Contact
language
Contact
  1. HOME
  2. For Investors
  3. Management Policy
  4. Business Risks

Business Risks

Among the risks that may affect the Group’s operating results, financial position, and other matters, important risks for which both the likelihood of occurrence and the magnitude of impact are medium or higher are presented below as risk items. In addition, based on their relevance to management priorities, these risk items are classified into “management perspective risks” and “operational perspective risks.” In particular, recognizing that management perspective risks are not independent risks but are mutually interrelated, the Group is advancing initiatives to address each risk.

Forward-looking statements contained in the descriptions below are based on the judgment of the Group as of March 31, 2026.

Risk category Risk item Magnitude
of impact		 Likelihood of occurrence Relevant
Management
priorities
High High (ii), (iii), (vi)
High High (i), (ii), (vi)
High High (i), (ii), (vi)
High High (iv), (v), (vi)
High High (iii), (vi)
High Medium (v), (vi)
High Medium (vi)
High Medium (vi)
High Medium (vi)
Medium High (vi)
Medium High (vi)
Medium High (vi)
Medium High (vi)
Medium Medium (vi)
Medium Medium (vi)
Medium Medium (vi)
Medium Medium (vi)
Medium Medium (vi)
Medium Medium (vi)
Relevant management priorities
  • (i)
    Creation of information-based social infrastructure
  • (ii)
    Challenges in new businesses contributing to solving social issues
  • (iii)
    Optimization of business and product portfolio
  • (iv)
    Improvement of labor productivity
  • (v)
    Maximizing the value of human capital
  • (vi)
    Enhancement of governance and risk resilience

Management perspective risks

Business portfolio

Details of the risk
  • Stagnation or deterioration of profitability and growth due to an inability of the business structure to respond to changes in economic trends and market environment
  • Suffering from less-than-expected performance or effect due to deterioration of market environment following the conclusion of an M&A transaction or external alliance
Main responses
  • Regularly check and verify the appropriateness of the business portfolio structure at the Management Meeting and the Board of Directors, and deliberate and implement revisions as necessary
  • Clarify the objective of the acquisition or alliance and get a complete picture of assets and risks in advance
  • Make an acquisition or form an alliance with appropriate invested capital by considering risk and return
  • Recover invested capital at an earlier stage following the conclusion of an acquisition or alliance

Creation of new businesses

Details of the risk Delay in creating new businesses due to divergence from market needs resulting from insufficient coordination between theme exploration and technology development for new businesses and sales functions
Main responses Establish a structure in which sales functions are incorporated into new business creation teams, enabling integrated promotion of theme exploration, technology development, and market validation

Climate change (carbon neutral)

Details of the risk
  • As a transition risk, higher raw material procurement costs and manufacturing costs due to raising of GHG emission reduction targets across countries and increased burden from carbon taxes resulting from government policy changes
  • Exclusion from the supply chain or products, services and labor markets due to an insufficient response to climate change
  • Suspension of factory operations due to an unforeseen risk of flooding or drought linked to climate change
Main responses
  • Revised our Environmental Vision 2050 to reflect our commitment to achieving net-zero greenhouse gas emissions across the entire value chain, and implement reduction initiatives in line with our Environmental Target 2030
  • Formulate a climate transition plan and disclose information in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)
  • In addition to using hydroelectric power in the Nikko area, install solar power and switch to procuring renewable energy in Japan and overseas
  • Grasp the risk of flooding and drought linked to climate change, and formulate responses

People and organization

Details of the risk
  • Lack of specialist personnel for creating new businesses and personnel capable of managing the business portfolio
  • Shortage of human resources, both in quality and quantity, due to insufficient talent acquisition, retention, development, and diversity
  • Decline in employee engagement, which is the driver of sustainable corporate growth
  • Impairment of human capital due to misalignment between management strategy and the organization
Main responses
  • Based on the Furukawa Electric Group Vision for Our People, implement measures to strengthen human capital and organizational execution abilities, which will enable individuals and the organization to grow together by aligning their growth vectors and enhancing the attractiveness of our people and organization
  • Promote diversity, equity and inclusion initiatives and workstyle reform
  • Monitor through surveys of human capital and organizational execution abilities, including elements related to employee engagement, and implement workplace-led improvement measures through HRBPs
  • Establish and properly operate a foundation for job-based talent management, including recruitment, assignment, and development, linked to management strategy

