Risks associated with business activities

Major risks that may affect Yaskawa Group’s performance and financial position include the following.

Matters concerning the future in the text are based on Yaskawa Group’s judgment as of the end of the fiscal year under review.Yaskawa Group is fully aware of these risks and will make every effort to prevent them from occurring and to respond in the event that they occur.

 

(1) Economic trend

Yaskawa Group’s revenue is significantly affected by economic conditions in Japan, the Americas, Europe, and Asia (especially China), where Yaskawa Group’s products are sold, as well as capital investment and production trends in each industry, including the automobile and semiconductor industries, which are the main demanders.These industry trends may adversely affect Yaskawa Group’s performance and financial position.

 

(2) Exchange rate fluctuations

Yaskawa Group exports products in local currencies such as U.S. dollars and Euros, and fluctuations in foreign exchange rates may affect Yaskawa Group’s business results. A stronger yen than expected could weaken the competitiveness of Yaskawa Group’s products and adversely affect its operating results and financial condition.

 

(3) Fluctuations in interest rates

Yaskawa Group has been working to optimize its borrowings and other interest-bearing liabilities, but future trends in market interest rates may still have an adverse effect on Yaskawa Group’s performance and financial position.

 

(4) Increased competition

Yaskawa Group has strong competitors in each of its business areas. In the face of intensifying price competition in particular, there is no guarantee that Yaskawa Group will remain competitive in the future, even in areas where it enjoys a high market share. Intense price competition may adversely affect Yaskawa Group’s performance and financial position.

 

(5) Changes in the market environment

Yaskawa Group’s main products, AC servo motor and its control equipment, arc welding robots, spot welding robots, painting robots, and handling robots for semiconductor and LCD manufacturing equipment to be used in clean and vacuum environments, are greatly affected by trends in the semiconductor, automobile, LCD, and electronic component industries. A decline in demand from these industries could adversely affect Yaskawa Group’s performance and financial position.

 

(6) Procurement of raw materials

Yaskawa Group procures raw materials such as steel materials and various parts from a number of suppliers, but it may not be able to obtain necessary quantities continuously due to surging procurement prices or increasing demand in the industry. As a result, there is a possibility that Yaskawa Group’s production will be affected, which may adversely affect Yaskawa Group’s business results and financial condition.

 

(7) Occurrence of quality problems

Yaskawa Group manufactures products at its domestic and overseas production bases in accordance with domestic and overseas quality standards, and has established a comprehensive quality control system to ensure that no product defects occur. However, there is no guarantee that all products are free from defects or liability.The Group has product liability insurance, but this insurance may not cover all of its liabilities, which may adversely affect Yaskawa Group’s financial position and results of operations.

 

(8) Information security

Yaskawa Group retains personal information on customers, business partners, other related parties and employees obtained through its business activities. To ensure the safety and proper handling of confidential information, we have established information management regulations, information security management systems, and technical measures as the most important issues, and are working to strengthen security in the event of any data breach or incident. However, Yaskawa Group’s business results and financial position may be adversely affected if information is infringed due to unforeseen circumstances.

 

(9) Natural disasters and social disorder

Yaskawa Group operates both in Japan and overseas. In the event of natural disasters such as major earthquakes, tsunamis, typhoons, floods and river flooding caused by heavy rains, or terrorism, wars, infectious diseases such as new types of viruses, there is a possibility that it has a serious impact and causes damage on Yaskawa Group’s overall corporate activities, including production activities, as well as its human resources, with an adverse effect on its business results and financial condition. In particular, the new coronavirus that broke out at the beginning of the year has yet to show signs of ending. If the impact of the new coronavirus continues or spreads, it could adversely affect Yaskawa’s business results and financial condition by worsening operations at Yaskawa Group’s plants and at its customers’ plants.

 

(10) Environmental regulations and issues

Yaskawa Group’s environmental philosophy states, “Based on management principle, we recognize that global environmental conservation is one of the most important issues shared by all humankind, and we will contribute to the realization of a sustainable society by actively taking environmentally conscious actions in all aspects of our corporate activities. We are striving to make further contributions by further reducing the environmental impact of our production activities (Green process), and enhancing the environmental performance of our products (Green products) with Yaskawa’s technological capabilities, thereby reducing the environmental load of the world. Yaskawa Group’s business results and financial position may be adversely affected in the future by damages caused by abnormal weather and increased expenses associated with stricter environmental laws and regulations.

 

(11) Legislation and national regulations

Yaskawa Group conducts its business activities on a global scale and is subject to various laws and regulations in each region.Yaskawa Group is making efforts to develop internal rules and educate its employees on compliance. However, if these laws and regulations become stricter than ever before, it is possible that business activities will be restricted and that increased expenses to comply with penal provisions and laws and regulations may have an adverse effect on Yaskawa Group’s business results and financial condition. In addition, Yaskawa Group requires its employees to comply with high standards of ethics through the Code of Conduct and compliance education. However, compliance risks, including personal misconduct, cannot be completely avoided, and in the event of a material violation of laws and regulations, Yaskawa Group’s business results and financial position may be adversely affected.

 

(12) Litigation and legal proceedings

Yaskawa Group operates its business on a global scale and may be subject to various lawsuits in the course of its business activities. We also use intellectual property rights that are held or licensed in Yaskawa Group and there is no guarantee that we will be able to maintain those licenses in the future. Yaskawa may be sued by third parties for infringement of other intellectual property rights relating to its products. The filing of a lawsuit could have an adverse effect on Yaskawa Group’s results of operations and financial position.

 

(13) Risk relating to corporate acquisitions and business alliances with other companies

To strengthen its global competitiveness, Yaskawa Group is aggressively pursuing investments, including corporate acquisitions and capital participation, as well as business alliances with other companies, with the aim of expanding its business, primarily by developing and enhancing its product development, production, sales and service systems. However, if the expected effects are not achieved or if the alliance or cooperative relationship is severed, Yaskawa Group’s business results and financial position may be adversely affected.

 

(14) Securing human resources

Yaskawa Group hires and develops human resources based on its personnel philosophy, which states that each and every employee will grow independently, and as a result, the company will grow. Our human resources in manufacturing, sales, technology development, and other specialized fields have continuously taken on new challenges in anticipation of the needs of the times based on our personnel philosophy, have a professional consciousness, and have continued to take on new challenges in cooperation with others without fear of failure. However, if Yaskawa Group is unable to hire and develop sufficient human resources due to factors such as competition to acquire human resources and retirement from a more mobilized workforce, the inability to respond to changes in the world may lead to a decline in competitiveness, which may adversely affect its business results and financial condition.

 

(15) Overseas business

Yaskawa Group is actively developing its business on a global scale to achieve sustainable business expansion. Therefore, in addition to the risk of uncertainties regarding the economic and market trends in various countries and the religious and cultural differences, political, economic and legal obstacles may arise due to changes in politics or unexpected changes in laws and regulations, which may adversely affect the business results and financial condition of Yaskawa Group.

 

(16) Reputational risk

Yaskawa Group conducts its business activities in compliance with laws and regulations, and in the unlikely event that an inappropriate act, such as a violation of laws or regulations, is discovered, it will take appropriate action against the violation as soon as possible. However, if malicious rumors about Yaskawa Group arise or spread through media reports or Internet postings, whether based on accurate facts or not, there is a possibility that social credibility of Yaskawa Group will be damaged and its business results and financial condition will be adversely affected.

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