Nitto Group Report 2017

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28Nitto Group Report 2017the performance of the Nitto Group could be negatively affected.(8)Procurement of raw materialsThe Nitto Group endeavors to reduce the risk of becoming unable to procure its key raw materials by sourcing such materials from multiple suppliers. However, some raw materials are sourced from specic individual suppliers. If the supply were to decrease or be disrupted due to unavoidable circumstances on the part of those suppliers, such as damage from natural disasters, accidents, or bankruptcy, the supply-demand balance could be disturbed, resulting in failure to procure necessary raw materials or an increase in costs. Any of these contingencies could inuence the performance of the Nitto Group.(9)Product qualityThe Nitto Group manufactures components, devices, and other products in compliance with international quality standards and delivers them to its customers. Nevertheless, it is virtually impossible to completely eliminate liability risks associated with product defects. If the amount of compensation were to exceed the coverage of product liability insurance in such cases, the performance of the Nitto Group could be negatively affected.(10) Intellectual property rightsThe Nitto Group owns, maintains and manages a large amount of intellectual property rights for the purpose of enhancing its market competitiveness. However, it is possible that a third party could claim that such rights are invalid, or such rights could be inadequately protected, imitated, or involved in litigation in some regions. Should the protection afforded by intellectual property rights be seriously lost, the performance of the Nitto Group could be negatively affected.(11) Mergers and acquisitionsWith the aim of sustaining its business growth, the Nitto Group forges relationships with other companies in various ways, such as acquisitions of and alliances with companies possessing superior technologies. If such acquisitions or alliances do not produce their expected outcomes, the performance and nancial positions of the Group could be adversely affected.(12) Retention of human resourcesIn order to promote the business activities of the Nitto Group, it is necessary to recruit talented people in a variety of elds, including research, development, manufacturing, sales, and administration. The Nitto Group proactively recruits global-minded human resources who will drive its business in the global arena. Nevertheless, failure to continually hire necessary personnel or to prevent the drain of such talents could negatively affect the performance of the Nitto Group.(13) Financial position of customersThe Nitto Group makes it a rule to closely investigate the nancial positions of its customers before starting business. Nevertheless, serious nancial problems could develop at some customers with whom the Nitto Group holds accounts receivable due to major changes in their operating environments. Should such receivables become irrecoverable at any one of its largest customers in the fast-changing electronics and life science sectors, the amount to be written off could be enormous, which in turn could negatively affect the performance of the Nitto Group. (14) Information managementInformation systems play a crucial role in every aspect of the Nitto Group’s business activities. Such systems become increasingly complicated and advanced with each passing year, and are often subject to cyberterrorism attacks and other forms of human-caused risk. The Nitto Group takes various security measures against both hardware and software problems in order to prevent leakage and unauthorized use of technical, customer, transaction, and personal information. However, if such systems should fail to prevent leakage or unauthorized use of such information, the performance of the Nitto Group could be adversely affected due to response to those situations.(15) LitigationIn the course of performing business activities, the Nitto Group might become involved in litigation with its business partners or third parties. There is no telling whether or not the outcome of such litigation will be in accord with its assertions or predictions. Should such risks become a reality, the performance and nancial positions of the Nitto Group could be negatively affected.(16) Dened benet liabilitiesThe Nitto Group’s dened benet liabilities are calculated on the basis of various assumptions used in actuarial calculations and investment yields of pension assets. As such, uctuations in the market value of pension assets, interest rate behaviors, and changes in retirement allowance systems and pension plans can affect the amount of such liabilities that are recognized or reported, thereby having an impact on the performance of the Nitto Group.