Political and economic situation

Details of the risk
  • Supply chain disruptions caused by the impact of economic sanctions between groups of nations following the heightened repercussions of international conflicts, etc.; and supply shortages and suspensions due to dependence on supply from specific suppliers
  • Review of international division of labor in response to changes and tightening of laws and regulations—such as tariff policies and economic security policies—resulting from regime changes and policy shifts in various regions.
  • Decline in earnings due to the overall business impact of reduced demand caused by the economic downturn and changes in customers’ policy and measures for capital expenditures and purchasing
  • Decrease in competitive advantage of our products and services due to intensified competition
Main responses
  • Add redundancy within the supply chain (multiple suppliers and decentralization of manufacturing sites), optimization of inventory quantity, and stable procurement through long-term contracts
  • Grasp the potential risks within the main international logistics routes
  • Conduct risk analyses based on potential political instability and emergency situation, and formulate appropriate response policies
  • Strengthen the foundation of key businesses to enhance their resistance to economic downturns, and establish a system that can respond to rapid changes in demand by regularly monitoring and verifying customer trends and order intake status
  • Promote efficient and rational manufacturing systems to maintain and strengthen price competitiveness, produce high value-added products, and proactively take on initiatives to optimize product portfolio

Human Rights and Labor Practices

Details of the risk Exclusion from the supply chain or products, services and labor markets due to a potential or actual negative impact on human rights resulting from an inability to fulfill the responsibility as a company to respect human rights
Main responses
  • Promote initiatives in line with the three requirements of the UN Guiding Principles on Business and Human Rights for companies: “Establish a human rights policy,” “Conduct human rights due diligence,” and “Establish a remedy mechanism.”
  • Promote business activities that respect human rights based on Furukawa Electric Group’s human rights policy
  • Provide education on human rights risks and improvement measures based on the results of compliance surveys, etc., to employees of the Group
  • Conduct the self-assessment questionnaire (SAQ) for major suppliers based on the Furukawa Electric Group CSR procurement guidelines
  • Promote responsible mineral sourcing
  • Utilize the whistleblower system and Japan Center for Engagement and Remedy on Business and Human Rights (JaCER) as a remedy mechanism

Operational perspective risks

Impact of disasters or infectious disease

Details of the risk
  • Suspension of operations at manufacturing sites due to flooding or building damage caused by a large typhoon, etc. linked to climate change
  • Disruption of a customer’s or supplier’s supply chain due to a large earthquake, tsunami, fire or infectious disease
  • Inability to continue business operations due to the occurrence of a large cluster of infections among employees
Main responses
  • Promote business continuity management (BCM) in accordance with ISO22301
  • Develop and refine a business continuity plan and effectively utilize a safety confirmation system
  • Establish data centers in facilities that are earthquake resistant and have a stable communications environment
  • Add redundancy to the supply chain
  • Survey manufacturing sites of customers and suppliers
  • Permit employees to work from home and utilize remote meetings, etc.

Quality management

Details of the risk Unexpected future claims for damage compensation due to a defect in products and services, etc. (in particular, additional costs could be large depending on the type of defect for products related to power cable, telecommunications cable and automotive products)
Main responses
  • Aim to realize the quality expected by customers, strive to prevent defects and continue the activities to improve problem solving ability
  • Consistently strengthen the quality management system based on the guidelines for quality control
  • In preparation for damage compensation claims, enroll in product liability insurance and product recall insurance
  • Consider contractual provisions that limit the Group’s liability for loss compensation

