Risk Factors

(1)  Natural disaster, infectious disease and accident risks

• Business continuity and recovery from natural disasters

  Large natural disasters and accidents, including earthquakes and typhoons, may cause severe damage to employees and production facilities of the Group and its suppliers, which may have an adverse impact on the Group’s business performance and financial condition. We have proactively taken measures to minimize potential damage from natural disasters and accidents that would threaten our business continuity, by enhancing the resistance of our facilities against disasters, preparing a business continuity plan, diversifying procurement sources, developing and integrating backup systems at production bases, maintaining the appropriate inventory levels, and obtaining insurance coverage. 

• Infectious and communicable diseases

  The spread of an infectious or communicable disease may restrict our business operations and our stakeholders’ activities, undermine business partner trust due to a failure in hygiene control at our facilities, or cause reputational risk due to the spread of rumors. These situations may have an adverse impact on the Group’s business performance and financial condition. We have developed a group-wide system to take various measures to reduce the infectious disease risk amid the spread of infection. Focusing mainly on maintaining public health, we will carry out a certain level of infection preventive measures to ensure business continuity while protecting employees’ health. We have also built an intranet that allows the entire group to communicate information relating to infectious diseases.

• Occupational accidents and health and safety

  The shutdown of operations as a result of a violation of labor-related laws and regulations, such as the Industrial Safety and Health Act, or the occurrence of an occupational accident may have an adverse impact on the Group’s business performance and financial condition. This may also increase reputational risk, threatening the Group’s business continuity. In the Toyo Seikan Group Code of Conduct, established as standards [a standard] for all group members to follow, we explicitly state that we will prevent overwork and perform daily health and safety activities without fail. We also ensure full compliance with labor-related laws and regulations and thoroughly manage occupational health and safety, thereby aiming to create a workplace where everyone can work with peace of mind. 

(2)  Compliance Risk

• Compliance

  With growing emphasis on corporate social responsibility in recent years, all businesses are required to operate in full compliance with the rules and regulations and improve corporate value through an efficient and appropriate allocation of business resources while avoiding management risks.
  In light of this situation, we recognize that the enhancement of compliance system is one of the most important management issues, and have been making efforts to achieve this goal across the Group. However, we also admit that it is impossible to completely eliminate the risk of being blamed for failing to fulfill our social responsibility because of insufficient risk control framework. The materialization of such risk will increase reputational risk and may severely damage the credibility or reputation of the Group and affect its business continuity. We therefore have been enhancing our compliance framework by implementing the following measures:

  • Formulate the Toyo Seikan Group Sustainability Charter, the Toyo Seikan Group Action Policy, and the Toyo Seikan Group Code of Conduct as common standards of activities for the Group to comply with and implement, and work on education of its officers and employees for their full understanding.
    [Reference] The Toyo Seikan Group Sustainability Charter, the Toyo Seikan Group Action Policy, and the Toyo Seikan Group Code of Conduct 
  • Establish the Group’s compliance hotlines as an internal reporting system, and disseminate information about the system to the employees with posters and self-check cards.
  • Establish the Group Risk and Compliance Committee to lead compliance-related activities across the Group, and conduct educational programs for officers and employees under its supervision. 
  • Conduct the month-long Group Compliance Promotion Campaign in October every year for raising awareness about compliance through educational activities. 
  • Transmit information to the group members to ensure their understanding by regularly publishing the Compliance News Letter, which contains internal and external information on compliance, and by using emails and intranet.
  • Create compliance risk maps to allow major domestic subsidiaries to identify and analyze their respective risks, select risks to be focused on, and formulate and implement countermeasures.

  On top of these measures, we preemptively take action against antitrust law-related risks that would have a particularly significant impact on the Group’s business continuity in the event of their occurring. We remind newly assigned presidents of group companies to comply with laws and regulations, regularly examine and check the state of compliance with relevant internal rules, and provide employees with educational programs by career level, aiming to enhance our compliance management framework. In addition, we designated April 20 as Day of Renewed Commitment to Competition Law Compliance. On this day every year, the presidents of the Company and its group companies send all employees a message to remind them about their compliance responsibilities in order to ensure no violation of the Antimonopoly Act.
  With respect to matters related to anti-corruption, we raise awareness of the relevant internal rules among group members, reconfirm the status of our compliance management framework, and provide group members with educational programs.

