Nitto Group Report 2016

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25Nitto Group Report 2016Potential risks which could have an adverse effect on our operational results, share price and nancial standing are indicated below.(1)Political, Social, and Economic TrendsThe Group conducts business throughout the world. Depending on the country in which the Group operates, there are inherent unforeseeable risks that can materialize. Such risks include; deteriorating employment relationships; labor disputes; increasing labor costs; and interruption to transportation networks and electric power supplies. If such an event were to occur, the performance of the Group could be adversely affected. Furthermore, the occurrence of terrorism, war and coups caused by political instability, and market stagnation, unexpected uctuations in exchange rates and nancial instability caused by sudden changes in the world economy can all have adverse effects on the performance of the Group.(2) Changes of Legal Regulations and ComplianceThe Group carries out business in various elds overseas. The Group endeavors to abide by the various laws and regulations of each country in every activity. However, if there were to be signicant changes to, strengthening of, or discrepancies in the interpretation of laws and ordinances or taxes and regulations, or a difference in business customs, the activities of the Group might be impaired, or the Group might incur additional costs, which could adversely affect its performance. Moreover, lack of compliance on the part of executive ofcers and employees could have adverse effects on the performance of the Group.(3)Accidents and DisastersThe Group has drawn up a Business Continuity Plan (BCP) and promotes Business Continuity Management (BCM) in preparation for accidents and disasters, according to the policy, “We place safety before everything else”. In particular, Japan has a high occurrence of earthquakes, which are often accompanied by tsunami and ooding. The effects of an earthquake, tsunami or ood could cause a blaze, leakage of chemical substances, or damage to infrastructure, such as electricity and gas supplies, which could cause disruption to supply chains over a wide area. Moreover, if there were a massive outbreak of new infection affecting human life, there could be an impact on the regional and global economies, which could interfere with continuity of our business. Any of these contingencies would impact the business results of the Group.(4)Environmental IssuesThe Group views “Integrity with a commitment to environmental preservation, both locally and globally”, as one of its key business policies and has a voluntary environmental impact reduction plan in which the Group accepts its social responsibility, focusing on reducing waste and preventing air pollution and global warming. The Group has not caused any serious environmental problems to date. However, there exists the possibility that the Group might fail to meet performance targets in reduction of environmental impact or an accident or natural disaster which could cause unforeseen environmental pollution, resulting in signicant expenses. Any of these contingencies inuence the business results of the Group.(5)Optoelectronics BusinessMaterials used in LCD-related and touch panel products constitute the core of the Group’s sales. Many companies participate in this market and competition continues to be stiff. Market trends for products using materials of the Group, technical innovation, corporate reorganization and the switching of strategy among liquid panel makers and touch panel makers, declining prices due to supply demand imbalance, sharp increase in material costs caused by change due to manufacturing capacity of materials suppliers and demand can all negatively affect the performance of the Group. (6)Research and DevelopmentWith the aim of meeting high market expectations, the Group strives toward technological innovation and competitive power of costing across all areas of our business. The Group continues to pursue the development of new products, exploitation of new applications and creation of new demand, with research and development investment, as well as plant and equipment investment based on our Area Niche Top® strategy, in which we supply products meeting specic needs in an area, in addition to our Global Niche Top® strategy. However, it is not easy to accurately forecast changes in an industry in which market changes are so drastic. It is possible that another company could unexpectedly develop a new technology or a new product that renders a product of the Group obsolete. The occurrence of such an event beyond contingency expectations could affect the future performance of the company.Associated Business Risks Listed in the Financial Report as of March 2016

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