Governance

GovernanceIn an effort to continuously enhance its corporate value, the Company is striving to ensure transparency of management and compliance, along with the maintenance and operation of an adequate governance framework while reinforcing its risk management framework.
Specifically, each of the following bodies and meeting bodies isin place to function effectively.

Corporate GovernanceOur basic policy on corporate governanceDirectors and the Board of Directors

The Group’s business activities are based on the business principles that “prioritize ethics and contribute to the prosperity of customers and society as a whole.” We therefore strive to attainsound corporate management through strengthening and reinforcing corporate governance, fully appreciating the significanceof compliance based on corporate ethics. At the same time, we
review as appropriate our management monitoring system to ensure its conformity to the changes in the business environment
including social environment and relevant legislation.

At its regular monthly meetings as well as extraordinary meetings
held when appropriate, the Board of Directors, which is composedof seven Directors including three Outside Directors, discusses
and decides on important management matters such as reports
on Operating Officers’ business execution and matters to be decided solely at the discretion of the Board of Directors, while supervising the execution of duties by Directors and Operating
Officers.

Overview of corporate governance structure andreasons for its adoption

Management Strategy Meeting and Operating Officer
Report Meeting, etc.

We have corporate bodies established in accordance with laws
and regulations as well as the Articles of Incorporation, including
the General Meeting of Shareholders, Directors and the Board of
Directors, Statutory Auditors and the Board of Statutory Auditors,
and Accounting Auditors. To strengthen corporate governance, thesupervision and execution functions of the Board of Directors are
separated, through the adoption of a structure where the Board of
Directors is mainly in charge of governance, and Operating Officers are primarily in charge of business execution.
The Company strives to ensure that both the supervision function of the Board of Directors and the audit function of (the Boardof) Statutory Auditors work effectively and believes that the current system is sufficiently running.

The Company has meeting bodies including the Management
Strategy Meeting and Operating Officer Report Meeting. Throughthese bodies, specific matters related to their execution of duties
and critical management matters including those subject to thedeliberation of the Board of Directors are reported to the President
by Operating Officers and the general managers of business execution departments, deliberated and discussed preliminarily. In
addition, Outside Directors and Statutory Auditors attend thesemeeting bodies, as necessary. As for the matters discussed atmeetings, matters subject to the deliberation of the Board of Directors are decided by the Board of Directors and other matters
are decided by employees with business execution authority
through means such as circulars based on the Management Authority Rules.

Corporate governance framework
General meeting of shareholders
Appointments/dismissals
ReportingAccounting Auditors

ReportingAppointments/dismissals
Legal audit

Board of Statutory Auditors
Statutory Auditors
ReportingBusiness audit

ReportingAppointments/dismissals
Appointments/
Board of Directors
advising
ReportingDirectors

Appointments/dismissals

Nomination andCompensation
Advisory Committee

Reporting

Reporting/decisions

Appointments/
reporting/recommendations

Instruction/reporting

Audit DivisionInternal audit

President
Management Strategy Meeting
Operating Officer Report Meeting
National and Global Group Company Meetings

Sustainability Committee
Internal Control Committee

Requests/reporting

Instruction/reporting

ReportingAppointments/dismissals

Accounting audit

Operating Officers
Contact for whistle-blowers（internal） Whistle-blowings
Contact for legal consulting
Oversight[General Affairs Division]
Legal counsel(Contact for whistle-blowers)

