We strive to bolster risk management as a key management issue, analyzing various scenarios in the Sustainability Committee, comprehensively evaluating risks both qualitatively and quantitatively, and determining which risks are of the highest priority.Priority risks are then reported to the Board of Directors, where the status of priority risks and revisions thereof are discussed, and the Board strives to build, maintain, and enhance a company-wide risk management framework.

Among the risks pertaining to business and accounting that are described in Securities Reports, the following sections discuss priority risks that managers recognize have the potential to significantly impact consolidated companies’ financial status, business results, and cash flow.
Items that pertain to the future are as determined by the Group as of the end of the current consolidated fiscal year.

The Sun-Wa Technos Group consists of three sections: the Electrical Machinery department, which sells mechatronics products such as servo motors and linear motors used in semiconductor and LCD production machines; the Electronics department, which sells electronic components used in automobiles, digital appliances, personal computers, and PDAs; and the General Machinery department, which sells semiconductor-related production equipment, LCD testing equipment, clean robots, and industrial robots. Since our clients are primarily in the industrial electronics and mechatronics industries, our Group’s business performance is affected by trends in demand and capital investment in these industries.

The Group has a wide range of suppliers, but one of our biggest suppliers, YASKAWA Electric Corporation, accounted for 9.4% of goods purchased for the consolidated Group as a whole in FY3/2022, 8.8% in FY3/2023, and 6.6% in FY3/2024. Therefore, any changes in the management policies or sales strategies of the YASKAWA Electric Corporation may have an impact on our own business results.
The Group will continue to strengthen our business relationships with our primary suppliers while collaborating as a partner in providing customers with safe and secure services.

Units: Millions of yen

The Group operates its businesses globally and engages in transactions that involve foreign currencies.As we continue to grow our market share in markets outside Japan, there is a possibility that major changes in exchange rates will have an impact on the Group’s business results and financial status.Additionally, we also raise some of our working capital from financial institutions such that if interest rates should rise at those institutions, that may impact the Group’s business results and financial status.
The Group does strive to mitigate risk by utilizing currency forwards, rate swaps, and other tools.

The Group sells products to the industrial mechatronics and electronics industries. In this, our experts are themselves business resources with diverse knowledge and abundant experience with a wide range of business partners and products. We believe it is essential for us to continue to recruit and educate such experts.If we are unable to secure or maintain the employment of the excellent human resources we need to develop our businesses, it may impact our future business plans.
The Group will work to bolster recruitment of mid-career hires in addition to new university graduates, conducting on-the-job training at worksites and rank-specific training programs based on our HR development policy in order to develop global personnel, provide practical trainings for specific types of work operations, boost business skills, and otherwise create personnel training systems that “Develop talents” from a variety of perspectives.We work to secure and cultivate superior personnel by building work environments in which people can work in comfort and each person’s human rights are respected based on the Internal Company Environment Improvement Policy.

In order to comply with all laws and regulations in the execution of Group company business, as well as to deepen all personnel’s understanding and practice of compliance, we have set up a Compliance Committee and an internal control framework while also being advised by attorneys and audit firms with expertise in specialized areas in order to further enhance our compliance.However, in recent years, it seems that there has been a shift in attitudes toward lawsuits and that there are more lawsuits filed in today’s world than in the past, so there is a potential risk that we could be sued in the course of conducting our businesses.In the event that the Group is sued, and depending on the outcome of the lawsuit, there may be an impact on the Group’s business results and financial status.

Information security risks facing our business activities include the risk of unauthorized system access, external leaks of confidential or personal information due to employee operational error, system or data damage or encryption for ransom caused by cyberattacks exploiting vulnerabilities in the supply chain, malware infection, and unauthorized access to or theft from offices or data centers.
To address these risks, the company has established Information Security Management Rules and taken steps to prevent unauthorized access and information leaks by applying regular patches for software vulnerabilities, implementing highly reliable firewalls, introducing antivirus software and monitoring systems with EDR functionality, granting and managing appropriate access permissions, encrypting PC data and communications, prohibiting use of USB flash drives, and backing up server data for redundancy.We also conduct regular in-house training and self-inspections.

The Group is working to strengthen relationships with suppliers and maintain product quality and reliability, but if a business partner were to claim damages due to a faulty product sold by us, it may have an impact on the Group’s business results.
With respect to faulty products, we work to minimize damage claims through cooperative discussions with suppliers and other business partners in addition to seeking compensation from manufacturers to cover the costs. We have also taken out product liability (PL) insurance to cover potentially defective products, including those imported from overseas, in order to mitigate losses.

As one of our important roles as a trading company, the Sun-Wa Technos Group maintains a certain level of inventory with the aim of ensuring a stable supply of products for customers.Changes in customer production plans and reduced forecasted needs may result in slow-moving or excess inventory, and this may impact cash flow.Additionally, recording impairment loss or losses on disposal of inventories may affect our business results or financial status.
In response to these sorts of risks, we established an Inventory Management Supervisory Group in the Operations Headquarters, hold regular meetings with the Chief for Inventory Management in each department, and set appropriate inventory targets for each department to monitor progress.When there are changes to our agreements with customers and to production plans, our main risk mitigation strategies are to adjust the order quantities and delivery dates with suppliers as well as to negotiate with customers to prevent slow-moving or excess inventory.We also hold rank-specific inventory management training workshops to improve employees’ inventory management skills as another way of reducing risks.

The Sun-Wa Technos Group’s business environment may be affected by intensifying abnormal weather and other aspects of climate change, or there may be delays in business related to the decarbonization of the economy. These and similar events may negatively impact the Group’s business results.
We identify the climate change problem as a key issue in sustainability management, and our Sustainability Committee is leading our initiatives focused on these issues. We use the framework of the Task Force on Climate-related Financial Disclosures (TCFD) to evaluate the impact of climate change qualitatively and quantitatively on our company in terms of risk scenarios, and we both take countermeasures and publish information on this topic.Additionally, we aim to be consistent with the goals of the Paris Agreement including reducing greenhouse gas emissions (Scope 1, 2) by 20% by FY2030, and we have established the Sunwa Decarbonized society Approach that views decarbonization as a business opportunity with the goal of achieving an emission reduction effect of over 100 times greater than our company’s greenhouse gas emissions (Scope 1, 2, and 3) compared with FY2020 by FY2050 through the sale of environmentally friendly products. These initiatives serve to mitigate risk and maximize our opportunities.

In addition to our Japanese offices, the Group includes 14 overseas subsidiaries (39 locations), and our future policies include further overseas expansion.Therefore, unforeseen political, economic, social, legal, or tax-related changes or safety issues such as terrorism in relevant foreign countries may impact the Group’s business results and financial status.
The department at the Group responsible for foreign subsidiaries works with local managers to collect the most up-to-date local information on a regular basis, and in the event of a terrorist attack or other emergency, a response headquarters will be set up as stipulated in the Risk Management Rules to ensure rapid information collection and appropriate response.