Risk Factors

In the fiscal year ended March 31, 2019, we established a Group-wide risk management system, with the Risk Management Committee playing a central role in setting priority areas, strengthening countermeasures, and submitting reports to the Board of Directors. Forward-looking statements in the text below are based on the judgment of the Group as of the submission date of the Annual Securities Report and are not limited to business and other risks.

Classification	Category	Content
Business Environment	Impact of COVID-19 and other infectious diseases	The Group conducts its business activities on a global scale, which means the emergence of new high-risk variants could have a significant impact on its business in areas such as product sales, maintenance, manufacture, and procurement. Potential examples include disruptions to manufacturing operations due to lockdowns, restrictions on the procurement of certain raw materials and parts, prolonged restrictions on sales activities, and major unexpected changes in customers’ investment sentiment. Any of these factors could adversely affect the Group’s performance or financial position.
	Rapid development of cashless economy/Strong reliance on cash handling machines	The Group’s mainstay business in Japan and overseas is heavily dependent on the cash handling machine sector in terms of size of sales. To mitigate the risks inherent in such dependence, the Group aggressively invests in new business domain including non-cash areas. Should the cashless economy develop drastically and globally in a short time (due to the issuance of digital currencies by central banks, for example) before the Group’s new business domain matures, the Group’s performance could be adversely affected.
	Overseas business conditions	The Group has identified several factors that could cause serious problems for its production and sales activities and thus adversely affect its performance. These include sudden changes in political and economic conditions overseas, expansion of protectionist trade policies, social turmoil due to civil strife or war, and exchange rate fluctuations that exceed expectations.
	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 Should these laws and regulations be revised or repealed, or if new public regulations were to be established, or if any other special factors influencing the market environment were to arise, the Group’s performance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.
	Intensified competition	Intensification of competition in the Group’s business areas could lead competitors to launch new products and services or engage in aggressive sales activities such as significant price reductions, and might cause a shift in demand to lower-priced products. Any of these factors could adversely affect the Group’s performance.
	Strategic investments	The Group strategically allocates its management resources to expanding core business and creating new ones, with the aim of constantly improving corporate value over the medium to long term. As of March 31, 2022, goodwill and customer relationships amounted to ¥64,157 million and ¥21,335 million, respectively, and accounted for 17.7% and 5.9% 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.
	Procurement of parts and materials	In procuring parts and raw materials, the Group strives for stability in purchasing from multiple suppliers and diversifying procurement sources. However, dependence on single suppliers for the procurement of certain parts and raw materials might be necessary due to their special nature. In addition, natural disasters and/or accidents could result in suspension or interruption of production activities at supplier facilities, making it difficult to procure parts and raw materials. Moreover, the global supply/demand balance for semiconductors is tightening and the risk of not being able to procure products on time is increasing. Any of these factors could impact the Group’s production activities and adversely affect its performance.
	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, so attracting new talent and fostering talent among existing employees is indispensable. As such, the Group’s performance could be adversely affected if it fails to attract and foster human resources who match the characteristics and growth stage of each Group company, or people with exceptional talents in the areas of development, production, sales, maintenance, and management.
Business Operation	R&D investment	The Group is an R&D-based enterprise and continues to aggressively invest in R&D. Depending on the R&D themes, however, development periods could be longer, and costs higher, than initially planned. If such circumstances were to arise, the Group’s performance could be adversely affected.
	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, it is difficult for the Group to completely avoid intellectual property infringement issues. If such issues were to materialize, the Group’s performance could be adversely affected.
	Information security	To maintain its credibility and ensure smooth business operations, 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. Furthermore, the Group is implementing security measures for both hardware and software because its business activities are increasingly dependent on information systems. However, there is a possibility that information system failures might occur due to cyberattacks and/or computer virus infections. Any of these factors could adversely affect the Group’s performance and/or financial position.
	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.
Environment	Climate change	The Group aims to realize a sustainable society by leveraging advanced technologies to address social issues. Solving environmental problems is of particular importance. For the Group, which operates globally, the transition to a low-carbon economy has become an urgent and unavoidable issue for realizing the SDGs. The Group endeavors to develop environmentally friendly products while considering government policies and legal requirements for climate change and the demands of the market. If these regulations exceed expectations, however, transition risk might increase, leading to higher costs, 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 in recent years due to climate change, or earthquakes and other large-scale natural disasters. Any of these factors could restrict the Group’s business activities and adversely affect its performance.
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.