Risk Management

Threats and opportunities

Threats and opportunities

<Threats> Decline in sales opportunities due to deteriorating economic conditions
The Sysmex Group operates primarily in the healthcare sector, which is relatively stable. However, if a global economic downturn causes governments to tighten their healthcare finances or medical institutions to reduce their budgets, capital investment could decline, affecting our operating results and financial position.
In addition, significant changes in the economic environment, such as rapid inflation and soaring energy prices, could significantly increase the cost of raw materials, transportation, and other items, which could affect our operating results.

<Opportunities> Increased investment in healthcare infrastructure due to favorable economic conditions
When the global economy is strong, increased investment in medical infrastructure and other factors may provide additional sales opportunities for the Sysmex Group’s products. 
In particular, in emerging markets that are slated for population and economic growth, the need for improved medical standards is increasing, and further market expansion can be expected. 

Responses

The Sysmex Group monitors changes in market conditions globally through its bases in various countries and regions. We are also working to standardize and streamline testing by providing solutions that help medical institutions improve profitability through the use of robotics, AI, and other technologies. Furthermore, in emerging markets where economic and population growth is expected to spur investment in medical infrastructure, we are contributing to Universal Health Coverage* by developing and introducing products that meet a wide variety of market needs and improving access to and quality of healthcare. In particular, we have positioned India, which has high growth potential, as one of our key markets, and we are accelerating the development and launch of our products to expand our market share in the country. The entire Group will continue working to create further added value.

•  A condition in which all people have access to affordable and proper services to improve their health, prevent or treat illnesses, and recover

Responses

The Group hedges its foreign currency-denominated receivables and payables, including foreign currency-denominated trade receivables, loans to affiliated companies, and borrowings, mainly by entering into forward exchange rate contracts. 
In addition, we are taking measures to mitigate the impact of exchange rates by diversifying our reagent production sites globally. 

Threats and opportunities

 <Threats> Loss of public trust due to inadequate response to human rights
Respect for human rights is one of the most important elements of our corporate activities, and we are undertaking a number of measures in this regard in various countries. If the Sysmex Group’s efforts to respect human rights are inadequate or tardy, and human rights violations such as discrimination based on race, gender, or other factors, or if forced labor or child labor occur, we could experience a deterioration of trust among our business partners, investors, and other stakeholders. 

<Opportunities> Improving reliability through appropriate human rights measures
Promoting fair and sustainable corporate management and responding appropriately to human rights, such as by fostering DE&I* that creates and embraces a comfortable working environment for diverse human resources, and eliminating discrimination in the supply chain, may lead to increased reliability among stakeholders and ultimately to the creation of competitive advantage.

• Diversity, equity, and inclusion

Responses

The Sysmex Group has announced a global compliance code that outlines its commitment to respecting human rights and eliminating discrimination, and is committed to creating a corporate management and work environment that respects the human rights of all stakeholders. In addition, our human rights policy stipulates the implementation of human rights due diligence and promotes efforts to prevent and mitigate negative impacts on human rights, not only within the Group but also with external partners involved in the supply chain. We have put in place preventive measures to ensure that our business activities are not involved in or complicit with violations of human rights. These measures prohibit forced labor and child labor and counter discrimination based on gender, disability status, or racial group.
Sysmex has established internal reporting hotlines in Japan and overseas for handling consultations on human rights, including those related to discrimination and harassment. Furthermore, we provide training to prevent harassment and disseminate accurate labor-related information to prevent human rights infringements.

Threats and opportunities

<Threats> Decline in competitive advantage due to delayed response to technological innovation
Recent technological innovations have led to the emergence of new technologies in the healthcare field, and business models are likely to change substantially as a result. Operating in this environment, delays by the Sysmex Group’s in responding to this situation may reduce its competitive advantage.

<Opportunities> Enhanced added value through innovation
The creation and active use of innovative technologies will facilitate further innovation and the provision of high-value-added products and services that improve the efficiency of healthcare, including laboratory operations.
In addition, we have the potential to expand sales opportunities by adapting quickly to changes in business models that accompany the spread of innovative technologies.

