The Casio Group’s products are sold in countries around the world, including Japan and other Asian countries, the U.S., and Europe. Demand for these products is influenced by the economic conditions in each country. In the event of a market slump, sales may decline, and excess inventory may arise. Notably, as most of the Group’s products are intended for use by individual consumers, consumer spending trends in each country have a major impact on the Group’s business. While it is always possible that such risks could materialize and it is difficult to completely avoid their impact, to address such risks, Casio always assesses market trends while conducting its business.
(2) Social Disruption Caused by War, Terrorism, Infectious Diseases, and Other Factors
The facilities and production sites of the Casio Group could suffer devastating losses due to war, terrorism, or other events beyond its control. This could affect the Group’s production and other systems, resulting in production and shipment delays, stagnant sales activities, and other factors that could reduce sales and require significant costs to repair and replace.
It is always possible that such risks could materialize, and there are concerns about the impact of the COVID-19 pandemic and the Russia-Ukraine conflict on the global economy. To address such risks, Casio manages risk by developing detailed marketing activities based on specific market conditions, and by responding flexibly to situations as they occur.
(3) Foreign Exchange and Interest Rate Risks
As the Casio Group manufactures and sells its products worldwide, it is affected by fluctuations in exchange rates. The Group’s profits may be negatively affected by fluctuations in exchange rates between the yen and other currencies. The Group is also exposed to interest rate fluctuation risk, which could affect its overall operating expenses, procurements costs, and the value of its financial assets and liabilities, especially long-term debt. It is always possible that such risks could materialize, and it is difficult to completely avoid their impact. However, to address such risks, Casio takes steps such as using forward exchange contracts to mitigate and avoid the impact of exchange rate fluctuations.
(4) Price Fluctuati
In the industries that the Casio Group operates in, numerous companies continue to intensely compete for market share both in and outside Japan. If prices suddenly fluctuate within a short period of time, or if sales prices continue to drop over a long period of time, and cost-cutting activities are unable to keep pace, the Group’s financial position and operating results may be adversely affected. Although this risk has materialized in certain products, to address such risk, Casio works to ensure profitability by selecting profitable items and differentiating its products from those of industry peers to maintain its competitive advantage.
(5) New Products
The development of new products by the Casio Group is a complex and uncertain process that involves various risks. If the Group fails to release popular new products promptly and regularly, or if competitors launch products that are similar to the Group’s, especially at the same time as the Group releases new products, it could reduce the advantage that the Group would have had as the first mover or one of the first entrants to that market. At this time, Casio is not aware of any factors that may cause such risks to materialize. However, to address such risks, Casio strives to maintain its competitiveness by strictly managing the development schedule for new products and deciding the timing of their market release.
(6) Transactions with Major Customers
Changes in strategy, changes in product specifications, or cancellations or rescheduling of orders by the Casio Group’s major customers could adversely affect the Group’s earnings. At this time, Casio is not aware of any factors that may cause such risks to materialize. However, to address such risks, Casio always works closely with its customers.
The Casio Group outsources a substantial portion of its manufacturing and assembly processes to outside suppliers in order to improve production efficiency and operating margins, which could result in production risks including delivery delays and difficulties providing reliable quality control. In addition, the Group’s earnings and product prices could be negatively affected due to violations of relevant laws or infringement of the intellectual property rights of third parties by these subcontractors. At this time, Casio is not aware of any factors that may cause such risks to materialize. However, to address such risks, when selecting subcontractors, Casio strives to select reliable business partners by carefully examining their technological and supply capabilities in advance.
(8) Technological Development and Change
Rapid technological changes in the Casio Group’s fields of business and radical changes in market needs could cause the Group’s products to become obsolete sooner than expected, which may adversely affect the Group’s business expansion, financial position, and operating results. At this time, Casio is not aware of any factors that may cause such risks to materialize. However, to address such risks, Casio closely monitors trends in technological changes in its fields of business and strives to promote technological development.
