Amid slowing global economic growth and increasing market uncertainty, companies are facing an economic downturn and intensifying competition. In particular, as companies need to respond to changing customer needs and keep pace with technological innovation, competition from competitors and companies in emerging economies continues to intensify, making it essential to respond flexibly and promptly.

• Business operations and profitability may be adversely affected by a slowdown in global economic growth, an economic recession, volatility in foreign exchange and credit markets, or government spending cuts, potentially resulting in reduced research and development spending, delays in product development, and postponement of purchases by customers.
• If the Group fails to appropriately identify and respond to changes in customer demand and market trends, it may result in decreased demand for the Group’s products and services, reduced customer satisfaction, and the loss of competitive advantage.
• Competition from companies with superior technological capabilities, strong financial foundations, and diverse business models, as well as from low-cost manufacturers in emerging markets, may reduce the competitiveness and market share of the Group's products.
• Advances in technological innovation and new product development in the medical technology industry may reduce the competitiveness of the Group's products and require the Group to provide more cost-effective products and solutions.
• If research and development activities are delayed or suspended due to changes in economic conditions or government policies, product development may stall, which could adversely affect the Group's business growth.

• We are strengthening our information-gathering and analysis structure to swiftly capture changes in customer needs and market trends, and to respond flexibly to shifts in demand.
• We optimize our investments in research and development and promote technological innovation and new development to secure our competitiveness.
• As countermeasures against competitors and new markets, we work on product differentiation and improving cost competitiveness.

Measures to reduce healthcare costs and healthcare system reforms are being implemented in various countries. In addition, in emerging markets, inadequate legal and regulatory frameworks and non-tariff barriers may impede business expansion. Furthermore, companies must adapt to advances in medical technology and changes in healthcare systems and respond flexibly to maintain competitiveness.

• Revisions to reimbursement rates, including medical service fees and drug prices, may reduce the profitability of the Group's medical products and clinical testing businesses, thereby adversely affecting the Group's operating results and financial position.
• Inadequate responses to healthcare system reforms and technological innovation in various countries may reduce the Group's competitiveness, which could adversely affect its operating results and financial position.

• Through exchanges of views with relevant government authorities, industry associations, and KOLs (Key Opinion Leaders), we collect and analyze policy information and make policy proposals.
• By collecting and analyzing policy information, we aim to mitigate business risks and create opportunities.
• We link healthcare policy activities with business activities, and strengthen policy advocacy and collaboration with business divisions.
• Through prompt and appropriate responses to healthcare policies, we work to help resolve issues facing the industry.

In recent years, uncertainty in the business environment has increased further due to rising geopolitical risks, in addition to natural disasters such as earthquakes, storms and floods, tsunamis, and fires, as well as the spread of infectious diseases. These events may have a significant impact on business operations, particularly on the stability of supply chains, through slowdowns and disruptions at production sites and in logistics networks, delays in the procurement of raw materials, and delays in product shipments. Furthermore, there is an increasing risk that policy developments in various countries, regional conflicts, and energy issues may affect business activities and cost structures. This requires companies to accurately identify these complex risks and respond promptly and flexibly.

• Natural disasters, the spread of infectious diseases, international conflicts, terrorism, and other events may cause disruptions at production sites and in supply chains, resulting in the suspension or delay of product shipments and disruptions to the procurement of raw materials.
• If measures such as ensuring the safety of employees or suspending operations at manufacturing sites become necessary, business activities may be disrupted, which could affect the business performance of the Group.
• Government policy changes in various countries, including tax systems, investment regulations, import and export regulations, and foreign exchange regulations, as well as the introduction of policies promoting domestically produced goods and non-tariff barriers, may affect the Group's business activities and business expansion.
• Instability in the political and social conditions and the strengthening of tariff policies and protectionist measures in certain regions may result in increases in raw material prices, which could affect the price competitiveness of the Group’s products and business activities.
• In the event of power supply shortages or rising energy prices, production and business activities could be constrained, potentially affecting the Group's business performance.