Responses

Based on the “Sysmex Way,” the corporate philosophy of the Sysmex Group, we strive to create innovation through the development of various technologies and provide products and services that help to address social issues. The Group continues to invest aggressively in the development of new technologies and is committed to open innovation that effectively creates new clinical value by integrating the Group’s technologies with those of universities, research institutions, and other companies. We have established R&D sites around the world to facilitate these activities and are working to contribute not only to the conventional in vitro diagnostics but also to personalized medicine and preventive medicine.
We will continue to contribute to extending healthy life expectancies and aim for sustainable growth by working to solve medical issues through the creation of new technologies and innovations.

Threats and opportunities

<Threats> Impact on business due to inadequate environmental response or natural disasters
The sustainability of the global environment has become an urgent issue, and environmental regulations are being tightened in Europe, the United States, and other countries. Violations of or delays in responding to regulatory or other requirements by the Sysmex Group may result in penalties, bidding restrictions, or other actions.
In addition, natural disasters caused by climate change may affect the supply of products to customers around the world and the safety of our employees.

<Opportunities> Improving reliability and competitive advantage by addressing environmental issues
By obtaining information on environmental laws and regulations in each country as appropriate, and by proactively responding to such laws and regulations, we can improve the reliability of our products among stakeholders and expand sales opportunities.
In addition, providing added value on the eco-social front, such as environmentally friendly product development and production activities, and establishing a competitive advantage in this area, may contribute to business growth.

Responses

The Sysmex Group has established an Environmental Management Committee as an organization to promote environmental management. The Group is committed to the realization of a circular-oriented society and aims to provide sustainable value to the environment and society both by resolving social issues and by achieving business growth through the Group’s products and services.
We have formulated the Sysmex Eco-Vision 2033 and are working to reduce environmental impact through environmentally friendly products and services that take CO₂ reduction and biodiversity into consideration. For example, we are promoting the use of concentrated reagents, introducing dry ice-free transportation, and developing products using non-animal derived raw materials in all value chains, including production, development, sales, and services. In addition, we endorse the recommendations of the TCFD¹ and are striving to enhance information disclosure based on its framework. Furthermore, we have set targets based on carbon neutrality² and the SBTs³ by 2040, and we are accelerating our efforts to address environmental issues.

• 1 Task Force on Climate-related Financial Disclosures
• 2 Carbon neutral: Targeting Scope 1 and Scope 2
• 3 Science Based Targets (Corporate greenhouse gas emission reduction targets consistent with the levels required under the Paris Agreement)

Threats and opportunities

<Threats> Decreased sales opportunities due to inadequate or delayed response to healthcare system reforms
The marketing of the Sysmex Group’s instruments and reagent products generally requires regulatory approval, but the requirements for obtaining such approval are becoming increasingly complex and sophisticated in each country. This trend may increase the cost of compliance, and delays in responding to such requirements may result in lost opportunities to acquire markets, including an impact on new product launches.
In addition, if individual countries review their insurance coverage systems or reduce health insurance compensation, sales opportunities for the Group’s products could decrease.

<Opportunities> Improved competitive advantage through rapid response to regulations and needs
In the healthcare industry, compliance with increasingly strict regulatory requirements, including the IVDR* in Europe, may create barriers for new entrants and reinforce the Sysmex Group’s competitive advantage. In addition, we could see an increase in sales opportunities if the budgets of medical institutions grow due to improved healthcare finances in various countries. Furthermore, demand is expected to grow due to the expansion of healthcare systems in emerging markets and increased investment in medical infrastructure.

• In Vitro Diagnostic Medical Devices Regulation

Responses

We strive to remain abreast of the latest regulatory information by participating in industry associations in various countries, and we work to obtain and maintain regulatory approvals in a timely and accurate manner by utilizing the Sysmex Group’s global network. We are promoting the development of new diagnostic technologies that contribute to personalized healthcare, based on an accurate understanding of increasingly diverse and sophisticated needs amid changing environments in various countries and regions. In addition, we will continue to leverage our strengths in IVD instruments, reagents, IT, service, and support to address medical issues. These include improving the efficiency of medical workflows, enabling the early detection of diseases, and improving accessibility to healthcare in emerging markets.

