Message from the CEO

Ensuring patient safety is
our top priority and becoming aglobal MedTech company recognized
for its innovative products and solutions,as well as its people.”
I am delighted to take up this incredible opportunity and I sincerely express my gratitude
and delight at being named the new Olympus CEO and I am excited to continue ourtransformation initiated by my predecessor Yasuo Takeuchi. The first stage of Olympus’
transformation was a huge success in terms of becoming a pure MedTech player, increasing
performance, and striving for a more globalized organization with a global leadership. We
are now at the start of the second stage, where we will shift to grow. From here, myaspiration is for us to become a leading global MedTech company that is recognized by all
our stakeholders for its innovative products and solutions, as well as its people.

Initiatives in Pursuit ofPatient Safety and Sustainability

Director, Representative Executive Officer,
President and Chief Executive Officer

Stefan Kaufmann

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Olympus Integrated Report 2023

We are making progress toward becoming a globalMedTech company. We have successfully divested ourImaging Business and Scientific Solutions Business, andhave established a united and globalized senior
management team transforming us into a pure MedTech
player. However, the situation that we are in today inconnection with three Food and Drug Administration (FDA)
warning letters we received in fiscal year 2023 is an
opportunity for us all to recognize that we must
fundamentally improve our corporate culture, processes,and systems to meet the expectations of regulators andstakeholders. We put patient safety first and must continue
to make meaningful improvements in quality assurance andregulatory affairs (QARA) over the next two to three years.

One of the critical success factors of Transform Olympus
over the last four years has been giving equal weight toimproving both financial performance and organizational
health. We must now do the same with QARA remediation,
where we are not only focusing heavily on addressing issues
arising from the FDA observations at our sites globally, but
are also executing remediation on a broader scale thatcovers our entire manufacturing landscape and R&D
processes. This is because we want to be able to improveacross the whole organization, not just those sites that havereceived warning letters. We have already established aholistic transformation program to investigate the detail androot cause behind the warning letters and to address areasthat need to be enhanced. We are doing this by examining

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Message from the CEO

our global operating model, global process harmonization,and IT enterprise architecture, which still bears the legacy ofa Japanese manufacturing company with highly
decentralized components. We are also developing a
dedicated program to help change embedded mindsets
and bring in the necessary capabilities to fulfill ourcommitments when it comes to patient safety. Culturaltransformation starts from the top, and every decision must
put patient safety first. As a result, leadership must set theright tone by actively discussing patient safety withemployees and help them understand the importance of aquality mindset. We understand that this requires investingheavily in training and education, as well as rewarding
employees who act with patient safety in mind.
In the past, I believe we saw patient safety and quality asa functional responsibility, which is one of the reasons we did
not achieve the results we expected in our efforts to improve
our quality management systems. Patient safety and quality
are relevant to all Olympus employees and led by the CEO.
With this in mind, since becoming CEO in April 2023, I haveprioritized two key areas and communicated this clearly to
our employees. I have also been strengthening
communication with all stakeholders, including patients,
healthcare providers, and regulators. By bringing in a team ofMedTech QARA experts to assist us in developing one global
quality management system and transforming the corporate
culture, we have significantly enhanced our QARA capabilities
and resources. From a governance perspective, we havediscussed with the Board of Directors the establishment of aQA&RA Committee that is composed of three outside
directors with experience in leading global MedTech
companies and QARA knowledge. They meet monthly withthe executive team, monitor initiatives, and provide strategicadvice. I am particularly pleased that, over the last few years,
we have increased the capabilities at the Board level bybringing in new members with MedTech experience andpromoting the Board of Directors and the executive team tocooperate closely on patient safety and QARA.
As announced in the company strategy, we will invest
approximately ¥60 billion over the next three years on
strengthening QARA. This is a necessary investment rather
than a cost because we are not only addressing issues
arising from the FDA observations, but also taking a more
holistic approach to create a steadfast foundation designed
to meet patients’, customers’, and regulators’ expectations
and ensure patient safety is our top priority. Operational
performance will also improve given our digitizing andoptimizing manufacturing efforts that will help reduce costsby creating a more streamlined and harmonized operating
model. We expect SG&A ratio to be reduced due to greater
clarity on decision-making authority and improved R&D andregulatory processes that will ultimately accelerate our ability
to deliver products to customers while keeping productsafety a top priority. QARA transformation will unleash
Olympus’ full potential and make us more sustainable andstronger. We do not want to miss out on this opportunity.

Our Six ESG Focus Areas
We have revisited our ESG strategy to fully integrate it into
the new company strategy. This solved our problem ofhaving a siloed ESG strategy by making it an integral partof the company, business and overall functional strategy.
My personal aim is for Olympus to become an ESG leader
among global MedTech companies through six focus areas:
Healthcare Access and Outcome; Compliance, ProductQuality and Safety; Responsible Supply Chain; Healthy
Organization; Carbon Neutral Society and Circular
Economy; and Corporate Governance. These ESG focus
areas are crucial to Olympus’ sustainability and contribution
to society. For example, one of our top priorities in
Healthcare Access and Outcomes is to enhance colorectal
cancer related training by 20% in target emerging countries
and regions. Healthcare in many of these markets is still
underdeveloped, and Olympus has a strong track record ofbeing the first to deliver training and education tohealthcare professionals. Another focus area is to have a
Healthy Organization, which is critical to my goal of having
Olympus recognized by its stakeholders for its innovative
products and people, as well as being an ESG leader. I04