Whistle-blowings

Instruction/reporting

Each business department

Instruction/
reportingInstruction/reporting

Each Group company

Toyo Denki Seizo Report 2023

34

GovernanceStatutory Auditors and the Board of Statutory Auditors
The Board of Statutory Auditors is made up of four members including three External Statutory Auditors. Statutory Auditors oversee management by attending the Board of Directors’ meetings,
etc. and expressing appropriate opinions in the process of deliberating business execution reports from Operating Officers andmatters to be decided solely at the discretion of the Board of Directors. In addition, Statutory Auditors examine the business activities and assets of the Company and Group companies inaccordance with audit policies and division of duties set by the
Board of Statutory Auditors.
Voluntary committees
a. Nomination and Compensation Advisory Committee
Under the Board of Directors, the Company has in place theNomination and Compensation Advisory Committee, whose
members include Outside Directors. Its purpose is to list candidates for Directors and Statutory Auditors and nominate Operating Officers, and to ensure transparency and objectivity
regarding decisions on compensation for Directors and Operating Officers.
b. Internal Control Committee
The Internal Control Committee is in place under the Board of
Directors to develop a system stipulated in the basic policy ofinternal control systems, check the operation status, and conduct constant reviews. In principle, the Committee meetsquarterly, and the contents of deliberation are reported to theBoard of Directors each time.
c. Sustainability Committee
The Company has a Sustainability Committee in place underthe Board of Directors for tracking the progress of specific
SDG initiatives and continually reviewing them. In principle,
the Committee meets quarterly, and the contents of its deliberations are reported to the Board of Directors each time.

Auditors both verbally and in writing, and confirm their actionplans to be taken at a fiscal year-end audit. Statutory Auditors
also receive the results of fiscal year-end audits from Accounting
Auditors in statutory documents along with verbal reviews. Furthermore, Statutory Auditors are in principle required to be present at inventory taking or on-site inspection at subsidiaries by
Accounting Auditors.

Outside Directors and External Statutory Auditors
The Company’s Outside Executives currently include three Outside
Directors and three External Statutory Auditors as shown below.
Each Outside Executive has excellent insight in each expertiseand satisfies the independence guidelines for Outside Executives
defined by the Company.

Internal audit
Internal audits of the Company are carried out by the Audit Division based on internal audit plans decided by the Board of Directors. The Audit Division has staff with qualifications such as theCertified Information Systems Auditor (CISA). It reports its actionplans and internal audit results to the Board of Directors and theBoard of Statutory Auditors.
Statutory Auditors’ audit
Statutory Auditors work with the Audit Division and Accounting
Auditors and exchange information on audit plans and contents ofaccounting audits to perform appropriate auditing tasks. Statutory
Auditors receive the results of quarterly reviews from Accounting

35 Toyo Denki Seizo Report 2023

Directors
Remuneration for the Company’s Directors is determined within
the maximum remuneration amount resolved at the Annual General Meeting of Shareholders held in August 2006, with reference
to the policy for determining remuneration for Directors resolvedby the Board of Directors. To ensure the independence of Outside
Directors, the Company provides no bonuses to them. Decisions
on remuneration for Directors are made at the Nomination andCompensation Advisory Committee set up under the Board of

Directors, with the participation of Outside Directors, in order toenhance objectivity and transparency of the decision process for
executive remuneration.
Statutory Auditors
Remuneration for the Company’s Statutory Auditors is determinedthrough discussion among Statutory Auditors within the maximum
total remuneration, which was fixed at the Ordinary General Meeting of Shareholders held in August 2006. It takes form of fixed remuneration for each standing and part-time position. There are nobonuses for Statutory Auditors.

Executive Profiles (as of December 1, 2023)
Directors

Mr. Koji Mizumoto, Director (Outside Executive)
Mr. Koji Mizumoto provides useful advice on management in general, drawing on his wealth of corporate management experience at apredecessor firm to NIPPON STEEL CORPORATION and his knowledge of financial accounting as CFO.

Mr. Taizo Makari, Director (Outside Executive)
Mr. Taizo Makari provides useful advice on the Company’s management in general, drawing on his extensive insight and global perspectives developed throughout his career at Teijin Group.

Ms. Yukiko Machida, Director (Outside Executive)
Ms. Yukiko Machida was newly appointed as Director at the 162nd
Annual General Meeting of Shareholders on August 29, 2023. She
is a qualified lawyer and has a deep understanding of labor law
gained through extensive experience, including her role as aVice-Chairperson of the Daini Tokyo Bar Association’s Labor Issue
Committee. She leverages her experience to provide her advice andsuggestions on how to ensure the legality and appropriateness of
the Board of Directors’ decision-making and on HR and labor challenges.