Threats and opportunities

<Threats> Impact on business due to infringement or violation of intellectual property rights
The Sysmex Group applies for patents, trademarks, and design rights on a global basis, but such rights may not be granted in some or any countries. Furthermore, if counterfeit products that infringe on the intellectual property rights of the Sysmex Group are distributed, the reliability of test results may not be ensured, and medical institutions and patients may be affected.
In addition, disputes over intellectual property rights may arise, such as lawsuits for infringement of intellectual property rights of third parties or demands for payment of royalties, despite the legitimacy of the Sysmex Group claims.

<Opportunities> Provide unique products and services by acquiring intellectual property rights
The appropriate protection of the intellectual property rights held by the Sysmex Group should strengthen its independence and competitiveness and enhance its brand image.
The Sysmex Group also has the potential to further accelerate innovation through the appropriate use of third-party licenses as well as intellectual property rights owned by the Sysmex Group.

Responses

The Sysmex Group respects the intellectual property rights of the Group and third parties, and seeks to establish a global competitive advantage by proactively seeking rights to valuable intellectual property created in all of its business activities, and by responding appropriately to the intellectual property rights of third parties. Through internal training, employees are made aware of the importance of respecting the intellectual property rights of the Sysmex Group and third parties in the conduct of business. Furthermore, we have established an award system to motivate employees to acquire intellectual property rights.
In addition, as a countermeasure against infringement of the Sysmex Group’s intellectual property rights, we have obtained patents in countries around the world and are working to thoroughly eliminate counterfeit products so that our customers can use our products with confidence. We are working to secure intellectual property rights for important brands globally, including in emerging markets and developing countries. Notably, we have applied for trademark rights in 195 countries and regions for our corporate brands. As a result, overseas holdings account for 85% of our total intellectual property rights.

Threats and opportunities

<Threats> Impact on product supply due to interruptions or delays in procurement or production
The Sysmex Group supplies IVD instruments and reagents, which are essential for medical institutions to perform daily testing, to customers all over the world. Although we make every effort to ensure an uninterrupted supply of products to our customers, stable product supply may be disrupted in the event of difficulties in procuring parts or raw materials, owing to sudden changes in market conditions or the suspension of suppliers’ operations, or in the event of a major natural disaster, fire, or other serious accident or pandemic at supply chain locations including production plants and warehouses, or if distribution routes are blocked due to interstate conflict or trade friction.

<Opportunities> Provide peace of mind and improve reliability through efforts to ensure a stable supply of products and services
In the event of a natural disaster, serious accident, or other contingency, our ability to provide a stable supply of products necessary for testing and avoid interruptions in medical operations, and the establishment of a system to prepare for such contingencies may help us earn trust in our ability to continue supplying products in emergencies and further enhance our brand image.

Responses

The Sysmex Group is committed to the stable supply of products and services on a global basis, in line with its social mission of supporting medical care by providing accurate test results and ensuring confidence through the delivery of high-quality products around the world. In addition to securing inventories of parts and raw materials and purchasing from multiple suppliers, we are working to enhance prevention and recovery measures to address large-scale disasters such as earthquakes, windstorms, and floods at our factories and warehouses. Reagents account for 60.8% of the Sysmex Group’s sales (fiscal year ended March 31, 2024). For reagents, we secure inventory quantities that take into consideration the period required to ensure business continuity. In addition, we produce reagents at multiple locations. In particular, we have established a mutual supply network among major bases to ensure a stable supply of reagents in our mainstay hematology field. 
In addition, the Sysmex Group as a whole has a business continuity plan in place, and through daily training we prepare to restore operations quickly in the event of an emergency so that medical institutions can continue their testing operations.
We will continue to reinforce our efforts to ensure that our customers can use our products with confidence.

