Business risks

In the following discussion of risk factors, major risks related to the Group's businesses that may exert a significant influence on investors' judgment are outlined. From the standpoint of proactive information disclosure, we have included references to matters that do not necessarily constitute risk factors but that we believe are important for investors to consider.
The Tsumura Group will strive to avoid the materialization of such risks; however, should such risks materialize, we will endeavor to minimize their impact. This discussion includes issues that are not yet pertinent to the Group's performance.

（１）Medical system	Risks related to administrative developments such as government policies to curb healthcare spending Risk of domestic/overseas regulations concerning the development and manufacture of pharmaceutical products
（２）Supply of products	Risk in the procurement of raw material crude drugs due to unforeseen weather conditions, natural disasters, etc., changes in the scope of legal restrictions on imports and exports, or unexpected changes in political and economic conditions Risk in the procurement of secondary raw materials and other materials due to sudden supply-and-demand-related distribution concerns caused by natural disasters or unstable social conditions Risk of loss of production and distribution functions due to natural disasters, fires, power outages, etc.
（３）Product safety and adverse reactions	Risk of occurrence of problems with product quality or safety Risk of unexpected side effects
（４）International business	Risk that contingent liabilities or unrecognized liabilities will be discovered after acquisitions or alliances related to the launch of operations in China, and that the expected business value and future synergies from business integration will not be realized Risk of unexpected changes in laws/regulations or in political/economic Conditions
（５）R&D	Risk that future growth (globalization of prescription Kampo formulations, development of pre-symptomatic and personalized medicine) or performance cannot be maintained or improved (standardization of Kampo treatments cannot be accelerated) Risk that standardization of Kampo treatments cannot be accelerated due to the number of Kampo products listed in treatment guidelines
（６）Intellectual property (IP)	Risk of decline in competitiveness due to IP rights infringement by third parties Risk of disputes stemming from the infringement of third-party IP rights
（７）Human resources	Risk of being unable to secure or systematically develop the necessary human resources Risk of a decline in societal standing due to insufficient action to tackle occupational health and safety issues, harassment, etc.
（８）Competitiveness	Risk of entry into prescription Kampo market by Japanese and foreign pharmaceutical companies Risk of launch of new drugs by Japanese and foreign pharmaceutical companies in major markets for prescription Kampo formulations
（９）Changes in exchange rate	Risk of large fluctuations in the exchange rate relevant to the import of raw material crude drugs and Kampo powdered extract from China
（１０）Finance	Risk of changes in retirement benefit obligations Fundraising risk Risk of price fluctuation for marketable securities
（１１）Taxation	Risk of being charged additional tax or subject to double taxation due to differences of opinion with the tax authorities in each country
（１２）Environment	Risk of violating laws or regulations by causing soil contamination, water pollution, etc. Risk of receiving evaluation that our efforts to conserve the natural environment is insufficient
（１３）Litigation	Risk of various lawsuits being filed for, for example, side effects of pharmaceutical products including Kampo and crude-drug formulations, harm to health, product liability, labor issues, infringement of intellectual property rights, contract nonperformance, environmental pollution, etc.
（１４）Information systems and information management	Risk of IT systems malfunctioning due to large earthquakes or other disasters such as fire, power outages, etc. Risk of systems failing or confidential information being leaked as a result of cyberattacks by malicious third parties, carelessness or negligence by employees, etc.
（１５）Internal control	Risk of being unable to ensure the effectiveness or efficiency of operations Risk of being unable to ensure the integrity of financial reports Risk of unlawful conduct, fraud, etc.
（１６）Other	Risk of business being suspended as a result of the domestic and worldwide spread of COVID-19