• Human rights violations and discrimination

  Human rights violations or discrimination occurring in the supply chain of the Group or its suppliers or the Group’s failure to meet human rights requirements of society and stakeholders may destroy its social trust.
  To prevent this risk, the Group has established the Toyo Seikan Group Human Rights Policy based on the United Nations Guiding Principles on Business and Human Rights. The policy serves as a guideline for the Group to fulfill its responsibilities in respect for human rights. We have worked to disseminate the policy to the officers and employees and provided educational programs for group members to properly understand human rights. We have also established the Toyo Seikan Group CSR Guidelines for Suppliers, which contain basic practices we ask our suppliers to observe in order to aim for a sustainable society as an entire supply chain. We are promoting the suppliers’ understanding of the guidelines and asking for their cooperation in conducting self-assessments. In addition, the Company is a regular member of Japan Center for Engagement and Remedy on Business and Human Rights (JaCER). Through the Engagement and Remedy Platform provided by JaCER, we are promoting human rights relief efforts not only for the Group but also for all stakeholders. 

(3)  Business Management Risk

• Fluctuations in economic conditions

  Global and domestic economic recession or stagnation, an aging and shrinking population, and a resulting slowdown in consumer spending could reduce the Group’s sales and profit. 

• Fluctuations in production costs

  Fluctuations in raw material and energy prices, labor and logistics expenses, and other production costs for the Group's operations due to changes in economic conditions, including foreign exchange rates, and country risks associated with growing global tensions, such as the conflict in the Middle East, may adversely affect the Group's business performance and profitability.
  We are introducing a pricing scheme that allows us to link our sales prices to raw material prices mainly for metal and plastic products in our packaging business. We are also working to pass on to customers past and ongoing increases in energy costs as well as rising labor and logistics costs. Despite these efforts, higher production costs may reduce the Group’s profitability, depending on the degree of achievement and progress of such efforts.
  We are striving to improve productivity and optimize our cost structure through the upgrade of aged facilities in Japan, the establishment of recruitment and retention strategies, and the extensive renewal of production equipment to further save labor, resources, and energy.

• Procurement of raw materials

  Raw materials purchased by the Group, whether imported or domestically procured, use crude materials produced overseas. The Group’s business performance and profitability may be adversely affected by difficulties in procuring raw materials due to a global logistics disruption caused by country risks associated with growing global tensions, such as the conflict in the Middle East, natural disasters or equipment failures in global supply chains. To stably provide products and services that are indispensable to people’s daily lives, we strive to ensure stable procurement by collecting a wide range of information on raw material suppliers and diversifying suppliers, and to reinforce our relationships with them in order to receive adequate support and cooperation from them, as appropriate.

• Intensifying price competition

  Price competition is intensifying in the packaging container market, where the Group mainly operates, while more customers are self-manufacturing their containers. This trend could weaken the Group’s price negotiation power and increase downward pressure on product prices.
  To maintain an appropriate level of profit, we will seek to properly identify changes in consumer needs and differentiate ourselves from competitors by developing a variety of unique and innovative products and services using our early-stage ideas and technologies with all kinds of materials.

• Research and development (R&D)

  Although continuous and effective investments in R&D activities are essential for the Group, the results of the investments are uncertain, and a larger R&D investment does not necessarily guarantee desired results. In particular, if R&D investments for new products and technologies do not generate sufficient returns, or if the R&D data accumulated within the Group are not effectively used for developing new products and technologies due to a lack of data sharing among group companies, the expected future growth and profitability of the Group could decline.
  In order to meet diversifying market needs, the Group’s research divisions, including Corporate R&D, Technical Center of Toyo Seikan Co., Ltd., and R&D Center of Toyo Kohan Co., Ltd., are actively engaged in R&D activities to develop next-generation technologies. We regularly conduct monitoring of individual projects. We also aim to take full advantage of the abundant R&D data accumulated within the Group through technological exchanges among group companies.

• Investment and lending (Corporate acquisitions / capital participation / capital investment /etc.)

  The Group actively seeks opportunities for corporate acquisition and capital participation with an eye on strengthening its operation base and expanding business, while making active and effective investment in manufacturing, sales and R&D activities to further improve our corporate value. However, results of those activities that do not fully meet expectations may significantly affect the Group’s business performance and profitability. 
  We have established the Investment Management Committee to control risks related to investment and loan activities, implementing close examination by clarifying decision-making procedures and criteria for the Company and Group companies, making post-evaluation, and setting criteria for whether to continue or exit the project based on the evaluation results. The committee also conducts regular monitoring of existing projects and, if the evaluated project has not yielded the expected results and is likely to adversely affect the Group’s overall profitability, it will decide to withdraw from the project to reduce the risk of lowering future profitability.

