Risk Information

The principal risks that may materially affect the financial condition, operating results or cash flows of the Konica Minolta Group (the “Group”) are described below. These risks are not necessarily exhaustive and the Group may be affected in the future by other risks that we do not anticipate or that we believe to be immaterial.
All forward-looking statements are based on the beliefs of the Group in light of information available as of March 31, 2025.

1. Risks Related to Economic Conditions

1) Economic Trends and Market Environment

We provide MFPs and digital printing systems, healthcare equipment, measuring instruments, optical materials, optical systems, products and components for industrial use, display materials, and related services to customers around the world. Sales and profits in these businesses are significantly affected by economic trends in each country.
The global economy performed relatively well during the current fiscal year, but there are concerns that the impact of U.S. tariff policies may lead to a global economic downturn going forward.
The Japanese economy temporarily stagnated, but has maintained a recovery due to a recovery in personal consumption and a steady expansion in inbound demand, and a return to an inflationary economy has been observed in a wide range of sectors. As inflation subsides, the economy is expected to maintain a gradual recovery, but there are concerns that uncertainty due to factors such as the U.S. tariff policy will have a negative impact.
The U.S. economy has been strong, supported by domestic demand, primarily personal consumption due to stable employment conditions and rising wages, amid continued monetary tightening. However, there are concerns that the U.S. tariff policy is putting upward pressure on the inflation rate, and that the increased burden on consumers will slow domestic demand.
The European (EU) economy continued to recover gradually thanks to a steady employment situation and a recovery in personal consumption due to an improvement in the income environment. However, the economic outlook is becoming increasingly uncertain due to factors such as the situation in Ukraine and the Israel-Palestine situation, which have led to high energy prices and geopolitical risks.
The Chinese economy has stagnated due to a long-term slump in the real estate market, sluggish personal consumption due to the worsening employment and income environment, and financial difficulties of local governments. Financial instability caused by the slump in the real estate market has not been resolved, with the risk of bankruptcy of major real estate companies increasing, and there are concerns that the decline in exports and imports to the United States due to the reciprocal tariff hike measures will have a negative impact on economic recovery.
If these risks materialize and stall economic activity across different countries, it could lead to customers cutting back on investment and changing spending behavior. This in turn could adversely affect the Group’s operating results and financial position in the future, including decreases in new equipment purchases beyond expectations, declining sales prices due to intensifying competition, and inventory buildup.

2) Exchange Rate Fluctuation

As indicated by the high percentage of overseas revenue, we are expanding our business globally and are significantly affected by exchange rate fluctuation. In addition, there are fluctuation risks of the yen value of our assets and liabilities arising from transactions denominated in foreign currencies, and the translation differences of foreign operations arising from financial statements of foreign subsidiaries. With regard to the euro, if the exchange rate fluctuates to a depreciation of ¥1, an increase in profits in Europe would have a positive impact on operating profit of approximately ¥0.4 billion. Similarly, if the renminbi were to depreciate by ¥1, it would have a positive impact on operating profit of approximately ¥0.8 billion due to increased earnings in China. On the other hand, with respect to the U.S. dollar, if the yen weakens by ¥1, there would be a negative impact of approximately ¥0.1 billion on operating profit due to an increase in procurement and manufacturing costs, and so on.

2. Risks Related to Business Activities

1) Risks Related to Environmental Changes of Printing in Digital Workplace Business

Mainly in developed countries and emerging countries, the medium for sharing information rapidly shifted from paper to digital devices such as tablets and smartphones. Additionally, the COVID-19 pandemic has accelerated the adoption of remote work, hybrid work, and digital workflows across companies globally, leading to a continued decline in demand for office printing in each country. According to International Data Corporation (IDC), the total global electrophotographic print volume in 2028 is projected to be about 40% lower than it was in 2019, before the pandemic. While color prints, which is our focus, are expected to remain at 80.0% of 2019 levels, monochrome prints are projected to drop to 46.6%. Although some believe that the decline in print volume will not continue forever and may eventually level off, we currently view the risk of a greater-than-anticipated decline in print demand over the medum term. Under these circumstances, if we are unable to respond swiftly to future changes in customer behavior, it could adversely affect the Group’s operating results.

