Business Risks

Of the matters concerning the business and financial conditions described in the Annual Securities Report, the following are the principal risks that management recognizes as potentially having a material impact on the Ushio Group’s consolidated financial position, operating results, and cash flows.
Any forward-looking statements contained herein are based on the Group’s judgments as of June 25, 2026, the date of filing of the Annual Securities Report.
This section does not cover all risks associated with the Group.

Risks in Each Business Area

1. Risks in the Industrial Processes Business

　In this business, the Group continues to invest in research and development to enhance the competitiveness of its products and services. These investments are aimed at expanding the adoption of related products and securing new product adoptions in growth areas including the semiconductor packaging market, the printed circuit board and electronic component markets, and the inspection equipment market.
However, the anticipated results of these research and development investments may not be achieved sufficiently or in a timely manner, or competitors may take the lead in technological development. These factors could materially affect the Group’s operating results and financial condition.
In addition, changes in the business environment in each business area, including global economic trends and the uncertain situation in the Middle East, could result in substantial changes beyond expectations in demand for equipment incorporating the Group’s consumable products, the operating conditions of such equipment, or supply chains, including the procurement of materials. Such changes could lead to a decline in profitability.
The Group intends to establish a system that enables it to promptly gather information on future technological trends, changes in market conditions, and trends among customers and business partners, and to respond flexibly to changes in its business structure and technology-development trends.

2. Risks in the Visual Imaging Business

　In this business, the Group’s customers and business partners include movie theaters, public facilities, companies, amusement parks, and distributors. If changes in market conditions accelerate the deterioration of the financial condition of these customers and business partners, they may become unable to fulfill their contractual obligations. This could materially affect the Group’s operating results and financial condition.
Over the medium to long term, the cinema market may undergo significant structural changes that could affect the continued operation of cinema chains. Such changes may result from the enhancement and wider adoption of streaming services for video content, as well as changes in consumers’ behavior and patterns of content consumption.
If these changes result in significant fluctuations in demand for video equipment, particularly projectors, or if the replacement of cinema lamps with solid-state light sources progresses faster than expected, this could materially affect the Group’s operating results and financial condition.
In addition, changes in the business environment in each business area, including global economic trends and the uncertain situation in the Middle East, could result in substantial changes beyond expectations in demand for equipment incorporating the Group’s consumable products, the operating conditions of such equipment, or supply chains, including the procurement of materials. Such changes could lead to a decline in profitability.

Going forward, the Group will continuously update its long-term demand forecasts in response to changes in the business environment, including technological advancements, and respond flexibly as necessary. Specifically, based on these demand forecasts, the Group will flexibly adjust its production and other operational systems to align with anticipated demand. The Group will also focus on creating new businesses, including by expanding into new markets with competitively advantaged products that leverage existing technologies and products.

Common Risks Across Business Areas

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 resulting from 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-demand conditions, etc.	・Classify each component by risk level, organize and enhance supply chain data, and determine measures to ensure stable procurement. ・Formulate a procurement policy that includes centralized purchasing and decentralized purchasing within the Group. ・In response to price hikes, create a system that allows us to assess appropriate prices and appropriately pass on cost increases to selling prices.
Business Continuity	・Sharp decline in sales due to restrictions on local business activities, etc. resulting from political tensions with certain countries. ・Earthquakes, tsunamis, and volcanic eruptions resulting in human casualties and damage to factories, warehouses, offices, equipment, and systems, as well as interruptions to business operations.	・Based on information provided by each business division regarding its strategic direction, strengthen business continuity efforts by promoting collaboration across our sites and leveraging their respective strengths to optimize the locations of our production and sales operations. ・Hold regular disaster preparedness and initial response drills, BCP drills, and in-house fire brigade drills in accordance with the manuals to improve response capabilities by embedding response procedures and reviewing and revising the manuals.
Overseas Crisis Management	・The occurrence of wars, conflicts, political unrest, or other such events could adversely affect the Ushio Group's business. Employees and others could also be caught up in such events, putting their safety at risk.	・Strengthen collaboration with our overseas sites and establish a mechanism for regularly gathering risk-related information. ・Establish a response manual for expatriate employees, share information with each overseas subsidiary, and conduct regular reviews of the manual.
Global Human Capital Strategy	・There is a risk that we may be unable to hire personnel with specific expertise and skills, potentially hindering business growth and reducing our competitiveness. ・Skills and know-how that experienced　employees have cultivated through their work may not be passed on, resulting in a decline in productivity and competitiveness.	・With input from the business divisions and technical specialists in relevant fields, develop a global human capital strategy and HR systems and implement related measures. ・Clarify talent requirements based on the business strategy and consider appropriate compensation structures and other measures to secure highly specialized talent. ・Promote the systematic development of next-generation executive leaders through the Human Capital Strategy Committee.
Information Security Management	・Internal fraud and malicious attacks from external sources, such as cyberattacks, may cause information leakage, tampering, or loss, or IT system outages, resulting in reputational damage to the Ushio Group, business losses, liability for damages, and business interruption.	・Conduct education and awareness-raising activities tailored to the security levels of each Group company to promote the effective implementation of the Ushio Group Information Security Policy across the Group. ・Promote the deployment of tools with high detection capabilities and log monitoring services to counter cyberattacks, thereby strengthening information security across the Ushio Group. ・Conduct regular information security assessments to verify compliance with the Ushio Group Information Security Policy and identify issues. ・Establish and communicate response procedures and other relevant protocols in preparation for major security incidents.
Climate Change	・Delays in disclosing information on climate-related risks and the status of specific initiatives in line with the TCFD Recommendations. ・Failure to meet requests from business partners and other stakeholders to reduce CO₂ emissions, resulting in the termination of business relationships and damage to our corporate reputation.	・Enhance and expand our disclosures on climate change as a key sustainability issue. ・Obtain third-party assurance of GHG emissions data and take measures to improve our CDP score in order to ensure the appropriate disclosure, transparency, and accuracy of GHG emissions in response to emissions reduction requirements.