Mr. Hitoshi Kobayashi, Statutory Auditor

Internal audit and Statutory Auditor’s audit

Executive Remuneration

Mr. Hitoshi Kobayashi provides useful advice, drawing on his wealthof experience and knowledge as a statutory auditor to contribute toauditing activities.

President,
Representative Director

Chairman, Director

Kenzo Terashima

Akira Watanabe

Director, Senior
Executive Officer

Director, Senior
Executive Officer

Yoshifumi Otsubo Kenji Tanimoto

Statutory Auditors

Full-time Audit andSupervisory Board
Member (Outside)

Director (Outside)

Director (Outside)

Director (Outside)

Koji Mizumoto

Taizo Makari

Yukiko Machida

Operating Officers

Full-time Audit andSupervisory Board
MemberHitoshi Kobayashi Toshiharu Takaki

Audit andSupervisory Board
Member (Outside)

Audit andSupervisory Board
Member (Outside)

Koichi Abe

Keiichi Hasegawa

Director, Senior Executive Officer

Executive Officers

Operating Officers

Yoshifumi Otsubo

Shuji Horie

Takuya Hatakeyama

Kenji Tanimoto

Naoki Okuyama

Chiaki Nakano

Toshihito Nakanishi

Hiroyuki Imaizumi

Jun Nukina

Takatoshi Otsuka
Toshinori Yamai
Akihiro Otsuka

Director Skill Matrix

Areas of expertise and experience

Mr. Koichi Abe, Statutory Auditor

OutsideDirectors

Mr. Koichi Abe provides useful advice, drawing on his wealth ofexperience at financial institutions and extensive knowledge
regarding corporate management to contribute to auditing activities.

Name

Mr. Keiichi Hasegawa, Statutory Auditor (Outside Executive)

Akira Watanabe

●

●

●

●

●

Kenzo Terashima

●

●

●

●

●

Yoshifumi Otsubo●●

Kenji Tanimoto●●●

Mr. Keiichi Hasegawa was newly appointed as Statutory Auditor atthe 162nd Annual General Meeting of Shareholders on August 29,
2023. While concurrently serving as Professor for Waseda University’s Faculty of Commerce, he utilizes his voluminous experience incorporate finance and accounting to provide helpful advice on
maintaining the soundness of financial and accounting practices
and on business management in general.

Corporate
Sales/
management Marketing

Koji Mizumoto●●

Taizo Makari●●

Yukiko Machida●

Research andManufacturing/development/
Quality control
Technology

Globalbusiness

Personnel/
Labor

●

●
●

●

Accounting/
Legal affairs
Finance

●

●

●

●

●

●

●

●
●

●
Toyo Denki Seizo Report 2023

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Governance

Messages from Outside Executives

Internal Control and ComplianceInternal Control

Yukiko Machida

Koichi Abe

Director (Outside)

Audit and Supervisory
Board Member (Outside)

Labor law, my area of expertise, has typically followed a regulatory approach—laws are written to clearly define the dos anddon’ts for employers, and administrative agencies provide guidance and supervision to prevent violations and, when violations do
occur, penalize the offenders. A classic example of this is the Labor Standards Act.
However, the enactment of the Act on the Promotion of Women’s Active Engagement in Professional Life in August 2015
marked a pivot from that traditional approach. This law enjoins
employers to analyze their company’s response to various legal
requirements and to disclose their findings, but it does not regulate the content of what is reported (for example, it does not
specify a minimum percentage for female representation in management). At first glance, this approach may seem considerablylooser than the traditional regulatory model, but is that actually
the case?
The world of labor law is now being swept with a growing callfor companies to (just) disclose certain information such as thepercentage of male employees who take childcare leave. And,
looking outside the realm of labor law, items such as human capital and diversity have been added to the list of disclosures expected for annual securities reports. This trend has made it easier tocompare companies by creating a uniform measuring stick forevaluating them. More than ever, businesses need to seriously
envision what it will take for them to remain companies that attract talent and shareholders on into the future, and to constantly
strive to achieve that vision. Those that just keep looking at therear-view mirror may end up getting left behind by the market.
Compliance is more than just not doing illegal things; it means
taking action aligned with the spirit of the law, with “law” here including soft law. I would like for Toyo Denki to remain mindful ofthe importance of staying abreast of the times and taking action
with a forward-looking perspective.

