Risk Management

Risk Management System

The Compliance and Risk Management Committee promotes adherence to applicable laws, the Articles of Incorporation, internal regulations, and social norms in our business activities. Additionally, the committee is responsible for identifying, analyzing, and assessing risks related to our operations, reporting significant risk management issues, and directing or deciding on necessary countermeasures.

Business Risks

The following outlines the key risks identified by management that could significantly affect the financial condition, business performance, and cash flow of the consolidated company, based on the business environment and financial matters described in the securities report.
As it is difficult to reasonably predict the likelihood, timing, and potential impact of these risks on our group’s business performance and overall condition, such details are not included. The forward-looking statements herein reflect the group's assessments as of the end of the current consolidated fiscal year.

Impact of Fluctuations in the Semiconductor Market

Our group specializes in the global manufacturing and sales of semiconductor and FPD inspection equipment, as well as measuring instruments, which constitute the core of our business operations. While the semiconductor and FPD markets experience growth and increased demand driven by technological innovation, changes in market needs or economic conditions can significantly disrupt the supply-demand balance. Such disruptions may lead to freezes in capital investment by clients, production cuts, or adjustments to business plans, potentially having a significant impact on our business performance.

Our group strives to minimize risks by diversifying its product and business portfolio to mitigate the effects of market fluctuations.

Impact of Limited Client Diversity

Our group’s products are supplied to major semiconductor and FPD manufacturers both domestically and internationally. However, as consolidation and restructuring continue within these industries, the proportion of sales dependent on specific clients has increased, making our business more susceptible to their actions. Consequently, changes in capital investment, production plans, or business strategies by key clients could significantly impact our business performance. Additionally, requests from clients for cost reductions may lead to lower sales prices, which could further affect our financial performance.

To mitigate these risks, our group remains vigilant in monitoring changes in the market environment and strives to diversify its customer base as much as possible.

Impact on Quality

Given the advanced technology behind our group’s products, unforeseen defects may occasionally occur. Such issues could lead to delivery delays, production stoppages, product recalls, or additional expenditures related to liability claims and recovery efforts. These events may significantly impact our business performance by reducing sales and damaging our reputation.

To maintain high-quality, our group continuously improves processes across product development, manufacturing, material procurement, management, and services based on QDCCSS initiatives. Additionally, we strive to enhance our quality assurance system, including maintaining ISO 9001 certification.

Impact of Research and Development

Our group strives for sustainable growth by actively developing new technologies and accelerating the early market launch of new products. To this end, we closely monitor technological advancements and trends in the semiconductor market and proceed with development accordingly. However, if we fail to meet the technological requirements or timelines set by our clients, or if competitors introduce superior technologies or products ahead of us, our products may lose competitiveness. This could make it difficult to maintain profitability and may significantly impact our group's business performance.

To mitigate these risks, our group fosters strong relationships with clients through regular technical exchanges, allowing us to swiftly identify emerging needs. By proactively initiating the development of essential technologies, we aim to establish an efficient system for timely innovation and new product launches.

Impact of Intellectual Property Rights

Our group actively conducts research and development to differentiate and enhance our products, striving to strengthen intellectual property rights such as patents and know-how. However, there is a risk that our intellectual property may be leaked externally due to employee turnover or information breaches. If such leaked information is misused or imitated by third parties, it could impact our business performance.

Failure to acquire or protect intellectual property rights, the invalidation of our intellectual property rights, or inadequate protection in certain regions where our group operates may also negatively affect our business performance. Additionally, if our group's products or technologies are deemed to infringe upon third-party intellectual property rights and result in litigation, it could have a significant adverse impact.

Furthermore, if our group faces restrictions due to third-party technologies, patents, or other intellectual property when commercializing products, is unable to obtain necessary licenses, or encounters unforeseen patent infringement lawsuits, it could significantly hinder our business expansion and performance.

To mitigate these risks, our group strengthens collaboration between on-site engineers and the intellectual property department, consulting with external experts such as lawyers and patent attorneys, and rigorously investigates third-party intellectual property rights from the early stages of development. Additionally, we encourage employees to obtain patents related to development, design, and manufacturing through an incentive system, reinforcing the protection and enhancement of our own intellectual property rights.

Challenges Related to Information Security

Our group holds a large amount of confidential information, including technical data, business information about clients, and personal information about employees, as part of its business operations. However, unforeseen events such as unauthorized access, computer virus infections, ransomware, DoS attacks, cyber-attacks, misuse or improper use of information systems and assets by executives or employees, natural disasters, large-scale power outages, or fires causing information infrastructure failures could not only make business continuity difficult but also lead to legal claims, lawsuits, liabilities for damages, and fines. These events could have a significant impact on our group’s business performance and social credibility.

