Business and Other Risks

The following is a list of major risks related to the Group's business and other risks that management recognizes as having the potential to materially affect the financial position, operating results, and cash flows of the consolidated companies.

(1) Risks related to quality

With business operations closely related to the healthcare system, our group pays keen attention to information on healthcare system reforms by the Ministry of Health, Labour and Welfare and other information released by other administrative organizations.

We recognize that there is always a possibility that this risk may materialize, and if this risk materializes, it may have an impact on our group, such as a decline in public trust in our company, increased workload due to compensation payments and collections for damages incurred, and decreased productivity due to increased inspection workload.

To address the above risks, we have set forth in our "Quality Policy" to constantly improve the quality of our products and services in order to comply with laws and regulations and to provide products and services that meet the expectations of the medical field, as well as to improve our quality-related systems as appropriate. In addition, the Company is taking steps to reduce risk by purchasing insurance such as product liability insurance in case of serious damage caused by defective products, etc.

(2) Risks related to market prices

There is a risk that market prices of products offered by the Group may decline due to intensified competition both in Japan and overseas, such as reductions in official prices of medical fees and medical insurance in developed countries in response to measures taken by medical institutions to curb medical expenses, and an increase in new companies entering the medical market in emerging countries due to the expansion of the medical market.

We recognize that there is always a possibility that this risk will materialize, and if this risk materializes, our group may be affected by a decrease in sales and profits due to a switch to other companies' products.

To address the above risks, we will closely monitor information disclosed by government agencies, including healthcare system reforms in various countries, and reflect such information in our management strategies as appropriate, as well as develop and provide high value-added products that accurately meet the needs of the medical field by deepening customer-oriented business operations. In addition, we will further promote optimal production throughout the Group to strengthen our price competitiveness.

In addition, our net sales include discounts based on the sales performance of our customers. Although the Company records the amount of discounts based on sales performance based on estimates, any difference from actual sales performance could have a negative impact on the Group, such as a decrease in sales or lower profits.

To counter this risk, we strive to minimize the difference from the confirmed discount amount by reasonably estimating the discount amount based on past discount rates and actual sales amounts for each product by customer.

(3) Risks Related to Production Activities

The Group manufactures medical devices and pharmaceuticals at its plants in Japan and in overseas markets in Singapore, Indonesia, China, the Philippines, and South Korea. There is a risk that production may be reduced or halted due to difficulties in procuring raw materials or securing manufacturing personnel as a result of sudden breakdowns of manufacturing facilities at these plants, unforeseen changes in laws and regulations or political conditions in these countries, natural disasters such as earthquakes and volcanic eruptions, or outbreaks of epidemics, etc.

We recognize that there is always a possibility that this risk may materialize, and if this risk materializes, we may not be able to fulfill our responsibility to supply products, and our group may be affected by a decrease in sales and profits.

In response to the above risks, JMS will promote fail-safe measures, including a business continuity plan (BCP), such as periodic inspection and maintenance of manufacturing facilities, diversification of dependence by considering alternative materials and alternative suppliers, and procurement and alternative production within the our group.

(4) Risks related to price fluctuations of raw materials

Many of the products offered by the Group are made primarily from plastics, which are petroleum products, and there is a risk that raw material purchase prices will rise if crude oil and naphtha prices soar due to conditions in oil-producing countries, including geopolitical factors.

We recognize that there is always a possibility that this risk may materialize, and if this risk materializes, it may have an impact on our group, such as a decrease in profits due to higher manufacturing costs.

To mitigate this risk, we are working to secure stable suppliers, including diversifying our procurement sources, and are monitoring international market conditions for crude oil and naphtha to negotiate prices at the appropriate time.

(5) Exchange Rate Risks

The Group has subsidiaries based overseas. Profits and losses, assets, liabilities, and other items denominated in local currencies are converted into yen for the preparation of consolidated financial statements, so there is a risk that the yen value of such items may fluctuate depending on the exchange rate at the time of conversion. In addition, in some cases, transactions for sales of products overseas and purchase transactions from overseas are denominated in foreign currencies, and there is a risk of fluctuations in foreign exchange rates.

We recognize that there is always a possibility that this risk may materialize, and if this risk materializes, it may affect our group's business performance and financial position.

To counter the above risk, we strive to balance transactions by currency and reduce foreign exchange risk by entering into forward exchange contracts.