37 Toyo Denki Seizo Report 2023

It has been over a year since I was appointed Audit and Supervisory Board Member (Outside) for Toyo Denki. The Company has laidout a medium-term management plan toward the fiscal year ending May 2026 and is pursuing corporate activities for drasticallystrengthening its management foundations. I believe that Toyo
Denki’s strength lies in its commitment to sincerely addressing theneeds of customers while honestly striving to improve quality withthe power of trust backed by more than 100 years of history.
The Japanese economy has been gradually recovering following the lifting of the COVID-19 pandemic restrictions, with many
positive signs being seen, including growth in both wages andstock prices. As for the latter, the Nikkei average as of end-August
had climbed roughly 25% since January—likely buoyed in part by
the management reforms that businesses implemented in response to the Tokyo Stock Exchange’s call for improvement oflackluster price--book ratios—and average PBR on the TSE stoodat 1.3 for the Prime Market index and at 0.99 for the Standard
Market index. While Toyo Denki’s share price has likewise grownby around 23%, PBR nevertheless stands at 0.4. I believe that theshare price can at least double if the Company leverages its potential.
Across its over 100-year history, Toyo Denki has cultivated to ahigh standard many different artisanal skills, know-how, technicalexpertise, and development capabilities in manufacturing processes. However, there are challenges that need to be addressed.
Namely, the Company needs to drastically strengthen its management foundations and ability to do business, so as to realize theaims of the Medium-Term Management Plan’s basic policies andto raise ROE to 8% or higher. Statutory Auditors are tasked withhelping to ensure the soundness of corporate management. I
think that effective utilization of corporate resources and improvement of profitability are the cornerstones of governance. I hope to
see the Company work as a team to tackle management challenges under the leadership of the senior management.

The Company views the development and operation of an internal
control system to be an important management issue, and it hasdeveloped an efficient, legal and appropriate business execution
system pursuant to Article 362 of the Companies Act and Article
100 of the Ordinance for Enforcement of the Companies Act. The
Internal Control Committee established under the Board of Directors reviews the operational status of the internal control system
and will revise it as necessary.

Principles of compliance
The Company has set “1. adherence to rules,” “2. observance ofconfidentiality,” “3. distinction between private and public matters,” “4. strictness with money,” “5. prohibition of side jobs,” and“6. prohibition of discriminatory and sexually suggestive statements or behavior” as principles of compliance.

Compliance promotion framework
To focus on business principles and fulfill its social responsibility,
the Company has provided all officers and employees with a copyof the Compliance Manual (Toyo Denki Seizo Ethical Standards)
that stipulates its code of conduct. The move is part of an effort tohave the code and the basic rules of work fully known.
The Company has also introduced a whistle-blowing systemthat allows employees to provide information directly to the management. The system is aimed at ensuring that any illegal orinappropriate conduct within the Company is detected at theearliest possible stage and that adequate measures are taken
promptly and as needed so that such conduct is rectified.

Compliance education
We conduct compliance training every year for all employees of
the Group in order to enhance knowledge of compliance and foster awareness to respect corporate ethics.

Proper export controls
The Export Control Department at General Affairs Division is responsible for export management as the export management
control department. We have created a system for the proper
management of exports in order to ensure compliance with thelaws and regulations concerning export management in the

countries and regions where we engage in business activities aswell as to avoid involvement in transactions that could hinder the
maintenance of international peace and safety.
The Export Control Department handles cargo and technology
parameters used in determining whether or not export permits are
required, as well as investigation of transactions. In addition, theDepartment carries out employee education and guidance andsupport for Group companies.