• To address the global economic slowdown and geopolitical risks, we are strengthening our information-gathering and analysis structure so that we can identify the impact on our business at an early stage and respond appropriately.
• Focusing on our manufacturing sites, we work to improve the effectiveness of our BCPs (Business Continuity Plans) and conduct drills, and focus on establishing frameworks for rapid decision-making.
• Through training, our corporate intranet, and internal social media, we work to foster a risk-aware culture and to raise awareness of ongoing measures aimed at preventing recurrence of issues.

The business environment is changing rapidly, and companies face intensifying market competition, rapid technological advances, and increasingly diverse customer needs. In addition, business expansion in emerging and developed markets presents different challenges, which may make it difficult to achieve planned progress. Furthermore, achieving the objectives of the Group's management plan requires the successful execution of strategic initiatives and new product development, as well as the ability to respond promptly to unexpected external factors.

• If the assumptions established under the Group's Mid-term Management Plan, Value Creation Plan 2027 do not materialize as expected, it may become difficult to achieve the planned targets, which could adversely affect the progress of the Group's businesses and profitability.
• If competition intensifies more than anticipated, the Group may be unable to expand its market share or strengthen its businesses as planned, which could result in the loss of revenue opportunities.
• If the Group's growth strategy, product strategy, cost reduction strategy, and other initiatives do not progress as planned, the overall management plan may be adversely affected.
• If the Group is unable to respond quickly to technological innovation or changes in customer preferences, or if responding to such changes entails significant costs, its competitiveness may decline, which could impact profitability.
• The Company's profitability is highly dependent on the BGM business. If its sales strategy in developed markets is not implemented as planned, its profits may decline.
• If the development of new products or business expansion in emerging and developed markets does not proceed as planned, the Company's revenue structure may become imbalanced, potentially resulting in lost opportunities to generate revenue.
• Under the Value Creation Plan 2027, the Company has positioned the enhancement of business portfolio management as one of its key initiatives and is working to improve the capital efficiency of each business through the use of ROIC (Return on Invested Capital).
  However, if portfolio management using ROIC does not function effectively and the profitability and capital efficiency of each business do not improve as planned, it may affect the profitability and corporate value of the Group as a whole.

• Toward the achievement of the Value Creation Plan 2027, we regularly review our growth and product strategies, and manage progress in light of the business environment and market trends.
• To respond to technological innovation and changes in customer preferences, we promote technology and product development that leverages the strengths of the Group's products and services.
• We formulate business strategies tailored to the characteristics and challenges of each emerging and developed market, and advance business development on a region-by-region basis.
• To stabilize our earnings structure and strengthen competitiveness, we are building management systems and evaluation processes that make use of ROIC, and are developing frameworks to quantitatively track and evaluate the capital efficiency of each business.
• By positioning ROIC as one of our key management indicators, we continuously consider and implement measures to optimize invested capital by business and improve profitability, thereby aiming to secure returns that exceed our cost of capital and to enhance corporate value on a sustainable basis.

In the healthcare sector, technological innovation is accelerating and customer needs are becoming increasingly diverse, resulting in rapid changes in the market environment. In addition, the emergence of new technologies and innovative products introduced by competitors has made it increasingly difficult to maintain the Group's technological advantage. Under these circumstances, prompt responses and continuous research and development efforts are essential. Furthermore, rapid technological advances and disruptive technological innovations may have a significant impact on the Group's existing business models and technological foundations.

• If it takes longer than expected to launch products, the products may fail to keep pace with changes in the market environment, and the Group may be unable to achieve the expected sales or outcomes.
• Due to rapid technological innovation and disruptive technological advances, there is a risk that the Group's existing products and technologies may become obsolete, resulting in a loss of competitiveness.
• If competitors develop and introduce innovative technologies or products to the market, the Group may lose its technological advantage, resulting in a decline in competitiveness.
• With the advancement of medical technology and the emergence of new treatments, market demand for the Group’s products may decline.

