Risk Factors

We established our group-wide risk management system in fiscal 2018, with the Risk Management Committee playing a central role in setting priority initiatives and strengthening countermeasures, as well as reporting information on its activities to the Board of Directors. Forward-looking statements in the text below are based on the Group’s judgments at the date of submission of the latest Annual Securities Report and are not limited to business and other risks.

Classification	Category	Content
Business Environment	Rapid development of cashless economy/Strong reliance on cash handling machines	The Group is working to expand its new business domain, including such non-cash areas such as the DMP business. However, should the cashless economy develop drastically and globally in a short period of time (e.g., due to the issuance of digital currencies by central banks) before the Group's new business domain matures, the Group’s performance could be adversely affected.
		[Countermeasures] Under its 2026 Medium-Term Management Plan, the Group will focus on the retail/financial and food and beverage (F&B) markets as its target markets. Here, the Group will drive customers' digital transformation (DX) with best-in-class products and software platforms to expand its new business domain.
	Overseas business conditions	The Group is actively expanding its business in overseas markets. However, we face geopolitical risks, including the impact on business activities on changes in international conditions, such as the outbreak or intensification of war or conflict. In addition, unprecedented fluctuations in foreign exchange rates and interest rates, as well as infringements of intellectual property, could adversely affect the Group's performance.
	Overseas business conditions	[Countermeasures] To advance its operations, the Group will formulate and implement medium- and long-term business and production strategies to reduce the impact of growing geopolitical risks around the world, take foreign exchange hedging measures to prepare for exchange rate fluctuations, and engage in intellectual property activities that are directly linked to future business creation and earnings.
	Laws and regulations of countries and regions where the Group operates	The Group is subject to business permits and import and export regulations, as well as various laws and regulations, in the countries and regions where it operates. Should these laws and regulations be revised or repealed, or if new public regulations were to be established, or if any other special factors influencing the market environment were to arise, the Group's performance could be adversely affected.
		[Countermeasures] The Group will monitor changes to laws and regulations in each country where it does business, identify operations subject to such regulations, assess risks, implement countermeasures, and educate employees.
	Intensified competition	Competition in the Group's business areas is intensifying. In this environment, other companies may release competitive new products and services or engage in aggressive sales activities, including significant price reductions, that might cause a shift in demand to lower-priced products. Any of these factors could adversely affect the Group's performance.
	Intensified competition	[Countermeasures] The Group enables confidence by providing comprehensive solutions that drive customers' digital transformation (DX) with best-in-class products and software platforms combined. In this ways, we aim to be a partner company that creates the future together with our customers.
	Strategic investments	The Group strategically allocates its management resources to expanding core businesses and creating new ones, with the aim of constantly improving corporate value over the medium to long term. As of March 31, 2024, goodwill and customer relationships amounted to ¥84,171 million and ¥26,838 million, respectively, and accounted for 18.0% and 5.7% of total consolidated assets, respectively. These intangible assets are subject to impairment assessment, and if the Group does not achieve expected outcomes due to changes in the business environment, it might incur impairment losses that could adversely affect its performance. In addition, if an investee company that has become an entity accounted for using equity method fails to fulfill its business plan, it might incur Share of loss of entities accounted for using equity method, which could affect the Group's performance.
	Strategic investments	[Countermeasures] In accordance with the rules of the Strategic Investment Committee, the Group periodically evaluates conditions surrounding its investee companies' business operations and reports the results to the Board of Directors and other relevant bodies. In these ways, we ensure proper post-investment management and promote growth strategies in line with the scenario at the time of investment.
	Supply Chain	Natural disasters and/or accidents may result in suspension or interruption of suppliers' production, while a breakdown in the supply–demand balance for semiconductors, raw materials, and other products may lead to delays in product deliveries. Any of these factors could impact the Group's production activities and adversely affect its performance. In addition, inflation and other factors that raise the prices of parts and raw materials might increase the Group's business costs and affect its performance.
	Supply Chain	[Countermeasures] The Group endeavors to switch to parts and raw materials with higher availability and place advance orders based on medium-term sales forecasts for semiconductors and other electrical components for which a supply-demand imbalance is expected to occur. In these ways, we strive to ensure stable procurement of parts and materials.
	Securing human resources	The Group conducts business activities on a global scale and employs people with a diverse range of nationalities, values, and expertise. Its medium- to long-term growth is highly dependent on these human resources. As such, the Group's performance could be adversely affected if it fails to attract and foster talented human resources, especially experts in digital transformation who are indispensable to expanding its new business domain, according to its medium- to long-term plans.