Whistle-blowing system
The Group has established a whistle-blowing system that aims toensure that any illegal, inappropriate, or unethical conduct by anindividual or an organization is detected at the earliest possible
stage and that risks are minimized, and to promote ethical and legal compliance. In addition, the number of whistle-blowing reports
received is disclosed annually in the Business Report.

Risk Management
Risk management framework
The Group’s risk management framework is as follows.
Risks pertaining to management strategy challenges such as
business strategies and new business development are discussed
at the Management Strategy Meeting, which is generally held
twice a month.
Risks concerning day-to-day business operations are reported
to the President at the Operating Officer Report Meeting, which
generally convenes at least three times a month, for three subjects: orders received, sales, inquiries, and other business activities; procurement, manufacturing, shipments, and otherproduction activities; and quality control, R&D and other technicalmatters, production reforms, and adoption of IT. The progress ofbusiness plans and the status of business execution are checkedon a monthly basis.
For Group company-related risks, the progress of each company’s business plan and the status of business execution are examined at semiannual national and global Group company
meetings.
Of these various risks, matters deemed to be especially important are discussed by the Internal Control Committee underthe Board of Directors, with the participation of the legal counsel.
Reports and recommendations based on those discussions are
made to the Board of Directors. Risks pertaining to climatechange, human capital, and other sustainability issues are discussed by the Sustainability Committee under the Board of Directors, and are reported to the Board of Directors.
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Governance

Risks and countermeasures

Risks & scenarios: Our Group provides products and services that broadly support social/industrial infrastructure in Japanand abroad in all of our business segments—transportation, industry, and ICT solutions. Our business environment is undergoing a drastic transformation, as seen in the decline in railway ridership due to population shrinking and the spread of
new lifestyle changes such as teleworking; the CASE* transformation in the automobile industry; the advancement of DX in
products, services, and production equipment; and the transition to a decarbonized society. If we fall behind in our efforts toadapt to these changes, we could experience a decline in our competitiveness, orders received, sales, and profitability.

This section presents risks that may affect the Group’s earnings and financial position, and countermeasures for them.
Forward-looking statements below are based on the judgment of the Group as of the end of the consolidated fiscal year ended May
2023.

Risks & scenarios: Fatal/life-threatening accidents and large-scale failures in railways or other social/public infrastructurethat stem from the Group’s products could have a very serious impact on the Group’s operation. Also, defects in quality andproduction delays that prevent the Group from fulfilling its responsibility and mission of stably supplying products could
cause a loss of trust and adversely affect our earnings.
Risks related toquality andstable supply

human resourcecompliance andhuman rights

Countermeasures: The Group has included in its business principles a commitment to prioritize ethics and contribute to
the prosperity of customers and society as a whole, and recognizes the importance of compliance aligned with the businessprinciples. As a concrete action for this, the Group provides every officer and employee with training and a copy of the business principles and the Compliance Manual (Toyo Denki Seizo Ethical Standards), which lays out our code of conduct andbasic rules on business operations, in order to ensure that everyone familiar with what constitutes compliant conduct. We
have also established contacts for whistle-blowing and consultation on harassment and implemented other measures toconstruct the framework needed to detect and take action on issues at an early stage. With regard to conflict minerals andforced labor in supply chains, we will continue to assess the state of compliance through supplier surveys and other means,and carry out appropriate measures for ensuring respect for human rights.