• We have newly established the Core Technology Laboratory as a company-wide R&D organization to accelerate development and drive innovation. In particular, to support further growth of the Diagnostics & Life Sciences Domain, we work to accelerate the development of high-value-added products and next-generation technologies.
• We have built an information-gathering structure to accurately capture market needs, and maintain and enhance the competitiveness of our products.
• We work to streamline our development processes and shorten the time to market.
• By monitoring competitors' trends and pursuing differentiation strategies, we strive to secure our technological advantage.

In recent years, the environment surrounding the manufacturing industry has become increasingly complex, with growing risks associated with the aging of production facilities, adaptation to new technologies, and the diversification of procurement sources. In addition, increasing reliance on third-party contractors and heightened public concern regarding product safety have further increased the importance of quality management and regulatory compliance.

• If capital expenditures become necessary to address the aging of production facilities or molds, or to adapt to new production technologies, the associated increase in costs may adversely affect the Group's operating results and financial position.
• Supply chain disruptions caused by geopolitical issues, policy and regulatory changes in various countries, natural disasters, infectious diseases, force majeure events affecting suppliers, or suppliers entering civil rehabilitation or bankruptcy proceedings may result in increased procurement costs, production delays, or the suspension of manufacturing, which could adversely affect the Group's business activities.
• If third-party contractors suspend or discontinue their services, commit operational errors, or if contracts are amended, issues relating to business operations or regulatory compliance may arise, which could adversely affect the Group's operating results and reputation.
• If safety issues, quality issues, product recalls, or unexpected defects occur in the Group's products or services, they may disrupt customers' business operations or the stable supply to the market, which could result in a decline in sales or liability for damages.
• Revocation of licenses or permits, administrative dispositions, penalties resulting from violations of applicable laws and regulations, intensified competition, or delays in obtaining approvals from regulatory authorities may hinder the Group's planned business expansion, which could adversely affect its operating results.

• To address risks associated with aging production facilities and the adoption of new technologies, we promote systematic capital investment and technological innovation.
• Through such measures as considering and securing multiple sources of supply and alternative products, optimizing inventory levels, developing BCP frameworks, and evaluating suppliers, we work to minimize the impact on business activities.
• Through quality-review meetings and quality-awareness surveys, we strengthen our quality management framework.
• We ensure improvements in product safety and thorough legal compliance.
• We work to foster a quality-oriented culture and to raise quality awareness across the entire company.

The Group operates highly specialized businesses, including diabetes management, healthcare solutions, and diagnostics and life sciences, in more than 125 countries and regions. Organizational management associated with business expansion and mergers and acquisitions, as well as talent acquisition and development, has become a key priority.

• If the acquisition and development of highly specialized talent do not progress as planned, it may hinder the Group's management, research and development, and the provision of services.
• Delays in adapting to local labor practices and employment systems may affect the Group's international business operations and the optimal allocation of personnel.
• As the Group expands its business through mergers and acquisitions, delays in integrating organizational cultures and systems may adversely affect operational efficiency and business development.
• The accumulation of issues related to organizational management may reduce the Group’s overall organizational vitality, which could adversely affect the Group's ability to attract and retain talent.

• We promote the recruitment of specialized personnel in priority areas, and utilize diverse recruitment channels, including global hiring.
• Through educational programs such as PHC Academy, we promote the enhancement of expertise and the development of next-generation leaders.
• We have established a talent management framework covering our overseas sites, and are optimizing personnel allocation.
• We are reviewing compensation in line with market levels and performance, and strengthening our ability to secure and retain outstanding talent.

As changes in the global business environment accelerate and economic uncertainty increases, companies need to respond to a wide range of risks. In particular, factors such as fluctuations in interest rates and foreign exchange rates, changes in the business environment, and declines in asset values raise concerns about their potential impact on a company's operating results and financial position. In addition, in implementing growth strategies such as corporate acquisitions and business alliances, identifying appropriate opportunities and achieving successful integration present key challenges. Accordingly, effectively managing these risks is critical in achieving sustainable growth of a company.

