Business Risk Factors

The Toshiba TEC Group notes the significance of the following risks from among those risks that might effect the group's performance. In accordance with the risk management systems of the Toshiba TEC Group, we are making every effort to prevent the occurrence of and to minimize the effects of these situations should they occur.

1. Retail Information Systems Business Environment

The retail distribution and service industries are of major importance to our Retail Information Systems Business. The Toshiba TEC Group sells retail information systems and supplies to such customers as major convenience stores, super markets and various specialty shops. We also provide servicing and maintenance for these systems. Competition in this business segment may increase if new suppliers enter the market, if the market sees rapid change or if our customers stop or limit capital investment or experience extended poor performance. The Toshiba TEC Group is prepared to handle these risks. However, unexpected conditions may affect business performance.

2. Document Processing & Telecommunications Systems Business Environment

The Document Processing & Telecommunications Systems business is expanding mainly in foreign markets. There are many variables in these regional markets, such as government, financing, taxes, environmental protection regulations and exchange rates. The competition in the market continues to increase as the industry rapidly adjusts to greater hybridization and systemization. The Toshiba TEC Group is prepared to handle these risks. However, unexpected conditions may effect business performance.

3. New Business and Product Development

By using our leading electronics technology and system software, the Toshiba TEC Group is satisfying customers' demands. We will continue to build positively on the development of new businesses and products with new technology breaking ground in such new business models as IC tags as well as new technology to handle the environmental protection regulations in different countries. However, there are many unstable elements relating to these efforts and unexpected situations may affect business performance.

4. Expansion of Overseas Production

The Toshiba TEC Group is boosting overseas production capabilities to keep costs competitive and to ameliorate the risk of fluctuations in exchange rates. At the same time we are diverging risk management regionally for Japan, China, Europe, Singapore and the USA. We continue to enlarge scales of production in China, however, certain local issues such as revaluation of the Chinese yuan, the political and financial climate, infrastructure limits such as electric utilities, social problems and other factors may affect business performance.

5. Quality Problems

The Toshiba TEC Group is devoted to using the latest and best technologies to provide superior products that are made with selected components from carefully chosen suppliers and tested thoroughly to be as safe as possible. We are working to prevent the occurrence of large-scale quality problems through periodic inspections and focusing on the business associated with maintenance agreements. However, business performance may be affected by unexpected quality problems that may occur within the process of development, production and marketing, or undetermined factors attendant to supporting the proliferation of and advances in system software.

6. Compliance & Internal Control

The Toshiba TEC Group is working to build up internal control systems that focus on asset preservation, adherence to business laws, reliable financial reporting, as well as viable and effective business operations. Compliance with these controls is the result of the establishment of our "Toshiba TEC Group's Code" which is used as a code of conduct throughout the group. All employees are aware of the code and follow it in adherence with laws, social norms, and ethics. We have also established our "Risk Compliance Committee," which directs the efforts to bring the entire group into full compliance.
However, there are certain limitations to internal control systems for attaining compliance which means it is not possible to fully guarantee achievement of these objectives. Due to these limitations, it is possible that violation of laws in the future may have a large effect on the business performance of the Toshiba TEC Group.

7. Information Security

The Toshiba TEC Group maintains a wide array of information related to corporate operations; such as technical information, sales information, personal information and information related to company management. In adherence to relevant laws and to prevent this information from being misused, we are making every effort to protect this information. We have established various sets of in-house guidelines on procedures for handling information appropriately and a system for information management. However, unexpected conditions could result in this information falling into the hands of people that might use it illegally. If this should happen, the expenses to rectify any problems and the loss of trust in the Toshiba TEC Group may affect business performance.
Also, our information systems play a very important role in group operations, and while we are working to maintain stable operations of the information systems, there is a possibility that the system could breakdown due to a computer virus, accident, terrorism, or a malfunction in the software or hardware.

8. Employee Retirement Obligations

Employee retirement obligations are calculated with consideration to yield on long term government bonds. However, if the yield on government bonds should fall below the current level, it may affect business performance.
Also, pension investments are carried out with the expectation of suitable operating profit according to the company pension plan. However, if the operating performance falls due to various factors, the Toshiba TEC Group's business performance and financial condition may be affected.