Risk management system

• Foreign exchange

• Precious metals prices

• Commodity market conditions

The main raw materials used in the manufacturing of products handled by the Precious Metals Business Segment of the Matsuda Sangyo Group are recycled raw materials that contain precious metallic elements, primarily including gold, silver, platinum, and palladium. In principle, their purchase and sales prices are based on the market prices of precious metal bullion, and conditions in the international commodities market as well as foreign exchange fluctuations could impact these prices. The Matsuda Sangyo Group conducts forward transactions on commodities with the aim of avoiding market risks associated with price fluctuations. However, as complete avoidance for all volumes traded is difficult, price fluctuations could potentially impact business performance depending on the trends for precious metal prices during the manufacturing and inventory periods. The products handled by the Food Business Segment of the Matsuda Sangyo Group are materials and ingredients used for food processing, such as seafood products, livestock products, and agricultural products. The majority of these are produced overseas, so both purchase and sales prices are affected by commodity market conditions and foreign exchange fluctuations. The Matsuda Sangyo Group engages in forward exchange contracts and addresses these fluctuations by transferring them onto the sales prices. However, in the event of a decline in sales prices due to factors such as supply and demand balance of the products, there is a possibility of incurring losses, such as inventory asset write-down loss, which could potentially affect business performance.

• Food labelling

• Contamination

The Food Business Segment of the Matsuda Sangyo Group adheres strictly to food labeling requirements in both purchasing and sale based on regulations, and takes thorough measures such as enhancing quality management guidance for overseas production areas and strengthening measures to prevent contamination. However, in the event of issues related to food safety, etc., or if measures such as import bans are implemented, they could potentially impact business performance.

• Environmental laws such as the Waste Management and Public Cleansing Law

In cases where legal regulations related to the Group’s Precious Metals Business Segment are strengthened, it may be necessary to take on additional capital investment burden to deal with such situations. The Company and some Group companies are engaged in the businesses of collecting, transporting, and treating industrial waste as business operators based on the Waste Management and Public Cleansing Law, so compliance with various laws is an important premise for business continuity. As a part of our efforts to ensure compliance across all our management activities, the Matsuda Sangyo Group has enacted the Matsuda Sangyo Group Global Code of Conduct as the highest internal standard for our business activities and other social activities, as well as the Compliance Regulations which sets out provisions on matters toward the realization of compliance.

• Environmental conservation

• Safety

The Group’s Precious Metals Business Segment uses toxic and deleterious substances in the manufacturing process, so we undertake appropriate, environmentally conscious disposal for waste liquids and emissions into the atmosphere. However, if any issues arise in the management of these substances through accidents at factories or other incidents, it could potentially impact our business results.

• Political economy

• Social conditions

The Precious Metals Business Segment and Food Business Segment of the Matsuda Sangyo Group are engaged in business activities in various countries and regions outside of Japan. If unforeseen circumstances caused by environmental changes, such as political economy and social conditions, in these countries or regions, they could potentially impact our business results and financial position.

• Earthquakes, floods, etc.

• Abnormal weather conditions

• Pandemic

The occurrence of natural disasters such as earthquakes and floods in countries or regions where the Matsuda Sangyo Group’s Precious Metals Business Segment and Food Business Segment engage in business activities could have an impact on the Group’s business activities. The Matsuda Sangyo Group introduces safety verification systems, conducts disaster drills, and puts in place various measures to ensure business continuity, in preparation for the occurrence of large-scale disasters. However, it is impossible to avoid damage completely, and such disasters could have an impact on our business results and financial position. Abnormal weather conditions due to climate change and other factors could also have an impact on the manufacturing of products handled by the Food Business Segment, and thereby affect our business results and financial position. At the same time, while we are advancing efforts to establish a supply system for products, commodities, and services in preparation for a large-scale disaster, such as a natural disaster, procurement could be delayed, and business activities could be interrupted or come to a standstill. Such situations could have an impact on our business results and financial position.

• System/communication disruptions

• Cyberattacks

• Information leaks

Many of the business activities conducted by the Matsuda Sangyo Group are facilitated by computer systems and communication networks. Disruptions, malfunctions, or defects in these systems and networks, as well as functional failures in data centers, could potentially disrupt our business operations and affect our business results. Additionally, the leakage of various forms of personal information, including customer data, due to cyberattacks or other unforeseen circumstances could potentially damage our social trust and incur significant financial burden. This could in turn impact the Group’s business results and financial position.