• Fluctuations in foreign exchange rates may affect import and export transactions and the operating results of overseas subsidiaries, while also affecting the carrying value of foreign currency-denominated assets and liabilities, which in turn could adversely affect the Group's operating results and financial position.
• If the Group's liquidity deteriorates due to a breach of financial covenants under loan agreements or rising interest rates, the funds available for research and development, capital expenditures, and dividend payments may be reduced, which could adversely affect the Group's operating results and financial position.
• If asset values decline as a result of the impairment of goodwill or other intangible assets, or changes in the business environment, the Group's operating results and financial position may be materially affected.
• Fluctuations in the prices of share acquisition rights and investment securities held by the Group may pose stock price fluctuation risks, which could adversely affect its financial position.
• In corporate acquisitions and business alliances, if the Group is unable to identify appropriate opportunities, or if the integration process and the realization of synergies require more time or management resources than anticipated, it may adversely affect the Group’s business expansion and operating results.
• Following a business acquisition or the establishment of a business alliance, unexpected changes in the business environment or inadequate integration may result in a deterioration in business performance, and the Group may incur costs associated with withdrawing from the business or terminating the business alliance.

• As measures to address foreign exchange and interest rate risks, we are working to reduce intercompany loan balances and introduce Notional Pooling, thereby improving the efficiency of fund repatriation.
• By diversifying our sources of financing and strengthening our relationships with financial institutions, we work to secure stable funding.
• Through continuous management of working capital, we stabilize cash flow and work to mitigate financial risks.
• In acquisitions and business alliances, we thoroughly refine integration plans and manage risks, aiming to maximize synergies.

As cyberattacks become increasingly sophisticated and ransomware attacks continue to increase, the risks of information leakage and system failures continue to grow. In addition, as laws and regulations concerning the protection of personal information and confidential information become more stringent, companies need to implement more advanced security measures and respond promptly to these changes. These risks have a direct impact on the Group's reputation and business operations.

• Personal information, including customer information, and confidential information related to product development may be compromised as a result of unauthorized access, employee negligence or misconduct, computer viruses, ransomware attacks, or similar incidents.
• If information leaks or security breaches occur, the Group's reputation may be damaged, and claims for damages and costs associated with corrective measures may arise, which could adversely affect the Group's operating results and financial position.
• If information systems become unavailable due to disasters, accidents, hardware or software defects, or cyberattacks, the Group's business operations may be disrupted, resulting in recovery costs and business delays.

• To address cyberattack and information-leakage risks, we continuously conduct information security training and simulated phishing-email drills, and strengthen employees' information security awareness and preparedness.
• We promote training on the protection of personal information and safety checks when using systems, and strengthen our information management framework.
• We improve disaster-recovery capabilities by enhancing safety through increased coverage of security tools and by migrating to the cloud.
• We are developing an IT-BCP (IT Business Continuity Plan) to enhance business continuity.

As the business environment becomes increasingly complex and globalized, companies need to strengthen regulatory compliance and internal controls and effectively address a wide range of risks. In particular, complying with regulatory requirements in different countries and protecting intellectual property rights present a growing number of challenges, and the ability to address these challenges is directly linked to maintaining competitiveness and credibility of a company. Furthermore, as the risk of damage to the Group's brand image and reputation resulting from misconduct by employees or third parties continues to increase, it is important to effectively address harassment and litigation risks.

• If the Group violates laws and regulations or license and permit requirements in any country, or fails to respond promptly to new or amended laws, it may become subject to administrative dispositions, penalties, or the revocation of licenses and permits, which could materially affect the Group's business operations and financial position.
• If intellectual property rights are infringed, counterfeit products enter the market, or disputes relating to intellectual property rights arise, the Group may incur liability for damages, and its competitiveness may decline.
• If the Group becomes involved in litigation or other legal proceedings, it may suffer unfavorable outcomes, related costs, and damage to its reputation and credibility, which could adversely affect its operating results.
• Unauthorized use of brands and trademarks, product defects or widespread customer complaints, and misconduct by employees or third parties may damage the Group's brand image and reputation, resulting in reputational damage.
• If harassment (including sexual harassment and workplace bullying) occurs, it may lead to lower employee morale, increased employee turnover, and damage to the Group's reputation through reports to external parties. Litigation or claims for damages may also arise, which could adversely affect the Group's operating results and corporate image.