2) Regulations in Each Country and Region

Many of the Group's business activities are conducted outside of Japan, such as North America, Europe and Asian countries, and are affected by legislation, regulations and approval procedures specific to the country or region. We always pay close attention to the imposition of reciprocal tariffs by the United States on other countries and the responses of other countries, particularly trends in economic measures such as technology export restrictions between the United States and China. However, in the future, if regulations by governments or international frameworks, such as taxation, import and export controls, currency controls, regulations on protection of personal information, digital tariffs, and various other rules, are newly introduced or changed, costs may be incurred to respond to them or the business activities may be hindered. In particular, with regard to regulations on personal information and artificial intelligence (AI), legislation and penalties are being strengthened in various countries, including bills to regulate targeted advertising by large IT companies, the European GDPR, and the European AI regulation law, which will have a significant impact on the related businesses that we are promoting.
Furthermore, if an unexpected state of war or other incident occurs among major countries and sanctions are imposed on those countries, the Group may be faced with the risk of facing unexpected changes in legislation, regulations, approval procedures, etc.

In particular, in the Healthcare business unit of the Group's Imaging Solutions Business, we are affected by various healthcare systems and licensing procedures in each country. If the healthcare system reform or other factors causes unpredictable and large-scale changes in healthcare administration policies, and if we are unable to respond quickly to those changes, the Group’s operating results could be adversely affected.

3) Next-generation technological change

There is a risk that the business environment could undergo significant changes due to evolving mid- to long-term global trends, such as the rapid spread of generative AI and new environmental laws and regulations. Amid these changes, being at the forefront of technological innovation is a key source of competitive advantage for our Group. However, competitors may develop and deploy similar or alternative technologies ahead of us. In addition, if we are unable to identify innovative technologies as targets for development, which can give us a competitive advantage, from a global and broad perspective, and provide them to the market quickly and flexibly, our operating results could be adversely affected, including the loss of our positions in the market in the future.

4) Transition to New Products

In the business fields in which the Group operates, there is always a risk of customers switching to new products or services, as there is a possibility that customers will choose different products or services from two perspectives: comparing them with upgrades of competing products or services that have been introduced to the market, or comparing them with products or services that can non-linear transform the products or business models in the existing market. The former can occur not only when individual services or functions are added, but also when services or functions that transform the user experience itself are introduced to the market and customers' selection criteria become more sophisticated. The latter can be caused by the emergence of disruptive technologies or changes in business models due to social trends.

5) Collaboration with Other Companies, and Acquisitions, etc.

From the perspective of enhancing our business competitiveness or effectiveness, we are pursuing collaborations with other companies, equity alliances and corporate acquisitions.
Accompanying acquisitions, the Company has recorded goodwill and intangible assets, and conducts periodic impairment tests. We may recognize impairment losses if changes in the business environment result in anticipated declines in future cash flows related to the acquired companies, which could adversely affect our operating results and financial condition.

6) Procurement, and Production, etc.

