Corporate Governance

These are the major risk factors that may affect the business operations of the Paramount Bed Group. Group companies are aware of these risks and are using appropriate measures to prevent these problems and minimize the effects of these events if they occur.

These risk factors were selected based on operations of the group as of March 31, 2015. This is not a complete list of risk factors that should be considered before making a decision about purchasing Paramount Bed Holdings stock.

Major risks involving activities of the Paramount Bed Group

(1) Revisions to systems and other items affecting the business climate

Most of our products are subject to government regulations. Hospital and nursing care beds, which are our core products, are used by medical and senior care facilities operated under the auspices of public-sector medical insurance systems and by the families of individuals requiring nursing care under the auspices of public-sector nursing care insurance systems. The payments for medical and nursing care provided by these systems do not include the cost of beds. Any revision to these medical and nursing care insurance systems or changes to payments in association with periodic reviews may cause a decline in the capital expenditures of the healthcare institutions that are the end users of our beds. These events may have a negative effect on the business operations, results of operations and financial condition of group companies.

(2) Growth of overseas operations

Growth outside Japan is one of our strategic goals. Overseas operations are vulnerable to risks that generally are not potential problems for operations in Japan. For example, risk factors for overseas operations include revisions to import and export regulations, inadequate technology and manufacturing infrastructures, and the difficulty of recruiting employees. These or any other problems involving overseas operations may have a negative effect on the business operations, results of operations and financial condition of group companies.

(3) Procurement of certain materials and other items

Group companies purchase specialized materials and other items. As a result, we may become unable to purchase an item from one of the few suppliers. In addition, if this happens, we may be unable to locate another supplier or an alternate product. We are exercising care to prevent this problem from occurring. However, a delay or interruption in the supply of a vital material or product may prevent us from purchasing necessary items as needed. This may have a negative effect on the business operations, results of operations and financial condition of group companies.

(4) Defective products and components

Group companies manufacture products by using quality assurance systems that comply with international standards as well as the group’s own standards. All group companies have extensive and effective quality assurance systems. If there is a defective product or other item that requires a large-scale recall with substantial expenses, the Paramount Bed Group’s reputation may be damaged. The resulting loss of public trust may have a negative effect on the business operations, results of operations and financial condition of group companies.

(5) Natural and other disasters

An earthquake or other natural disaster or a major fire or other accident may severely damage a factory of a group company or a supplier. If this prevents a factory from operating or delays or reduces output, there may be a negative effect on the business operations, results of operations and financial condition of group companies.