	Securing human resources	[Countermeasures] The Group has designated development of human capital as the source of its competitive edge and the objective of its human resources strategy. To improve employee engagement, we work to foster human resources who promote growth of individuals and the Company, enhance employee satisfaction with a focus on health and productivity management, promote diversity, and respect human rights. In these ways, we strive to recruit and develop talented human resources, especially DX specialists.
Business Operation	Intellectual property rights	The Group constantly conducts research on the products of other companies to prevent infringements by its products on the material intellectual property rights of third parties, as well as those by third parties' products on the Group's intellectual property rights. As an R&D-based enterprise, however, the Group might experience intellectual property disputes with other companies. If such disputes were to materialize, the Group's performance could be adversely affected.
	Intellectual property rights	[Countermeasures] Our IP department and operations divisions work together to engage in IP landscaping, which shows the Group's market position in terms of intellectual property. By also monitoring the intellectual property rights of third parties, we seek to reduce the risk of intellectual property disputes.
	Information security	The Group considers it essential to prevent leakages of personal and confidential corporate information. Based on this, the Group has taken various measures, such as formulating regulations, conducting thorough in-house training, and establishing an information security system. In the event of an information leakage, however, the Group might not only suffer a loss of credibility but also be liable for damages to customers and other parties. Because information systems are playing an increasingly important roles in the Group's business activities, moreover, the risk of business activity stoppage due to unauthorized access is also increasing. In July 2023, unauthorized access by a third party to a server managed by the Group was discovered.
	Information security	[Countermeasures] To minimize such occurrences, our newly established Group CISO spearheads efforts to control information security governance and works continuously to ensure rigorous employee training and continuously strengthen various measures, including monitoring of system operation status.
	Quality of products and services	The products and services provided by the Group are required to operate in a reliable manner, such as in the case of cash handling at financial institutions and retail stores. To this end, the Group focuses on providing highly reliable products by verifying quality and safety at each stage, including product design, evaluation, component procurement, and manufacturing. In maintenance services, the Group works to prevent serious product quality and safety issues by conducting regular inspections. However, unexpected quality problems might occur during the development, production, and maintenance service processes, such as uncertainties associated with sophisticated product and service functions. Any of these factors could adversely affect the Group's performance.
	Quality of products and services	[Countermeasures] In the event of a quality problem or defect that may violate laws and regulations, the Group has established a system to ensure that information reaches the chief in charge of management promptly so that there is no delay in addressing the issue.
	Fundraising	The Group raises funds for its business activities through internal funds, borrowings from financial institutions, and the issuance of bonds. However, interest rate hikes to counter inflation, mainly in the United States and Europe, as well as downgrades of our credit rating by rating agencies, might increase the cost of fundraising and adversely affect the Group's performance.
	Fundraising	[Countermeasures] The Group strives to reduce liquidity risk by updating its cash management plan in a timely manner and diversifying its financing sources, which include bank borrowings and bond issues.
Environment	Climate change	The Group views climate change as an urgent issue and is working to reduce greenhouse gas (GHG) emissions from its business activities and develop environmentally friendly products. If the requirements and demands of various countries exceed expectations, however, transition risk might increase, leading to higher procurement costs due to investment in energy-saving/renewable energy facilities and the introduction of carbon taxes, emission trading schemes, and the like, as well as lost sales opportunities and decreased corporate value stemming from damage to the corporate brand, which could adversely affect the Group's performance. In addition, physical risks might increase due to abnormal weather conditions, such as typhoons and torrential rains, which have been on the rise due to climate change. Any of these factors could cause damage to the Group's own factories and employees or suspension of operations of parts suppliers, which could restrict the Group's business activities and adversely affect its performance.
Environment	Climate change	[Countermeasures] The Group has positioned reduction of GHG emissions as one of its most important sustainability issues. Since the start of 2026 Medium-Term Management Plan, we have expanded the coverage of our GHG reduction targets (Scope 1 and 2) to a global scale (including overseas consolidated subsidiaries) and subject them to Science Based Targets (SBT) standards. We are now working hard to achieve those targets. In addition, we have endorsed the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD) and are promoting its efforts, and we will continue enhancing our disclosures in line with TCFD recommendations.
Internal Control	Internal Control	To ensure the accuracy of financial reporting, the Group strives to strengthen its internal control system by documenting operational processes and conducting rigorous internal audits. Even if the Group's internal control system is effective, however, it might cease to function properly in the event of operational errors or fraud on the part of employees or others. Any of these events might require the Group to revise its financial information, which could adversely affect its performance and/or financial position.
Internal Control	Internal Control	[Countermeasures] In response to the embezzlement at a domestic subsidiary uncovered in February 2022, the Group is strengthening its internal controls and the governance systems of all subsidiaries by strictly enforcing accounting- and finance-related rules and cash and deposit management, while taking other measures to prevent recurrence. We are also working to instill and ensure thorough compliance awareness.