Nitto Group Report 2016

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26Nitto Group Report 2016(7)Procurement of Raw MaterialsThe Group endeavors to nd multiple raw materials suppliers so as to reduce the risk of being unable to procure key materials. However, we depend on specic suppliers for some key raw materials. Failure to obtain the necessary raw materials, or a cost increase due to supply demand imbalances caused by supply decreases or stoppages resulting from circumstances beyond our control such as a natural disaster, accident or bankruptcy of a vendor, could adversely affect the performance of the Group.(8)Product QualityThe Group manufactures primarily parts and materials according to ISO 9000 quality standards and delivers them to our customers. The Group cannot completely eliminate the risk of liability associated with product defects. If compensation were to exceed the coverage of product liability insurance, this could negatively affect the performance of the Group. (9)Intellectual Property RightsThe Group owns, maintains and manages valuable intellectual property rights for the purpose of enhancing our market competitiveness. However, there exists the possibility that a third party could claim these rights to be invalid and the Group might not enjoy complete protection. The Group’s property could be imitated in some area or the Group could be involved in litigation. Therefore, intellectual property rights infringements could negatively affect the performance of the Group.(10) Mergers and AcquisitionsAiming for business growth, the Group constructs relationships with other companies with superior technology in diverse ways such as through acquisitions and afliations. If such an acquisition did not prove to be as protable as expected, the performance of the Group could be adversely affected.(11) Retention of Human ResourcesIn order to facilitate the business activities of the Group, it is necessary to recruit superior personnel in a variety of elds such as research, development, manufacturing, sales and management. We actively recruit global human resources with the aim of developing our business. However, failure to continually acquire the necessary personnel and prevent the loss of other human resources can negatively affect the performance of the Group. (12) Financial Standing of Our CustomersThe Group deals with customers who meet its strict nancial criteria. However, some customers are in rapidly changing business environments and serious nancial problems can occur with such customers with whom the Group has accounts receivable. In particular, customers such as liquid crystal panel manufacturers and touch panel manufacturers average a signicantly large amount in accounts receivable per customer compared with those of other product manufacturers. If a default were to occur, the amount involved would tend to be quite signicant, which could affect the performance of the company.(13) Information ManagementOur information system has a critical role in the Group and is becoming more complex and highly-developed, year by year. In addition, our information system is not only becoming increasingly at risk of natural disaster and re, but also a target of malicious intent, such as in the form of cyber terrorism. The Group takes various measures against both hardware and software problems. However, any failure occurring in our information system could negatively affect the performance of the Group. Furthermore, in order to prevent leakage and abuse of technical information, client information, transaction information and personal information, we take various measures in information security. However, if any leakage or abuse of information data were to occur, the performance of the Group could be adversely affected. (14) LawsuitsIn the business activities of the Group, there exists the possibility that the Group could become embroiled in legal proceedings with a customer or third party. The risk that the outcome of litigation did not properly reect the opinion of the Group and thus differed from the Group’s forecasts might be ineluctable and this could adversely affect the performance of the Group.(15) Retirement Benet LiabilityThe dened benet liabilities of the Group are calculated on the basis of various experience assumptions used in actual calculations and investment yields of pension assets. In line with the devaluation of pension assets at market price, interest-rate trends and changes in the retirement allowance system and pension system, recognized and calculated liabilities could be affected. This might inuence the business results of the Group.

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