• Digitalization

  To realize data-driven management, the Group is integrating internal system data and external information, and transforming work and decision-making processes by leveraging artificial intelligence. Any delay in these initiatives could impede the transformation of our work style reforms, thereby adversely affecting our future growth and profitability.
  We have established the Group Digital Vision 2030 to further enhance the Group’s source of competitiveness through the maximized use of the latest digital technology and data infrastructure. Recognizing “advancement of data utilization” as one of the key themes of our strategy, we aim to transform ourselves into a corporation that further contributes to society with digitization.
  Moving forward, the Group is advancing its digitalization under the digital strategy division established in April 2026.

• Customer credit risk

  If a default risk emerges due to concern over the creditworthiness of a customer or business partner, and if the Group is required to post an additional loss or a provision for a potential loss, it may adversely affect the Group’s business performance and financial condition.
  Most customers of the Group pose a relatively low credit risk. Meanwhile, for transactions with high risk customers, we reduce credit risks by using trading companies or by shortening account receivable collection periods, and conduct an appropriate credit search on a new customer before initiating transactions.

• Recruitment and development of talent

  Securing human resources remains difficult due to the declining birthrate and aging population as well as the decrease in the working age population in Japan, and the lack of necessary human resources may affect the Group’s business operations. In particular, to promote the Group’s continuous growth over the long term, securing excellent leaders and recruiting and developing qualified human resources are crucial for the Group’s growth and development. Failure to do so may adversely affect the Group’s future growth.
  We are striving to prevent the outflow of human resources from the Group by improving employee engagement and reforming work styles. We are also building a system that enables the Group to continue its business operations by promoting efficient and labor-saving measures through digitalization and the use of AI.
  To secure talented human resources, major group companies have adopted a group-wide process for periodic recruitment of new college graduates from fiscal 2021 (ended March 2022), switching from the previous system where each group company individually recruited new graduates. Through this new scheme, we aim to obtain competent human resources for the entire Group and foster next leaders by providing career development opportunities from a group-wide perspective. Since fiscal 2017, we have also adopted a core personnel management system to develop the capabilities of selected candidates as future leaders through training programs and strategic assignment.
  Furthermore, we are increasing internal talent mobility while promoting collaboration across companies and organizations in the Group to prevent inflexibility in the workplace and foster an open work environment that accepts diversity, thereby developing a corporate culture and human resources that can continuously create new value.

• Litigation

  The Group’s business activities in Japan and abroad carry the risk of being sued. Specifically, we may be obliged to bear an enormous cost to compensate for damage in relation to contractual non-performance, product liability following product defects, liabilities under labor contracts with officers and employees and relevant laws, infringement of third party rights, or other liabilities.
  To reduce the risk, we aim to minimize the potential impact of a lawsuit, if it occurs, on the Group’s business performance and finances by developing a basic form of contract that clarifies liabilities to be borne by the Group. We also facilitate cooperation between the relevant operational divisions and legal experts, including the internal legal department and external specialists, and have concluded a comprehensive general liability insurance to cover the entire Group.

• Overseas operations

  The Group operates globally, in Asia, Europe, the United States, and other regions. Changes in business environments in countries where we operate or inadequate governance systems of overseas subsidiaries could have an adverse impact on the Group's business performance and financial condition.
  In April 2026, we established the Overseas Business Management Office, which serves the primary role of quickly and accurately understanding the business conditions of overseas subsidiaries, taking timely and appropriate measures to address identified issues in collaboration with the relevant departments.

(4)  Information Security Risk

• Leakage of personal information

  While the Group takes various measures to protect the personal information it holds, the risk of information leakage due to unforeseen circumstances cannot be completely eliminated. The materialization of such risk may harm the Group's reputation, thereby damaging its credibility and adversely affecting its business performance.
  To address these risks, we have formulated internal regulations to manage information, and periodically conduct educational activities and training programs for officers and employees. To further enhance our information management framework, we have established the Group Information Management Committee to supervise information management across the Group, and the Information Management Committee to oversee the Company’s information management.

• Leakage of trade secrets and other confidential information

  Although we take various measures to protect trade secrets and other confidential information obtained in the course of business, leakage of such information could occur due to unforeseen circumstances and cannot be completely prevented. The occurrence of such leakage may harm our reputation, thereby damaging our credibility and adversely affecting both our competitiveness in the industry and our ability to procure raw materials.
  To address these risks, we have formulated internal regulations to manage information, and periodically conduct educational activities and training programs for officers and employees. To further enhance our information management framework, we have established the Group Information Management Committee to supervise information management across the Group, and the Information Management Committee to oversee the Company’s information management.