Olympus Integrated Report 2023

want our employees to come to work smiling, knowing thatthey are part of a unified and collaborative working
environment where they can contribute to Our Purpose of“making people’s lives healthier, safer and more fulfilling,”with a leadership that cares about their well-being andcareer advancement. A key priority within Healthy
Organization is for 30% of management positions globallyto be held by women by fiscal year 2028. Setting a target
is vital for initiating change while demonstrating anunwavering commitment from Olympus’ leaders to both
our stakeholders and employees. Having a target will also
help us enhance our diversity, equity and inclusion strategy,
which is important for ensuring a safe and sustainable
workplace. To reach our target, we have set a minimum of
25% of all new employees as women graduates in Japan,and we have launched a number of programs to create
networks and dedicated teams (for example, in R&D) todevelop future women leaders. In terms of governance, we
now have two women on the Board of Directors out of the
13 members, and I am confident that this number will
steadily rise in the coming years.

New Company Strategy and the Three Guiding Principles
The corporate strategy overseen by Yasuo Takeuchi has
been a huge success, doubling our adjusted operating
margin from below 10% to 20%. However, beyond financial
targets, we have made significant cultural progress by
successfully divesting our Imaging Business and ScientificSolutions Business, so our transformation from an opticalequipment manufacturer to a pure MedTech player is anachievement that we should all be proud of. We have alsoglobalized and diversified the Board of Directors, which wasformerly made up mostly of Japanese members before
2019, so that we are now a leader in Japan and on par withother MedTech companies and global players in terms ofgovernance. Furthermore, half of the senior management
team, our 60 leaders, are non-Japanese, reflecting our global
models’ high level of unity and willingness to collaborate inorder to fulfill Our Purpose. Another achievement has been
increased efficiency, with the SG&A ratio falling below 50%
from 55% in fiscal year 2019, despite working in a variety ofchallenging macroeconomic and macropolitical environments
over the past three to four years. Overcoming thesechallenges, meeting financial targets, and transforming thecompany to a new level demonstrates that the corporate
strategy was perhaps the greatest success story in our longand fruitful 100-year history.
I would like to now discuss our new company strategy,
which introduces the Three Guiding Principles. First, “PatientSafety and Sustainability” entails developing a patient safety
mindset and adjusting our operating model, processes, andsystems in order to become a leading global MedTechcompany. Second, “Innovation for Growth” refers to not only
the need to innovate and develop products but to be moreinnovative and creative, and to take bolder calculated risks
as a company, while working more closely with ourcustomers to create commercial models and offerings.
Third, “Productivity” is the fuel for innovation and we arebuilding a high performing organization focused on patient
safety and product quality while ensuring simplicity andoperational efficiency. We have also established four
strategic value pools that will drive our long-term sustainablegrowth and create value for our customers and society:Business and Global Expansion, Strategic M&A, Care
Pathway Enhancement, and Intelligent Endoscopy
Ecosystem. The Three Guiding Principles and the four value
pools are deeply connected and help facilitate andaccelerate each other, which is the beauty of the newcompany strategy. Strategic M&A, for example, is part ofInnovation for Growth because we cannot develop
everything in-house and must occasionally look outside for
products and solutions to expand our portfolio and fill unmet
customer needs. Finally, our resource allocation andinvestment priorities remain unchanged from the corporate
strategy, with GI, Urology, and Respiratory as focus areas.

Our new company strategy sets a target of revenue
growth CAGR of around 5% over the next three years.
Given our QARA transformation efforts and renewed patient
safety initiatives, investing approximately ¥60 billion in QARA
over that timeframe means that resources allocated to someof our innovation and R&D projects will be impacted, andconsidering the current level of global macroeconomic andmacropolitical instability, I believe this target is reasonable
and will require significant commitment to achieve. However,I am confident that after we have successfully transformed
Olympus to reach the next level of maturity as a leading
global MedTech company, our growth potential will besignificantly higher, and we will be able to grow our revenue
at a rate greater than 5% CAGR while improving ouroperating margin.
I also believe that our capital allocation policy is morethan appropriate for Olympus to become a leading global
MedTech company. Our first priority is to invest in innovation,
the business, and M&A. The second priority is to continue
increasing the dividend gradually, as we have done hitherto.
After securing sufficient liquidity on hand for working
capital and investment, we will consider additional
repurchasing of our shares if there are surplus funds.
Although we expect this policy to remain unchanged for thenext few years, we need to improve how we communicate
the criteria for whether or not to repurchase our shares,
while also keeping in mind that M&A opportunities can bedifficult to plan for, and that the more demanding andchallenging macroeconomic environment will likely cause
Olympus and other companies to hold more cash surplus
than in previous years. While I recognize and appreciatethat capital markets have high expectations of Olympus’
growth potential in the next two to three years, we must be
realistic and focus on QARA transformation and invest for
future growth. Our capital allocation policy is intended tomake Olympus more sustainable while also providing
shareholders with the best possible return, and I continue
to believe that if we accomplish our growth targets outlined
in our new company strategy, the returns to shareholders
will be larger than if we channel future investments into
paying higher dividends.
Olympus has proven in the last three years that it candeliver on its commitments while also creating value forstakeholders. As the new CEO, I will make certain that thistrend continues. Despite facing challenges, we are fullycommitted to becoming a leading global MedTech company
that is recognized by all our stakeholders for its innovative
products and people. I am confident that Olympus has abright and promising future ahead, and we are workingextremely hard to justify the trust that has been placed in us
over the years.

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