Nitto Group Report 2018

Nitto Group Report 201827Associated Business Risks Listed in the Financial Report for the Year Ended March 2018Described below are potential risks that could have an adverse effect on the Nitto Group’s business results, stock prices, and nancial positions.(1)Political, social, and economic trendsBecause the Nitto Group operates across the globe, there are always inherent risks in the various countries that it operates in, such as deterioration of employment relationships, labor disputes, rising labor costs, and interruption of transportation services and electric power supply. When such risks emerge, the performance of the Nitto Group can be adversely affected. Furthermore, the Nitto Group’s performance can be adversely affected by the occurrence of terrorism, wars, and coup d’états triggered by sudden turns in political situations, as well as market stagnation, unforeseeably large forex uctuations, and nancial instability that are brought about by abrupt changes in the global economy, such as the rise of “our country rst” policies.(2) Changes in laws/regulations and complianceThe Nitto Group carries out business in various elds and territories, and so it endeavors to abide by the laws/ regulations of each host country in everything that it does. In the event of tightening of or signicant changes in relevant laws/regulations and tax systems, discrepancies in their interpretation, or differences in business practices, the activities of the Nitto Group might be restricted and additional costs might be incurred, which in turn could adversely affect its performance. Moreover, failure to comply with the relevant laws/regulations on the part of executives and employees could also have adverse effects on the performance of the Nitto Group.(3)Accidents and disastersIn accordance with the policy of “placing safety before everything else,” the Nitto Group has drawn up a Business Continuity Plan (BCP) and promotes Business Continuity Management (BCM) in preparation for work-related accidents and natural disasters. Earthquakes, which are often accompanied by tsunami and oods, are particularly frequent in Japan, and can result in res, chemical leaks, and damage to infrastructures, such as electricity and gas supplies, thereby causing disruptions of supply chains across a wide area. Also, regional and global economies would almost certainly be affected by massive outbreaks of new infectious diseases with a serious impact on human lives, and such occurrences could interfere with the continuity of the Nitto Group’s business. Any of these contingencies would impact the performance of the Nitto Group.(4)Environmental issuesThe Nitto Group views “integrity with a commitment to environmental preservation on both a local and global basis” as one of its key business policies, and it has drawn up a voluntary environmental impact reduction plan that is geared toward reducing waste and preventing air pollution and global warming in an effort to fulll its social responsibility. The Nitto Group has not been the cause of any serious environmental problems to date; however, there exists a possibility that it might fail to reduce environmental impact as planned, or that an unexpected accident or a natural disaster might lead to unforeseen environmental pollution, which would result in signicant expenses. Any of these contingencies would inuence the performance of the Nitto Group.(5)Optoelectronics businessMaterials used in LCD-related and touch panel products form the core of the Nitto Group’s business. This market is crowded with many players that engage in erce competition. Market trends for products using such materials, technical innovations, realignment and strategy changes of customer LCD panel / touch panel manufacturers, price erosions due to supply-demand imbalances, and sharp rises in material costs due to suppliers’ capacity constraints or changing demands can all negatively affect the performance of the Nitto Group.(6)Life science businessThe Nitto Group is pouring an increasing amount of resources into the new business of life science. Should any difculty exceeding the Group’s assumptions occur in this business, including rigorous screening and resultant approval by regulatory authorities in the countries/regions concerned, the performance of the Nitto Group may be negatively affected.(7)Research and developmentWith the aim of meeting the high expectations for technological innovation and cost competitiveness in many of the markets in which it is involved, the Nitto Group remains committed to the development of new products and applications and the creation of new demand by means of the Area Niche Top® strategy, wherein it supplies products that cater to the specic needs of each region, in addition to the Global Niche Top® strategy. Accordingly, the Nitto Group carries out all necessary research and development investments and capital expenditures. Nevertheless, changes in some markets are so rapid that it is difcult to predict them. Furthermore, new technologies or products from competitors can suddenly render the Nitto Group’s offerings obsolete. Should such an event develop,

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