• Cyberattacks and hacking by viruses

  In the event of a cyberattack by a malicious third party, systems for the Group’s operations may shut down or malfunction, and unauthorized use, information leakage and other security incidents may occur with the systems. This poses a risk to the Group’s business continuity.
  The Group Information Management Committee has proactively taken measures to protect the systems used by the Group with continuous monitoring of the Group’s security status and the development of a cooperation framework with external experts.

(5)  Financial and Accounting Risk

• Financing

  If there is a delay in the process to procure funds necessary for the Group’s operations, it may adversely affect the Group’s business performance and financial condition. We strive to maintain a certain level of cash and deposits on hand, taking liquidity risks into consideration. We will also ensure sufficient funding stability by diversifying funding sources and methods and manage funding costs appropriately.

• Changes in accounting standards and tax systems

  The Japanese accounting standards have been amended from time to time in order to align with the international standards, and this trend is expected to continue. In addition, discussions are under way toward applying the International Financial Reporting Standards (IFRS) in Japan. Given such circumstances, future changes in accounting standards may have an impact on the Group’s business execution, operating results, and financial condition. Amendments to tax systems and procedures, both domestically and abroad, may similarly affect the Group as well.
  To ensure the validity of the Group’s financial statements and other accounting documentation, the Company has been a member of the Financial Accounting Standards Foundation (FASF), participating in training and other programs provided by the FASF to continuously gather information and thereby properly understand accounting standards and respond to their changes.

(6)  Manufacturing and Quality Risk

Although the Group follows strict quality control standards in manufacturing and selling diversified products, there is still no guarantee that all products are completely free of defects or that no quality claims or product liability claims are brought against the Group. Unexpected massive claims for quality or product liability may cause the Group to incur significant expenses or may damage its credibility or reputation.
To reduce significant quality risks, the Company is working to continuously improve quality assurance systems and has established the Quality Administration Department to supervise the quality control divisions across the Group. Under this framework, we aim to implement social responsibility of a corporate group that provides safe and reliable products, systems and services and earns the trust of customers and society.

(7)  Environmental Risk

While the Group is working to reduce environmental impacts of its manufacturing activities, measures to respond to tighter regulations and soaring raw material prices may increase its production costs. The Group’s insufficient efforts to reduce environmental impact would also increase reputational risk and affect our business operations.
In Japan and overseas, we see transitioning to a circular economy from the perspective of resource and environmental constraints, and the risk of tightening regulations on packaging has been increasing. For plastic packaging, in particular, concerns over tighter regulations on single-use plastics have been growing against the backdrop of the global problem of marine plastic pollution. As the Group manufactures and sells packaging containers by processing a wide range of materials, including plastics, changes in future regulations and customer needs may affect the Group’s manufacturing and sales, and may impact on its business performance and financial condition.
To address these risks, we are striving to achieve sustainable growth and developing products that help resolve environmental issues by focusing on “developing and offering products and services that are environmentally sound,” one of the key issues of the Group’s Materiality. The details of this activity are shown on our website (see the page of “Open Up! Products & Services,” our internal certification program). Under the Medium-Term Management Plan 2030, the Group aims to increase the share of these certified products and services in total sales to 50% or more by fiscal 2030. We have also formulated the Eco Action Plan 2030, a set of environmental targets toward 2030, to reduce greenhouse gas emissions from our operations and supply chains as well as the use of fossil resources by reducing the weight of our plastic products and switching to alternative materials.

(8) Country Risk

As the Group operates globally, in Asia, Europe, the United States, and other regions, its business performance and other conditions may be affected by country risks such as an act of terrorism, political turmoil, economic and currency fluctuations, and unexpected changes in laws and regulations in foreign countries and regions. In particular, we are concerned that the Group’s performance could be adversely affected by rising tensions surrounding Taiwan, US-China frictions, the Russia-Ukraine conflict, supply chain disruptions caused by the conflict in the Middle East, difficulties in procuring materials, material price hikes, import and export restrictions, and the imposition of new tariffs. These risks may also have a severe impact on employees of the Group and its suppliers.
In the event of an emergency in overseas regions where we operate, we determine how to respond to the situation based on the Group Crisis Management Rules for Overseas Operations. Placing the highest priority on protecting human life, we act based on overseas safety information from the Ministry of Foreign Affairs of Japan and local reports. In starting a new business abroad, we determine whether or not to proceed with the project based on country risk assessments conducted during both the decision-making and implementation stages of the project.