In the Group's mainstay businesses, such as Digital Workplace Business, Professional Print Business, and Industrial Business, we continue manufacturing activities both in overseas and in Japan to strengthen cost-competitiveness and supply products swiftly to the market. In the course of our global production activities, there is an increasing possibility that difficult-to-predict situations may occur, such as changes in legal regulations and labor policies, import/export regulations and tax systems, changes in environmental regulations, and geopolitical risks such as conflicts. In particular, in the United States, the risk of cost deterioration has become apparent due to tariff policies such as reciprocal tariffs. In addition, there is an increasing risk of sudden fluctuations in parts and raw material prices, crude oil prices, and energy prices, as well as logistics disruptions, due to the impact of the situation in Europe and the Middle East. If production costs rise due to these factors, it may have an adverse effect on the Group's business performance and growth strategy.
The Group has adopted a procurement policy to source certain products, parts, materials, and energy from suppliers worldwide. However, in the event of a supply disruption or delay due to unforeseen circumstances at suppliers, natural disasters, labor disputes, geopolitical risks, or other factors, this could have a significant impact on our production and supply capacity.
The Group's financial performance could be affected by rising prices for raw materials, such as steel, aluminum, and other metals, petrochemical products made from crude oil, rare earths, and other rare natural resources used in the Group's manufacturing activities, as well as energy prices.

7) Global Supply Chain

Many of our Group's production and sales activities are conducted outside of Japan, and our supply chain is also expanding globally. Logistical issues in each country and region could spill over to our Group's entire global supply chain, which could delay our supply and adversely affect our Group's operating results.
We produce many products in China and ASEAN countries and supply them globally from there. If activity restrictions occur in China and ASEAN countries due to a new infectious disease pandemic or similar events, bottlenecks and congestion in port and airport cargo handling could cause logistics delays, posing a major risk to the supply of our sales bases.
In the U.S. and European countries to which our products are exported, strikes at major ports due to prolonged and failed labor negotiations , extensions in supply lead times and prolonged increases in container transport costs due to restrictions on navigation through the Suez Canal (detouring around the Cape of Good Hope), and an imbalance between container ship supply and transport demand and increases in transport costs due to U.S. tariff policies and measures to impose port entry fees on Chinese-built ships could cause inventory shortages at sales bases, resulting in lost sales opportunities due to delayed deliveries to customers, which could have an adverse effect on the Group's operating results.
In Japan, the enforcement of the Work-style Reform Related Acts in 2024 will result in a worsening driver shortage, which could result in extended supply lead times and increased logistics costs, which could have an adverse effect on the Group's operating results.

8) Responsibilities for Products and Quality

Our domestic and overseas Group companies and subcontractors have established a rigorous quality assurance system to provide our customers with high-performance and reliable products and services. In the unlikely event of a defect in our products or services, there is a possibility that the Group could incur liability of damages resulting from the defect and we could incur significant costs to measure the defect. In addition, this issue could damage corporate and product brands and adversely affect operating results.

3. Other Risks

1) Human Rights

While Konica Minolta Group conducts business globally, it relies on many parts and materials suppliers in Southeast Asia. If human rights are not fully respected throughout the supply chain, issues such as child labor and forced labor may arise. In that case, our brand image could be tarnished, leading to social criticism, a decline in our stock price due to a loss of investor confidence, and loss of sales opportunities due to an inability to meet customer demands, which could have an adverse effect on our operating results.
In addition, based on the adoption of the "Guiding Principles on Business and Human Rights (UNGPs)" by the United Nations Human Rights Council, countries around the world are working to establish laws to respect human rights. For example, in addition to the Uyghur Forced Labor Prevention Act in the United States and the German law on corporate due diligence obligations in the supply chain, the EU has decided to enforce the Corporate Sustainability Due Diligence Directive (CSDDD) and the Forced Labor Product Prohibition Regulations in 2024, and the strengthening of laws and regulations in each country is accelerating. If the Group cannot comply with these, it may be subject to import bans and heavy fines.

2) Severe Earthquakes, Natural Disasters, Infectious Diseases, etc.