Threats and opportunities

<Threats> Reduced reliability due to poor quality of products and services
The products the Group manufactures and procures must be high-quality and safe. If the products we manufacture or procure are found to be of poor quality, this could result in delays or errors in testing at medical institutions, which could affect customers and patients. This could reduce trust in our products and of the Sysmex Group as a whole, and may also affect operating results.

<Opportunities> Improvement of reliability and competitive advantage through quality improvement
By further improving quality through the development and operation of a quality control system that complies with the laws and regulations of each country and international standards, we have the potential to win the trust of customers and expand sales opportunities.
Since our founding, the corporate philosophy of the Sysmex Group, has called on us to instill confidence in our customers through reliable quality. The brand image we have built up to date could help to maintain and enhance our corporate value and competitive advantage.

Responses

The Sysmex Group is committed to group-wide management to maintain quality in compliance with the laws and regulations of each country and international standards. We have established a quality policy to monitor and improve the quality and safety of our products and services. In addition, all of our production bases have acquired ISO 9001 or ISO 13485 certification, the international standards for quality management systems. Furthermore, we collect and analyze information on product reliability and safety from a wide range of domestic and overseas sources, and utilize this information to improve product quality.
The Sysmex Group will continue to instill confidence among its customers through its high-quality products and services.

Threats and opportunities

<Threats> Impact on customers and business due to cyber-attacks
The Sysmex Group’s products are equipped with network-based service capabilities. In the unlikely event that the Group’s products are compromised by cyberattacks targeting medical institutions, testing operations could be suspended, and third parties could gain unauthorized access to personal information.
In addition, we have introduced various information systems within the Group to support information communication, core business operations, and approval procedures to improve operational efficiency, and much of the business information is managed and operated via networks. In the event of system outages or leaks of confidential information due to failures in these systems or networks or cyberattacks, or in the event of the provision of false information or infringement of third-party rights due to the misuse of generative AI and other technologies that the Sysmex Group has been promoting in recent years, the efficiency and reliability of its operations may be impaired.

<Opportunities> Improved reliability of products and services by strengthening security support
By enhancing the security of our products and services, we can further enhance the trust customers place in our products and provide our customers with network-based services that they can use with confidence.
In addition, through the promotion of DX, including security enhancement, and the appropriate use of generative AI, we can expect to further improve business efficiency and productivity by strengthening information collaboration within the Group while managing information appropriately.

Responses

The Sysmex Group is promoting cybersecurity measures for its products and services, led by the Product Cybersecurity Committee, in order to reliably ensure confidence among customers and patients. In line with these efforts, we have established a Product Security Policy and set up a PSIRT¹ to design and manufacture products in accordance with the security policy and to manage after-sales vulnerabilities in cooperation with product security managers in each region.
Furthermore, to minimize the operational impact of information system or network line failures, computer viruses, or external intrusions into information systems, we are working to tighten information management by introducing mechanisms to detect unauthorized communications and isolate malware, conducting 24-hour monitoring, establishing a CSIRT², and developing security measures such as joining external organizations to quickly obtain information in case of emergencies or major incidents, as well as developing systems related to business continuity.
In addition, we are promoting efforts to inform employees of the rules for the use of AI technologies in general, taking security into consideration, and to accelerate innovation through proactive use of AI technologies.

• 1 Product Security Incident Response Team
• 2 Computer Security Incident Response Team

Threats and opportunities

<Threats> Delay in achieving strategic goals due to lack of investment effectiveness
The Sysmex Group is working to expand its R&D, production, and other bases. At the same time, the Group is accelerating its growth through proactive investment in IT infrastructure and leading-edge technologies, as well as through acquisitions and capital tie-ups. Amid these initiatives, changes in the business environment or exposure to unpredictable risks could prevent the full realization of the expected impacts and affect the achievement of our strategic goals.

<Opportunities> Accelerate business by maximizing investment effectiveness
Based on our management strategy, active investment from a long-term, global perspective may generate even higher investment impacts and allow us to realize our strategies even more swiftly.

Responses

• 1 Post-merger integration