39 Toyo Denki Seizo Report 2023

*CASE: A concept expressing the mobility transformation in terms of four features, Connected, Automated/Autonomous, Shared & Service, and Electrification

Countermeasures: Guided by the basic policies of Medium-Term Management Plan 2026 to expand new businesses andproducts and thoroughly improve the earnings structures of existing businesses, the Group is endeavoring to maintain and further
strengthen its competitiveness through efforts such as developing new products and improving existing products and services.
Key actions include exploring alliance and M&A opportunities, developing technologies and products that contribute to decarbonization and the realization of a sustainable society, incorporating automation and renewable energy use in automobiles, and leveraging ICT. We opened the Development Center in June 2022 to strengthen company-wide development of new business fields.
With regard to trends among our competition, we are working to maintain and further strengthen our competitiveness by gathering information on tenders and markets, and by utilizing our extensive supplier network to collect client information.
Risks & scenarios: If we are unable launch products incorporating advanced technologies with the right timing or are slow
to respond to the decarbonization movement, our product competitiveness could decline. Also, slowdowns in our adoptionof new technologies for manufacturing processes could impair efforts to improve productivity and reduce costs, and thereby
lead to a deterioration in our competitiveness.

Risks related totechnology/
product
development

Countermeasures: In line with the basic policy of our rules on human resource development, we pursue human resource
development approaches aimed at continually increasing our corporate value. To support efforts for maintaining, improving,
and transferring our unique technologies, we have established a Technical Staff Development Committee and implement
measures for transferring advanced technical expertise for each high-priority specialized field. In addition, as a specific initiative of Medium-Term Management Plan 2026 we have begun to review the design and operation of our human resource
systems to promote employee and organizational vitality. To further improve employee engagement, we have clearly defined
our expectations for human resources and have started to re-examine our systems for fair evaluation and treatment and to
implement various measures, including for talent/organizational development.
Risks & scenarios: Violations of domestic/international laws and regulations in the Group’s conduct of business could result in a loss of public trust and lead to suspension of trading and other serious impacts on our business activities. Also,
failure to properly prevent or deal with harassment of employees could reduce employee motivation, prompt employees toquit, cause a loss of trust, and reduce our competitiveness. In addition, failure to appropriately deal with issues surrounding
conflict minerals and forced labor could result in a loss of trust and thus lead to reduced trade and exclusion from supply
chains.

Risks related tochanges inbusiness
environment

Countermeasures: The Group’s business principles include a commitment to build trust by focusing on quality first. The
production bases Yokohama Plant and Shiga Ryuo Plant have constructed and operate quality management systems, andhave acquired ISO 9001 certification. As part of the monthly sessions of the Operating Officer Report Meeting, information
on quality control and production management is shared with upper management, risks are identified, and countermeasures are discussed and promptly implemented, so as to ensure quality standards and stably supply products. In preparation for the potential occurrence of product liability issues or recalls, the necessary insurance policies are in place so thatthe impact of quality issues on earnings can be minimized.
Risks & scenarios: We consider human resources to be the most important management asset supporting the Group’s
growth. If retirement by experienced technicians, exodus of talent, slowdowns in human resource development, or othersuch issues make it impossible to secure and develop the human resources needed, quality could decline due to the resulting difficulty in transferring technical expertise, and the creation of new business areas and development of new products
could be hindered. This could make it impossible to maintain our competitiveness in the industry, and thus adversely affectour earnings.

Risks related to

Risks related toCountermeasures: We are working to supply customers with products that appeal to them by identifying their needs andincorporating new technologies in the products we develop. In addition to enhancing existing products and services, to expand new business and products, we are seeking to strengthen and accelerate company-wide development of new business domains, particularly by utilizing the Development Center that we opened in June 2022. To address the technical challenges standing in the way of new business development, we have formed project teams at the Development Center andare focusing our internal resources on these efforts. In addition, we are taking action to maintain and further strengthen our
technical expertise and product development capabilities, including by pursuing R&D in collaboration with other businesses
and academia and by exploring M&A opportunities.
Risks & scenarios: Our Group’s products and services use many different types of raw materials. If supply of those materials is delayed or interrupted by shifts in the global economy, market trends, or natural disasters, or if suppliers of raw materials that are hard to substitute go bankrupt or suspend operation, we could experience slowdowns in our production andshipment, among other issues. Also, increases in our manufacturing costs due to raw material price hikes driven by risingenergy prices could adversely affect the Group’s earnings.

Risks related to

procurement of
raw materials,
etc.