(9) Risks Related to International Activities and Expansion Outside Japan
Most of the Casio Group’s production and product sales are conducted outside Japan. Therefore, the Group’s financial position and operating results are to a large extent affected by political and economic conditions and laws and regulations in other countries. In particular, unexpected changes in regulations and the application of laws and regulations are difficult to predict and may adversely affect the Group’s performance. At this time, Casio is not aware of any factors that may cause such risks to materialize. However, to address such risks, Casio strives to accurately collect information on legal changes in countries where it does business.
(10) Intellectual Property
The Casio Group basically uses technology developed in-house and seeks to protect it through a combination of patents, trademarks, and other intellectual property rights. However, the following risks could apply to the Group.
Competitors’ independent development of similar technologies
Disapproval of the Group’s pending patent applications
Measures to prevent misuse or infringement of the Group’s intellectual property are ineffective
Intellectual property laws and regulations do not adequately protect the Group’s intellectual property
The Group’s future products or technologies are alleged to infringe on the intellectual property rights of other companies
At this time, Casio is not aware of any factors that may cause such risks to materialize. However, to address such risks, Casio basically uses its own technology developed in-house and protects its technology through a combination of patents, trademarks, and other intellectual property rights.
(11) Product Defects and Litigation Issues
Although the Casio Group has not been subject to serious complaints or adverse criticism since its founding, there is no guarantee that complaints regarding product liability or the safety of the Group’s products will not arise in the future. At this time, Casio is not aware of any factors that may cause such risks to materialize. As a manufacturer and distributor of consumer products, however, Casio addresses this risk by positioning “Casio quality” as not only including the quality of the product itself, but also everything from conserving the environment to recycling. Casio performs strict quality control based on the belief that the role of quality assurance is to deliver quality that satisfies customers.
(12) Information Management Risks
The Casio Group possesses much personal and confidential information related to its business promotion and development. In the event of information leaks, the Group’s business development, financial position, and operating results could be negatively affected due to a decline in competitiveness caused by the leakage of trade secrets and a loss of customer and social trust. At this time, Casio is not aware of any factors that may cause such risks to materialize. However, to address such risk, Casio works to strengthen its information management by establishing and disseminating internal rules for information management, providing security education to employees, and taking measures to protect against cyberattacks and system failures (preventing, monitoring, and preparing for response and recovery).
(13) Partnerships, Joint Ventures, and Strategic Investments
The Casio Group has formed partnerships, joint ventures, and strategic investments in several countries, including Japan, to promote and expand its business or to streamline management. In these cases, the Group examines in advance the possibility of recouping its investments and generating profits from various perspective, but it may become difficult to establish a cooperative framework or produce the expected sufficient results due to changes in the partner’s management environment, management policies, or business environment, or other factors. Furthermore, the business integration could take longer than expected. Therefore, partnerships or acquisitions may not achieve their original objectives, which may adversely affect the Group’s business development, financial position, and operating results. At this time, Casio is not aware of any factors that may cause such risks to materialize. However, Casio carefully addresses such risks, such as by examining the potential for recouping investments and generating profits from various perspectives in advance.
(14) Decline in Value of Group-Held Securities
Investments in securities are affected by fluctuations in stock prices, interest rates, and other factors, and basic economic uncertainty in general could have a major impact on the Casio Group’s assets. Although it is always possible that such risks may materialize and avoiding their impact completely is difficult, Casio reviews the significance and rationality of its holdings on a regular basis and carefully decides how to respond to such risks.
(15) Other Risks
In addition to the above, the following factors may also affect the future business and earnings of the Casio Group.
Business cyclicity in the IT industry
Accessibility of equipment, raw materials, facilities, electricity, and other items at reasonable cost when needed
Revisions to laws and regulations related to retirement benefit accounting, system revisions, and radical changes in the operating environment
Tax revisions including amendments to accounting standards for tax effect accounting and tax rate changes
Fires, earthquakes, floods, and other natural disasters (including those caused by climate change) and work-related accidents
At this time, Casio is not aware of any factors that may cause such risks to materialize. However, to address such risks, Casio establishes various preventative measures and proceeds cautiously while complying with laws and regulations.
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