To prevent the leakage, falsification, loss, or destruction of such information, our group strengthens security measures, regularly revises the information security policy through the relevant department, and strives to ensure the proper operation and management of information assets in accordance with this policy. Additionally, we have enrolled in cyber risk insurance to minimize financial burdens and opportunity losses resulting from cyber-attacks.

Challenges in Materials Procurement and Outsourcing

Some components and processes used in our group's products involve cutting-edge technology, making it difficult to find alternative suppliers or subcontractors in certain cases. As a result, if delays in supply, processing deadlines, or quality issues arise from these suppliers or subcontractors, it could lead to interruptions in our product manufacturing or a decline in quality, which may significantly impact our business performance.

Our group places great importance on building and maintaining strong relationships with these partner companies. Additionally, we actively ensure stable supply by considering alternative materials and secondary suppliers in our procurement and outsourcing processes to maintain quality and delivery stability.

Challenges Related to Human Resources

Our group recognizes that securing and developing skilled talent, particularly in the development and technology departments, is essential for achieving sustainable growth. However, if recruitment of the necessary personnel does not proceed as planned or if key employees leave the company, it could significantly affect our business operations and overall performance.

To address this, our group is committed to improving our employee benefits system, actively recruiting talented individuals, and enhancing various training and development programs to promote employee retention. Additionally, we conduct engagement surveys to identify challenges and implement improvements, striving to create an environment where employees are motivated and find their work fulfilling.

Impact of Environmental Issues

Our group is subject to domestic environmental regulations, such as water pollution prevention, air pollution prevention, energy conservation, climate change countermeasures, and the management of chemical substances contained in products. Additionally, driven by the global push to reduce environmental impacts, stakeholders and society as a whole demand attention to global environmental issues like climate change and efforts to address sustainability challenges. Furthermore, the semiconductor industry’s code of conduct also requires compliance with environmental issues.

In this context, we are implementing various measures in the development and manufacturing processes of our products to reduce their environmental impact while adhering to relevant regulations. Failure to achieve the expected results or appropriately address laws and regulations could lead to countermeasure costs, reduced product competitiveness, and a loss of social credibility, potentially impacting our group's business performance.

In addition to complying with environmental laws and the semiconductor industry’s code of conduct, our group actively engages in environmental conservation efforts, such as reducing greenhouse gas (GHG) emissions toward achieving carbon neutrality and lowering energy consumption at business sites.

Challenges Related to Compliance Issues

Our group is required to comply with a wide range of domestic and international laws and regulations, including those related to product safety, national security and import/export controls, commercial practices, patents, product liability, the environment, labor, taxation, and more. However, the increasing complexity of these regulations makes it difficult to fully eliminate the risk of non-compliance by executives or employees. If such incidents occur, they could lead to a loss of social credibility, suspension of transactions, fines, penalties, and other consequences, which could significantly impact our business operations and performance.

Our group has established an internal control system and actively promotes legal compliance by distributing a "Compliance Handbook" that outlines our code of conduct. Additionally, we conduct regular training sessions to ensure that employees fully understand and adhere to these guidelines.

Risks Associated with Catastrophic Events

Our group is headquartered in Tokyo and has development, manufacturing, sales, and maintenance bases in Aomori and Oita Prefectures, as well as in Taiwan, China, the United States, Germany, South Korea, and Singapore. In the event of large-scale natural disasters such as typhoons, floods, earthquakes, or other catastrophic events, as well as terrorist acts, infectious disease outbreaks, large-scale power outages, or fires in these regions, there is a risk of disruptions to headquarters functions and/or product manufacturing, which could significantly impact our business performance.

To minimize damage to business assets caused by such disasters, our group strengthens Business Continuity Plan (BCP) measures and works to ensure the continuation and early recovery of operations.

Impact of Geopolitical and Country Risks

Our group operates manufacturing bases and provides sales and services worldwide, serving a diverse international client base. As a result, changes in international circumstances may lead to a risk of reduced orders. Additionally, country- or region-specific issues such as conflicts, wars, terrorism, natural disasters, epidemics, and infectious disease outbreaks may put our employees—both local staff, expatriates, and business travelers—at risk. If such situations arise, there is a potential for disruptions to business operations, which could significantly impact our business performance.

To address these risks, our group closely monitors international trends, security, and industrial policies, and collects timely information from overseas bases to implement appropriate countermeasures promptly.

Other Impacts

In carrying out our group’s business activities, we may be affected by economic conditions, financial and stock market fluctuations, foreign exchange variations, and other domestic and international factors.

Additionally, unforeseen factors, including laws, regulations, or government policies in Japan or in countries where our products are sold, could influence our business performance. To mitigate these risks, we implement appropriate measures to address each challenge.