Operating Risks

The business results of the Eiken Chemical Group are subject to risk of serious impacts from a wide range of factors that could arise in the future. In the following discussion, we list the main potential events that are risk factors for the Group’s business. Awareness of these risks enables the Group to take steps to prevent their occurrence or prepare responses in the event that they do occur.

Risks related to overseas operations

To meet the goals of EIKEN ROAD MAP 2030, the Eiken Chemical Group must advance its development on the global level. However, factors such as changes in economic and business conditions in each country and region, as well as geopolitical risks, can cause delays in drug approvals or result in the delay, suspension or even cancellation of colorectal cancer screening programs. Such events can adversely affect the Group’s financial position and management results.
Eiken China Co., Ltd., a consolidated subsidiary of Eiken Chemical Co., Ltd., produces clinical diagnostics under contract from Eiken Chemical and conducts its own development, manufacturing and sale of clinical diagnostics in China. If changes in the market environment cause production under contract from the Company to slow, if Eiken China’s business development in China does not proceed according to plan, or if the value of real estate held by Eiken China drops precipitously, the Company may be unable to recoup its investment in Eiken China.
In view of these risks, the Eiken Chemical Group is strengthening its global development through measures such as appropriate selection of sales agencies, led by the Global Sales & Business Development Division. Eiken China, to fulfill its central role in the Group’s China operations, is striving to expand sales in that country, with support from Eiken Chemical’s Chinese Business Division.

Risks related to new products and technologies

The Eiken Chemical Group aims to build strengths in the planning and development of products and technologies based on medical needs and a medium- to-long-term perspective. If research and development are delayed or suspended, however, the Group may be unable to recoup its investment in research and development; may lose opportunities to commercialize the fruits of that research and development; or may fail to keep pace with constantly changing market trends, with the result that the Group fails to obtain sufficient results from those R&D efforts. In such cases, the Group’s financial position and management results may be significantly impacted. Moreover, technological developments at other companies may erode the superiority of the Group’s products, resulting in a decrease in product sales.
In view of these risks, in EIKEN ROAD MAP 2030 and the medium-term management plan, the Eiken Chemical Group adjusts its business strategy in accordance with changes in the business environment. Similarly, the Group is strategically advancing its product and technology development, managing the progress of R&D through the Management Conference and the Board of Directors.

Risks from medical systems and pharmaceutical regulations

The Group sells its products in accordance with the pharmaceutical regulations of respective countries and regions. If trends in reform of medical systems in certain countries cause changes in medical expenses or pharmaceutical regulations, product prices and methods of use of products may be affected, causing the Group’s financial position and management results to be impacted.
In view of these risks, the Group strives to grasp trends in medical systems and pharmaceutical regulations in each country quickly, and to respond in an appropriate and timely manner.

Risks related to product quality

The Group works hard to assure the quality of its products, based on quality management systems (certification under ISO 13485 and MDSAP). However, in the event that a problem with product quality arises, the Group’s financial position and management results may be impacted. In view of these risks, the Group takes steps to strengthen quality assurance. The Eiken Chemical Group strives to maintain stable quality by strengthening its production-technology capabilities and operate quality management systems appropriately. For the same purpose, the Group surveys and analyzes product-quality assessments in the market.

Risks related to stability of product supply

In the event of a natural disaster, such as a major earthquake or storm and flood damage, or a major accident such as a fire, the factories and equipment of the Group and/or its suppliers could suffer extensive damage. Similarly, a pandemic or geopolitical risk may force the Group and/or its suppliers to suspend operations for an extended period of time. If this happens, stable supplies of products may become impossible, causing the Group’s financial position and management results to be impacted.
The Group is taking a number of steps to deal with these risks. In addition to securing safety stocks, the Group strives to reduce risk by purchasing from multiple companies. The Group also drafts business continuity plans and strives continuously to improve its response capabilities. Eiken Chemical has obtained certification as an Organization Contributing to National Resilience (Resilience Certification) from the National Resilience Promotion Office of the Cabinet Secretariat.

Risks related to IT systems

The Eiken Chemical Group introduces a variety of IT systems to enhance the efficiency of its operations and is improving its business processes. In this field, adverse events can occur such as delays in responding to innovation in IT, damage to systems and circuits from disasters and the like, and damage or information leaks from computer viruses. In such cases, the Group’s financial position and management results could be impacted.
In view of these risks, the Eiken Chemical Group devises appropriate cybersecurity measures and conducts education and training on problems such as targeted e-mail attacks (“phishing”).

Risks related to COVID-19

Under the impact of the worldwide COVID-19 pandemic, economic and healthcare activities have stagnated, national and regional colorectal cancer screening programs have become delayed and the number of screening tests conducted by medical facilities has declined, resulting in a decline in demand. However, if demand increases rapidly amid a later recovery in economic activity, shortages of semiconductors and materials and an increased burden of transportation and other procurement costs could result. Such events could impact Group’s financial position and management results.
The Eiken Chemical Group is taking a number of steps in consideration of these risks. The Group is striving to grasp trends in each country rapidly, adapting to changes in the environment as required at each moment. The Group is also making efforts to obtain stable supplies and global development of COVID-19 detection reagents. Through these efforts, the Eiken Chemical Group aims to expand sales while contributing to society.