Legal violations（Note）

Details of the risk
  • Compliance violation of a law or regulation in the countries in which the group operates
  • Increased costs, business restrictions, and other impacts due to the revision of applicable domestic and overseas laws and regulations, tighter regulation by regulatory authorities, including arbitrary enforcement, and stricter interpretation of laws and regulations in the countries in which the Group operates
  • Following the occurrence of a legal violation, administrative actions or sanctions are levied by the regulatory authorities, claim for damage compensation is received from an associated party such as a business partner or there is a negative impact on the company’s social reputation
  • Risk of administrative action after exporting to an embargoed country, violation of the foreign exchange law or application of export control regulations or laws outside the region in the United States or China due to the deteriorating relationship between the United States and China
  • Improper accounting or accounting fraud at an overseas site
  • Tax costs due to changes in tax systems for domestic and international transactions in each country, transfer pricing taxation, etc.
  • Additional tax costs due to differences in views with tax authorities in each country, etc.
Main responses
  • Establish a compliance system based on ethical and legal compliance through the Furukawa Electric Group Purpose, the Core Values and Furukawa Electric Group CSR Code of Conduct
  • Along with conducting a compliance self-check every year, provide education within Furukawa Electric Group on themes including the regulations related to competition laws and preventing bribery through compliance seminars and e-learning programs, and communicate information on legal amendments through the relevant departments
  • Prevent compliance violations and ensure early detection and remediation through the operation of the internal whistleblowing system
  • Conduct internal audits and provide education to the related division in regards to security export controls and tariffs; coordinate with a specialist attorney for overseas export control laws
  • Fulfill specified shipper obligations to prevent logistics compliance violations in Japan and improve logistics efficiency
  • Through the regional headquarters in Southeast Asia and China, integrate the procurement, accounting, HR, and legal operations at the locations in each region
  • Conduct oversight through financial analysis using data analytics
  • Raise awareness of tax compliance by establishing a basic tax policy
  • Comply with tax laws and implement responses to changes in tax systems and tax administration in each country
  • note
    The Company is subject to review by the Brazilian competition law authorities concerning auto-parts cartel. In addition, the Company and its consolidated subsidiaries are the defendant in a series of class actions that seek compensation for damages caused by the auto-parts cartel in the United States. It may also be possible that the Company and its associates pay compensation for civil damages to their customers including automobile manufacturers. However, the Company has reached settlement with some plaintiff and customers concerning the above-mentioned on-going cases, and thus believes that it will have limited monetary impact on its financial results. We will continue to work with our corporate lawyers to resolve the issue early and minimize losses. Note that above on-going cases are all related to past violations of competition law including auto-parts cartel, and there are no such violation committed at this point in time.

Raw material and fuel price fluctuations

Details of the risk Rapid fluctuations in the price of non-ferrous metals such as copper and aluminum, plastics such as polyethylene and fuels such as heavy fuel oil, LPG and LNG due to changes in supply and demand, speculative transactions and global affairs
Main responses
  • Reflect the market prices for non-ferrous metals, plastics and fuels in the product sales price
  • Implement hedges using futures contracts
  • Reduce costs and conserve energy in the production activities
  • Disperse the risk of price fluctuations through procurement from multiple sources

Information systems and information security

Details of the risk
  • Unauthorized use or system failure resulting from a data leak caused by an external or human factor, such as a cyberattack or unauthorized access
  • Increased security risks caused by the use of legacy systems
Main responses
  • Based on the basic policy for information security, strengthen security governance for the entire group, provide education and conduct support activities
  • Protect information assets through measures such as enhancing network security from a zero-trust perspective
  • Implement medium-term initiatives to update the legacy systems

Exchange rate, interest rate and share price fluctuations

Details of the risk
  • Fluctuations in the yen-denominated value of overseas transactions including import and export and foreign-denominated monetary claims and debt
  • Fluctuations in the yen-denominated balances in the non-consolidated financial statements prepared in local currency at overseas consolidated subsidiaries (Annual profit is expected to decline by about ¥0.5 billion for every ¥1 appreciation in the JPY/USD exchange rate)
  • Increased capital procurement costs due to rising interest rates (Interest-bearing debt as of the end of the current fiscal year is ¥316.7 billion)
Main responses
  • Utilize forward exchange contracts
  • Achieve a proper balance between yen-denominated and foreign-denominated transactions
  • Limit the increase in capital procurement costs when interest rates rise by utilizing long-term fixed-rate financing
  • Reduce interest-bearing debt based on the policy for improving the financial situation and improved capital efficiency through the cash management system (CMS)

Research & development and Intellectual property

Details of the risk

(Research & development)

  • Delays to technology development and appearance of alternative products developed through new technology by other companies
  • Litigation, decertification or decreased reputation of the company and its products due to falsification of the research and development data

(Intellectual property)

  • Direct damage or lost opportunities in a business due to a legal dispute with a third party following conclusion of an insufficient technology licensing agreement, or a dispute or negotiations regarding violation of a third party’s intellectual property rights
  • Decreased competitive advantages due to technology leakage or imitation by third parties
Main responses
  • Secure and train personnel with a high level of expertise
  • Secure superiority in technology development through co-creation with external partners
  • Acquire intellectual property rights from the design and development stage, investigate the patents held by other companies and file counter-patents to limit the use of rights by other companies
  • Create technology assets and safeguard them (by classifying them into classified, confidential & intra-company use only, and confidential & intra-division use only; and thoroughly managing information including electronic data); provide education for ensuring legal and regulatory compliance in relation to intellectual property; and conclude confidentiality and other agreements