We have R&D, procuring, manufacturing, sales, and other bases in various countries around the world, and are expanding our business activities globally. Earthquakes, fires, large-scale disasters associated with climate change such as typhoons, floods, and forest fires, the outbreak of major infectious diseases, or acts of war, terrorism, cyber-attacks, etc. could cause damage to our facilities, etc. It may cause temporarily operational shut down and delay in production and shipments, which could adversely affect our operating results.
In particular, in the event of a massive earthquake occurring directly beneath the capital or along the Nankai Trough, it is thought that there is a possibility that damage could occur on a scale beyond what is anticipated.
Although we continue to promote disaster prevention measures and business continuity management, in such the event, the continuation of the Group's business activities may be affected by the suspension of providing services to customers or the product shipments, etc. due to functional stoppages, damage to facilities, supply suspensions of electricity, water, gas, etc., shutdowns of public transportation or communication methods, or damage to the supply chain, etc.

3) Climate Change and Environmental Regulations

In the event of a global transition to a low-carbon society, environmental laws and regulations may become stricter, leading to additional obligations and costs. Increased stakeholder demand for renewable energy procurement and net-zero greenhouse gas emissions could result in lost investment and sales opportunities, potentially damaging the corporate brand.
In addition, reduction of paper output in offices, and increasing manufacturing and procurement costs due to the use of alternatives to fossil fuels or fossil resources, among other things, could affect the Group's results.
On the other hand, if the physical impact of climate change becomes apparent around the world, the procurement of cellulose raw materials could become unstable due to more frequent forest fires or the ocurrence of large-scale droughts in areas with high water stress, which could lead to lose business opportunities for the Group. In addition, if large-scale or localized storm or flood damage occurs, the supply of raw materials, etc., may be restricted or suspended temporarily, thereby causing temporary shutdowns at our Group's sites or suppliers, delaying production and shipments.
In addition, the Group is subject to various environmental laws and regulations relating to air pollution, water pollution, removal of hazardous substances, waste disposal, chemical substances in products, product recycling, containers and packaging, and soil and groundwater contamination, and we invest the necessary management resources to comply with them. However, we may incur costs or be subject to environmental liabilities associated with our current and past activities in production, development, and marketing.

4) Intellectual Property Rights

The Group accumulates a great deal of technologies and much know-how in the product and service development process and strives to acquire intellectual property rights to protect them. However, in some regions and countries, systems to protect and operate intellectual property may be inadequate, and we may not be able to prevent third parties from manufacturing and selling similar products using the Group's intellectual property rights.
In addition, the Group develops products and services without infringing on the rights of other companies. However, we may be alleged to infringe on the intellectual property rights of other companies due to differences in views, and this may affect the development and sales of the Group’s products and services, or the Group could be found liable for heavy compensation for damages. In addition, the use of the intellectual property rights currently licensed by third parties to the Group could be discontinued in the future or changed to unreasonable terms.

5) Retaining Human Resources

We recognize that the continuous acquisition of excellent human resources is essential for the future growth driven by new businesses in the Group. In particular, there are many competitors for cutting-edge technology personnel such as data scientists not only from our competitors but also from finance, services, and other industries on a global level.
We are working to improve the employment environment and strengthen our recruitment department, but the importance of appealing to the attractiveness of the company and the added value of working there is increasing, and if we are unable to meet the needs of diverse working styles or appeal to the environment in which employees can grow, securing human resources could become more difficult.

6) Information Security

In recent years, the methods of cyber-attacks targeting companies have become increasingly advanced and sophisticated. In particular, there have been many cases both in Japan and overseas of attacks in which user account logon authentication has been stolen, centrally managed internal networks have been infiltrated, administrator privileges have been seized, and unauthorized operations have been performed. In addition, attacks that exploit vulnerabilities in various IT devices and software are on the rise, and the risk of such cyber-attacks is increasing. In these attacks, administrative authority is seized, and unauthorized operations are performed, and the risk of such cyber-attacks is increasing.
If the Group's administrator privileges were to be seized through a cyber attack, there is a possibility that confidential information of the Group relating to technology, trade secrets, personnel, etc. could be leaked to a third party through unauthorized operation, leading to a serious information security incident such as the use of such information for unauthorized purposes or trading. This could have an adverse effect on the Group's business performance.