Countermeasures: The Group is striving to ensure stable access to raw materials through approaches such as bulk purchasing and multivendor procurement. While there recently have been global shortages, price hikes, and longer delivery times forcertain products such as semiconductors, our Group is implementing measures to mitigate the impact of those challenges, including by using our closely connected network of suppliers to establish multiple supply chains, and by switching the raw materials used to other alternatives. We also endeavor to regularly collect information on the risk for suppliers to fail or stop operating,and pursue permanent measures such as securing access to alternative suppliers. To address the risk of manufacturing costs
being driven up by rising raw material prices, we are seeking to lower cost prices by improving the operational efficiency of ourmanufacturing equipment, and by reducing energy costs through energy-saving measures, including the use of solar energy.
Risks & scenarios: The risk of violation of the Group’s intellectual property rights by other parties is growing with the acceleration of technological innovation and business globalization. Conversely, if the Group is found to have violated the intellectual property rights of other parties, it could be subjected to expensive damage claims or other responses that adversely affect its earnings.

Risks related tointellectual
property

Countermeasures: The Group recognizes the importance of intellectual property rights and carefully strives to protect
those rights. Our R&D units are collaborating to acquire rights on our intellectual property through strategic patent applications and other means. We are committed to swiftly taking appropriate action in response to violations of our intellectual
property, and to take appropriate measures to avoid violating the intellectual property rights of other parties.

Toyo Denki Seizo Report 2023

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Governance

Risks related toenvironmental
and climatechangeRisks & scenarios: Any violation of environmental laws and regulations or noncompliance with environmental regulations
could lead to a loss of trust among our suppliers, local communities, and society as a whole. Also, our failure to make progress in climate change actions, such as decarbonization of our products and measures for reducing our environmental impact, could reduce the competitiveness of our products and thus cause orders received and sales to fall, and could harm
our reputation among stakeholders as a whole.
Countermeasures: The Group properly manages this area of risk by constantly monitoring our business operations’ compliance with environmental laws and regulations and conformity with environmental regulations. In addition, senior management regularly discusses climate change actions at Sustainability Committee meetings, and we set targets, develop and implement measures, and monitor progress for our initiatives in products and services, in production activities, and in valuing
people and communities in accordance with our Sustainability Policy.

Risks related tooverseasbusinesses

in the Kanto area and those for the Industrial Systems segment are in the Kansai area. Production capacity may be severely
affected by large-scale disasters and the outbreak of infectious diseases in either of these areas. Furthermore, large-scaledisasters and the outbreak of infectious diseases may hinder the entire supply chain and impact order trends, thus affecting
the Company’s production and earnings.
natural disasterand infectious
diseases

Countermeasures: Our Internal Control Committee under the Board of Directors discusses and makes decisions on thepolicies and courses of action for developing preventive measures against large-scale disasters and building the emergency
response formation for disasters that occur. We implement disaster mitigation measures and training at each production
base, and will work to further strengthen company-wide business continuity planning and to increase resilience across our
supply chains. In the event of a large-scale infectious disease outbreak occurs, we will apply the lessons learned from our
response to the COVID-19 pandemic, which began in January 2020, and take action to prevent the spread of infection with
an approach that prioritizes employee safety and health with measures such as staggered commuting and working from
home, while aggressively minimizing hindrances to production.

Risks related tofinance andaccounting

Risks & scenarios: Occupational accidents (including those stemming from excessive working hours), fires, or equipment
failures that lead to employee injuries/fatalities or production stoppages could harm our public trust and a deterioration ofbusiness performance.
Risks related towork-related
disasters andaccidents

Countermeasures: In order to ensure a safe working environment and completely eliminate occupational accidents, theGroup has instituted a Company-Wide Safety and Hygiene Management Policy, and the local Safety and Hygiene Committeeof each workplace establishes and implements concrete measures. Information on these initiatives is shared at the quarterly meetings of the Company-Wide Safety and Hygiene Committee, with the aim of further raising the level of health andsafety across the entire organization. Also, each workplace has a Time Management Optimization Committee that monitors
the overtime work situation, compliance with rules for rest periods between shifts, and other such matters.
Risks & scenarios: In the event of a leakage of customers’ personal information or corporate secrets related to business
partners could not only harm our public trust, but also lead to damage claims, termination of trading relationships, and otherimpacts that could adversely affect our earnings. Moreover, destruction/alteration of important data and system stoppages
caused by external cyberattacks or computer viruses could have serious impacts on our production and sales activities.

