Business Risks

Below is a summary of risks that could affect the Ushio Group’s business performance, financial position, and cash flow adversely and materially. These are the risks identified by the Ushio Group (hereinafter, the “Group”) as of the date of submission of the Group’s Annual Securities Report (June 26, 2025). This is only a partial list and does not cover all the risks the Group faces.

Business Segment Risks

1. Industrial Processes Business Risks

　In the Industrial Processes business, we continue to invest in research and development to enhance the competitiveness of our products and services. This includes investments for new and expanded adoption of related products in growth areas such as the semiconductor packaging, printed circuit board and electronic device markets, and the inspection equipment market. However, there is a risk that we may not achieve the expected results from our research and development investments in a sufficient or timely manner, or that competitors may outpace us in technological development. These factors could have a material impact on the Group's business performance and financial condition.
Furthermore, there is a risk that our profitability may decline due to significant changes beyond our expectations in the demand for devices incorporating our consumable products, the operational status of equipment incorporating our consumable products, or their supply chain, caused by economic trends worldwide, the impact of U.S. tariff measures, and changes in the business environment in each business sector.
We will establish a system that enables us to quickly gather information on future technological trends, market environment changes, and customer trends, and will respond flexibly to changes in our business structure and technological development trends.

2. Visual Imaging Business Risks

　In the Visual Imaging business, our clients include movie theaters, public facilities, corporations, amusement parks, and agencies. There is a risk that, due to changes in market conditions accelerating the deterioration of their financial health, some clients may be unable to fulfill contractual obligations, which could have a material impact on the Group’s business performance and financial condition.
Over the medium to long term, the cinema market may experience significant structural changes that could threaten the survival of cinema chains, driven by the enhancement and widespread adoption of streaming services for video content as well as changes in consumer content consumption behaviors and styles. Accompanying these changes, there may be substantial fluctuations in demand for video equipment centered on projectors, or the replacement of cinema lamps with solid-state light sources may progress faster than anticipated, which could have a material impact on the Group’s business performance and financial condition.
Furthermore, there is a risk that our profitability may decline due to significant changes beyond our expectations in the demand for, operational status of, or supply chain related to equipment incorporating our consumable products, caused by economic trends worldwide, the impact of U.S. tariff measures, and changes in the business environment in each business sector.

The Group will continuously update its long-term demand forecasts in response to changes in the business environment, including technological advancements, and will respond flexibly. Specifically, we will flexibly adjust our production and other systems to meet the demand forecasts. Additionally, we will focus on creating new businesses by leveraging our existing technologies and products to develop competitive products in new markets.

Common Business Segment Risks

Material Risks	Risk scenarios	Responses to risk
Supply chain	・Suspension of operations due to delays or interruptions in the supply of raw materials, parts, and/or purchased products due to the closure of suppliers and the tightening of laws and regulations in the country of origin. ・Rising costs caused by the depletion of resources and tight supply and demand, etc.	・Analyze the current situation for each part and clarify alternative and backup plans for the risks visualized. ・Formulate a procurement policy that includes centralized purchasing and distributed purchasing within the Group. ・In response to price hikes, create a system that allows us to assess appropriate prices and pass on costs to prices as appropriate.
Business continuity	・Sharp decline in sales due to restrictions on local business activities, etc. resulting from political confrontations with specific countries. ・Earthquakes, tsunamis, and volcanic eruptions resulting in human casualties and damage to factories, warehouses, offices, equipment, and systems, which also interrupts business operations.	・Promote the strengthening of business continuity initiatives from the perspective of geographically-optimized production and sales by cooperation between bases that leverage the strengths of each based on business direction information from each business department. ・Hold regular disaster prevention and initial response drills, BCP drills based on manuals, and regular company fire brigade drills, and renew stockpiles and disaster prevention equipment.
Overseas crisis management	・The occurrence of wars, conflicts, political unrest, etc., may adversely impact the Ushio Group's business. It is also possible that employees and others may be involved, which could threaten their safety.	・Strengthen cooperation with overseas bases and build a system that can regularly collect risk information. ・Organize matters that need to be addressed and determined, and establish reporting rules and information sharing lines.
Global personnel strategy	・There is a concern that we will not be able to hire personnel with specific expertise and skills, which will lead to stagnation of business growth and a decline in competitiveness as a company. ・Skills and know-how that employees have cultivated through their work are not passed down, causing a loss of productivity and competitiveness.	・Strengthen communication with HR departments and business departments at overseas bases to understand the current situation and identify problems. ・Clarify talent requirements based on the business strategy and consider appropriate compensation systems, aiming to secure highly specialized human resources.
Information security management	・Internal fraud and malicious attacks such as cyberattacks from external sources may cause information leakage, modification, loss, or IT system outages, resulting in a decline in the credibility of the Ushio Group, business losses, liability, and interruption of business activities.	・To disseminate the Ushio Group Information Security Policy, we promote education and raise awareness according to the security level of each Group company. ・Promote the implementation of high-detection-rate tools and log monitoring services as measures against cyberattacks, strengthening information security across the Ushio Group. ・We will conduct regular information security assessments to check the status of compliance with the Ushio Group Information Security Policy and identify issues.
Climate change measures	・Delays in disclosing information on climate change-related risks and Specific Activities in accordance with the TCFD. ・Failure to respond to requests from business partners and others to reduce CO₂ emissions, resulting in the cancellation of transactions and weakening of the company's image.	・Expand the content of information disclosure on climate change, which is an important item related to sustainability. ・Obtain third-party verification of GHG emissions and handle disclosures through CDP, to ensure appropriate disclosure, transparency, and accuracy of GHG emissions in response to reduction requests.