Employee health and safety

Details of the risk
  • An employee suffers death, inability to work, permanent disability, long-term leave of absence or health impairment due to an occupational accident, traffic accident or illness
  • Disasters caused by failures of aging equipment due to delays in executing investment plans for the maintenance and renewal of manufacturing facilities
Main responses
  • Definitely implement the three pillars of the safety promotion activity (provide and implement safety related knowledge through the training of safety conscious persons, make the facilities safer through activities to promote fundamental safety and establish a safety-oriented organization by improving the level of safety management)
  • Deploy at each site measures to improve health literacy, address mental health, improve physical function, promote better sleep, improve lifestyle habits, prevent heatstroke, and establish a chemical substance management system, in accordance with annual hygiene management guidelines based on the medium-term occupational health plan
  • Properly execute maintenance and renewal investment plans for high-risk aging equipment

Deteriorated profitability of construction projects

Details of the risk

(Domestic and overseas)

  • Change in design, soaring of construction material and labor costs during construction.
  • Incurrence of additional costs during a submarine cable laying project due to disasters, infectious diseases, and adverse ocean or weather conditions caused, for example, by a typhoon
  • Payment of repair costs or compensation for damages and long-term extension of the defect warranty in the event of the occurrence of a serious defect or an accident and the resulting delay in construction
  • Unexpectedly large increase in costs or incurrence of additional costs due to a lack of consortium partners’ capability to carry out a project or non-performance of tasks assigned to them

(Overseas)

  • Changes in legal regulations, political instability, and exchange rate fluctuations in a country overseas where a construction project is carried out
Main responses
  • Strengthen activities to conclude contracts under reasonable conditions by strictly identifying a demarcation point, specifications and warranty coverage for each of goods and construction service, and by analyzing project-specific risks
  • Mitigate risks by appropriately monitoring progress and profitability of ongoing projects
  • Transfer risks through purchase of builder’s risk insurance
  • Clarify responsibility relations in a contract upon formation of a consortium, and thoroughly manage construction progress for the entire project including the share of partner companies

Environmental pollution and environmental regulations

Details of the risk
  • Occurrence of a problem in relation to environmental conservation due to the leak of toxic substances during the manufacturing process, and new capital expenditures or costs following a revision to an environmental law or regulation
  • Restrictions on the use or disposal of land
  • Additional costs following the enactment of stricter laws or regulations concerning the handling of soil contamination and toxic substances such as asbestos and PCBs that occurred during past manufacturing activities
  • Losses and expenses incurred for a product recall or suspended production and sales due to a violation of a country’s regulations concerning the content of chemical substances in products, such as the RoHS Directive and REACH regulation.
Main responses
  • At Furukawa Electric Group’s manufacturing sites, based on the environmental management system (ISO14001), thoroughly comply with the various environmental regulations related to the business activities and implement conservation measures
  • As measures to respond to the regulations for chemical substance content in products, issue the CSR Procurement Guidelines and Green Procurement Guidelines, confirm the status of compliance by business partners, and conduct regular checks within Furukawa Electric Group in response to the enactment of stricter regulations

Impairment of non-current assets

Details of the risk
  • Impairment of a non-current asset due to decreased profitability caused by deteriorating market conditions or business environment
Main responses
  • Deliberate the appropriateness of investment plan at Investment Committee meeting and Management Meeting
  • Regular monitoring and follow-up after the investment

Cash management

Details of the risk

(Funds procurement)

  • Deteriorating procurement terms and conditions or potential inability to procure capital due to deteriorating capital market environment
  • Possibility that financing requirements may increase due to expanded growth investments, resulting in constraints on financing or deterioration of financing terms

(Credit management)

  • Occurrence of bad debt loss due to an inability to collect accounts receivable following deterioration in the financial situation or cash position of a business partner
Main responses
  • Secure diverse means of capital procurement, and break up the repayment timing
  • Establish commitment lines and secure a certain amount of cash on hand
  • Secure an appropriate long-term borrowing ratio, taking into account the reduction of financing costs and the stability of financing
  • Improve the financial position
  • Minimize the risk of delayed collection or inability to collect accounts receivable by regularly monitoring the credit status of each client in accordance with the credit management regulations and sharing credit information between the companies affiliated with Furukawa Electric Group

Disclosure and brand

Details of the risk
  • Reduced trust due to lack of appropriate information disclosure
  • Lost recognition opportunities and image enhancement opportunities due to lack of consistent communication
Main responses
  • Ensure timely and appropriate information disclosure through centralized collection and management of material events and multilayered internal checks
  • Strengthen the delivery of a unified message through the use of multiple media
  • Improve brand recognition and image through unified Group brand management

Links

Annual Securities Report
  1. HOME
  2. For Investors
  3. Management Policy
  4. Business Risks