Risks related to

information
securityCountermeasures: The Group has included information security among its key management challenges and has formulated an Information Security Declaration as a guideline. We recognize the safeguarding of information to be a major social responsibility, comply with related laws and regulations, and implement measures to protect the information assets we possess from destruction, tampering, leaks, and other threats. In order to increase the level of information security andstrengthen the system of management, we have formed an Information Security Committee that is tasked with studying
measures, providing training, auditing, and other responsibilities. The Information Security Committee regularly reports to
the Internal Control Committee on matters such as the state of information security maintenance/management, and the occurrence of accidents and problems.

41 Toyo Denki Seizo Report 2023

Countermeasures: We have established a formation for communication and cooperation between the head office and theoverseas affiliates, and we strive to constantly remain aware of the situation in each location. We properly manage country
risk in order to minimize the impact of risks that emerge, and when necessary, we seek the counsel of lawyers and otherexperts who are well-versed in the local legal system and business practices.
Risks & scenarios: Given that the Group is proactively expanding its business in overseas markets, we are exposed to theforeign exchange risk that comes with the increase in foreign currency-based transactions. Also, since we secure financing
for our business operations through bank loans and other such sources, we face the risk that interest rate hikes will drive
up the amount of interest we need to pay. There is also the risk that finance market instability or a decline in the Group’s
creditworthiness will make it difficult to acquire financing at the levels we seek. The fixed assets we own, such as shares,
land, buildings, production equipment, etc., are subject to the risk of impairment due to a decline in their market value or
the profitability of our businesses. Trade notes and accounts receivable entail the risk of becoming difficult to collect if the
trading partner’s credit situation significantly falters.

Risks & scenarios: The great majority of the Group’s production bases for the Transportation Systems segment are locatedRisks related to

Risks & scenarios: The Group operates production bases and sales offices in China, Thailand, and the United States, andcountry risks such as political or economic changes and the outbreak of disasters could adversely affect our business activities and employee safety. Also, unforeseeable changes in laws or tax systems could negatively impact our overseas affiliates’ business operations and by extension our earnings and assets.

Countermeasures: With regard to foreign exchange risks, we monitor foreign exchange sensitivity and impacts on ourearnings, and implement risk management measures such as downsizing of our foreign currency-based assets. To manageinterest rate and liquidity risks, we are working to optimize our methods of financing and to shrink our working capital byreviewing the turnover period of trade notes and accounts receivable, inventories, and trade notes and accounts payable. At
the same time, we are striving to maintain an optimum level of liquidity on hand through monthly management of cash
flows. The purpose and benefits of our share holdings are examined annually at the Management Strategy Meeting are reported to the Board of Directors, and we are in the process of reducing our holdings based on those reviews. As for business-related fixed assets, we regularly monitor the progress of business plans and endeavor to detect early warning signsof impairment. We manage the collection risk of trade notes and accounts receivable through efforts that strengthen credit
management, including surveying of long-term debt and monitoring of trading partners’ performance.

Information Security
Basic policy
The Company holds a vast amount of information assets including
information presented by customers related to its businessexecution and confidential information concerning the Group’s
proprietary technologies and its trade. Each Group company istaking various measures in this respect based on an awarenessof shared security under the Group’s Information Security

Guidelines, which have been established to adequately manage
and use these information assets.

Information security training
The Company is conducting educational activities to develop
information security awareness among all employees including
various training sessions, some involving the use of educationalDVDs.

Toyo Denki Seizo Report 2023

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