Group. In addition, at overseas business facilities, the Group expedites delivery through the use of carefully managed delivery services, including hiring delivery trucks to make numerous daily product deliveries directly to wholesalers and users, as well as making use of delivery companies to accommodate specific volume and size needs. The use of such delivery systems helps us to differentiate ourselves from our competitors, but, at the same time, they can also contribute to higher distribution costs for overseas business facilities.

6.Importance of Overseas business

Nearly all of the rubber, plastic and metal industrial-use hoses and other products Kuriyama Group manufactures in North America, Europe and Central and South America are sold to the local market. Overseas sales made up 68.1% of the current consolidated sales for the current consolidated accounting fiscal year. Because Kuriyama Group continues to pursue a policy of active business development overseas, the business performance of the Group faces risks from currency exchange fluctuations; local business cycles, consumer behavior and economic trends; changes in local political and social conditions; regulatory requirements; local customs and norms; and other unpredictable factors.

7.Sales Channels

Most Kuriyama Group products are sold to customers via local distributors. Although the Group is not overly dependent on any specific distributors, because they also handle our competitors' products, any changes in the distributors' purchasing policies can impact the Group's business performance.

8.Impact of Exchange Rate Fluctuation

When preparing our consolidated financial statements, we convert into yen all Group company financial statements denominated in local currencies. Because of this, even if there has been no change in value in terms of the local currency, fluctuations in the exchange rate can impact business performance and financial condition when considered in terms of consolidate financial statements. Also, because transactions involving Group procurement of raw materials and merchandise overseas can be affected by exchange rate fluctuations, Group business performance and financial status can still be affected by medium and long-term currency fluctuations.

9.Regulatory Requirements

Consolidated subsidiary Kuriyama Japan Corporation not only sells products but also provides construction/installation services; hence, it must comply with the Building Standards Act, Construction Business Act and other laws and regulations. In the unlikely event that, for whatever reason, a Group company is subject to administrative sanctions by the Ministry of Land, Infrastructure, Transport and Tourism or some other competent authority, this has the potential to negatively impact the Group's business performance. The table below lists the major permits, licenses, registrations, etc., that we have obtained.

10.Changes in Accounting/Taxation System

'Consolidated subsidiary Kuriyama Japan Corporation not only sells products but also provides construction/installation services; hence, it must comply with the Building Standards Act, Construction Business Act and other laws and regulations. In the unlikely event that, for whatever reason, a Group company is subject to administrative sanctions by the Ministry of Land, Infrastructure, Transport and Tourism or some other competent authority, this has the potential to negatively impact the Group's business performance. The table below lists the major permits, licenses, registrations, etc., that we have obtained.

11.Natural Disasters, Epidemics and Other Hazards

Kuriyama Group conducts business activities on a global scale. As a result, unanticipated natural disasters, changes in the political and economic landscape, the spread of infectious/communicable diseases, legal and regulatory changes, terrorism, war and other social upheaval, etc., all run the risk of negatively impacting the financial situation and business performance of the Group. In order to counter these risks, we engage in business continuity planning (BCP) to manage crisis situations and minimize interruption due to natural disasters and other risks.

12.Cyber Security Risks

If a company falls victim to a cyberattack, such as from virus infection via targeted email or malware or from unauthorized access, it can impact the company's business activities and corporate reputation.
To address this risk, Kuriyama Group implements security-related education and training for employees across the Group, institutes a more robust communications system in the event of an incident, pursues security standardization, maintains 24-hour-a-day, 365-days-a-year security monitoring systems at some Group companies, and obtains cyber security risk insurance coverage to help minimize risk for the Group.