• Through the delivery of messages from the President during Compliance Month and surveys on compliance awareness, we work to promote legal compliance and enhance compliance awareness.
• We have established the Group Code of Conduct, Basic Rules on Compliance, and other related rules, and communicate them to employees.
• We provide training and information on compliance and intellectual property to employees, and, through monitoring of laws, regulations, and licensing in each country, and the timely establishment of response structures for amendments to laws and regulations, we work to prevent violations of laws and inappropriate conduct.
• By pursuing the rights to our own inventions and thoroughly conducting prior-art searches, we work to prevent infringement of the rights of others.
• We have established rules concerning the use of trademarks and brands, and work to prevent problems in advance. When we identify inappropriate use by third parties, we promptly request cessation and prompt corrective action. In the event of complaints or inappropriate conduct, we place importance on promptly ascertaining the facts and on timely, appropriate, and accurate information disclosure and transparency, and work to minimize impact and prevent recurrence.
• For our own external disclosures, we work to maintain and enhance our brand through prior review by responsible functions and media training, and monitor external information to help prevent reputational damage.
• Through the publicizing of our internal whistleblowing system and the establishment of consultation contacts, we provide an environment in which employees can easily raise concerns.

As the Group operates the medical devices and related businesses globally, its business structure is susceptible to the impact of increasingly stringent environmental and human rights regulations in various countries. In addition, customers are increasingly requesting supplier assessments and ESG-related disclosures, making sustainability-related initiatives an important requirement for doing business. Furthermore, ESG assessments by investors are increasingly influencing corporate value and valuation of a company in the capital markets.

• Fines, claims for damages, or business suspension resulting from regulatory violations could materially affect the Group's business operations and financial position.
• The Group may incur additional costs associated with initiatives such as reducing greenhouse gas emissions, which could adversely affect the Group's operating results.
• A decline in customers' evaluation of the Group may result in the loss of business opportunities, which could adversely affect the Group's operating results.
• A decline in ESG ratings or exclusion from major indices may undermine the confidence of investors and customers, which could damage the Group's corporate value.

• At the Sustainability Committee, we regularly discuss and manage ESG issues, including climate change and human rights.
• We have set greenhouse gas reduction targets, and established a framework for progress management and monitoring.
• We conduct human rights due diligence, and advance the identification of, and response to, risks across the entire value chain.
• We are advancing projects to address ESG-related regulations, particularly in Europe.
• We work to enhance the quality of our disclosure to ESG rating agencies and to improve external evaluations.

In recent years, as investors have become more diverse and institutional investors have gained greater influence in stock markets, the impact of shareholder composition on corporate management and stock prices is drawing greater attention. Under these circumstances, the actions of major shareholders may affect the market and the Group's management.
The following are potential impacts arising from a major shareholder's ownership of the Company's shares.

• Exercising of voting rights by a major shareholder may affect the Company's management policies and business operations.
• A major shareholder's shareholding policy may affect the liquidity of the Company's shares.
  The following is a potential impact that may arise if a major shareholder sells its holdings of the Company's shares.
• The sale of the Company's shares by a major shareholder may cause a temporary or sustained decline in the market price of the Company's shares.

• In order to conduct fair and highly transparent management that takes into account the interests of all shareholders, we have established an appropriate supervisory structure through a Board of Directors that includes Independent External Directors.
• By enhancing our IR activities, we promote constructive dialogue with shareholders and investors, and work to diversify the shareholder base and improve the liquidity of our shares.