The main operational and other risks that could significantly affect the decisions of investors, by having an impact measured in the tens of billions of yen or more on the Group’s business performance, financial position, and cashflow, are set out below, as well as countermeasures against these risks. The forward-looking statements contained in this report are based on the judgement of the Group at the time of publication of the securities report, and do not encompass every possible risk posed to the Group.

<Risks>
　Economic conditions in countries and regions that represent important markets for the Group could potentially have a major impact on the Group’s business performance. Economic recession, falling demand, or increasing price competition particularly in the North American market, which makes up approximately 80% of the Group’s revenue, could undermine the revenue and profitability of the Group’s products and services.

<Countermeasures>
　The Group continuously monitors economic conditions and demand trends in major markets and aims to mitigate the impact of economic downturns and falling demand by flexibly adjusting production and sales plans in response to changes in the market environment. In addition, in response to intensifying price competition, the Group strives to ensure profitability by enhancing the competitiveness of its products and services and reducing costs.

<Risks>
　North America accounts for approximately 80% of the Group’s revenue, and some of the Group’s revenue, operating profit, and assets are denominated in U.S. dollars and other local currencies and are converted into yen when the Group’s consolidated financial statements are compiled. If discrepancies arise between projected exchange rates in full-year forecasts, etc. and actual rates at the time of account settlement, the Group’s revenue and financial position may be adversely affected when the yen appreciates and positively affected when the yen depreciates.

<Countermeasures>
　To minimize foreign exchange risk, we conduct production in Japan and the United States, our main markets. In addition, depending on the circumstances, we hedge revenue denominated in foreign currencies generated in Japan through forward exchange contracts and other means.

<Risks>
　The Group primarily raises funds in Japan in Japanese yen, and in periods of rising domestic interest rates, increased financing costs could have a negative impact on business performance. Furthermore, if unexpected disruption in the financial environment makes it difficult to raise the necessary funds, this could have a negative impact on the Group’s financial position and the execution of its growth strategy.

<Countermeasures>
　The Group is taking steps to reduce interest rate and liquidity risks by raising funds primarily at long-term fixed interest rates through multiple financial institutions and financing methods, diversifying repayment due dates, entering into sufficient commitment line agreements, and maintaining a certain balance of cash and cash equivalents.

<Risks>
　The Group secures raw materials from numerous suppliers, but in some cases the Group relies on particular items and/or a limited number of suppliers. As a result, costs may increase due to rising raw material prices, logistics costs, and energy prices, as well as increases in labor costs, brought about by geopolitical risks, tight supply and demand, environmental regulations, and other factors. In addition, U.S. tariff policies may increase the procurement costs of parts imported from certain countries for locally produced vehicles at U.S. production facilities. In terms of geopolitical risks, a worsening the Middle East situation may lead to increases in energy and raw material prices, including rising crude oil prices, which could raise the costs of procuring parts and raw materials, as well as logistics costs. If these impacts cannot be fully absorbed through cost improvement efforts or by passing them on to product prices, the Group’s business performance and financial position may be adversely affected.

<Countermeasures>
　To ensure sustainable competitiveness in procuring raw materials, the Group is working on productivity improvements and quality improvements rooted in coexistence and co-prosperity with its suppliers. To address the impact of increased procurement costs resulting from U.S. tariff policies, the Group will continue to pursue cost improvements by closely monitoring the status of raw material and parts procurement, and working together with suppliers to achieve optimal procurement. Furthermore, to mitigate supply and demand fluctuation risks arising from dependence on specific raw materials and parts, we are working to transition to materials and component configurations with lower dependency and to develop alternative technologies. In addition, we are working to diversify and stabilize procurement risks by securing multiple suppliers, enhancing supply chain visibility, and strengthening collaboration with suppliers. Going forward, we will continue to implement measures from both technological development and procurement strategy perspectives and strive to minimize the impact of changes in supply and demand conditions on the Group’s business activities. Furthermore, in response to the risk of fluctuations in raw material prices, including crude oil prices, against the backdrop of the worsening the Middle East situation, we are striving to establish a stable procurement system by diversifying suppliers, building long-term business relationships, and appropriately managing inventory levels. We are also working to reduce the impact on our business by promoting cost improvement activities and passing on costs to product prices as necessary.

<Risks>
　The Group mainly comprises the Automotive Business Unit and the Aerospace Company. Aiming to be a compelling company with a strong market presence built upon its customer-first principle, the Group has carried out selection and concentration, and, by making the most of its limited management resources, operates a highly profitable business model.
　The Automotive Business Unit accounts for more than 90% of the Group’s revenue, and our sales are concentrated in the markets of developed economies, particularly in North America. Our main production facilities are the Gunma Plant in Japan and Subaru of Indiana Automotive, Inc. (SIA) in the United States, and production and sales are centered on sports utility vehicles (SUVs). Given this business structure, the Group is particularly susceptible to factors such as demand and market conditions in the automotive business, price competition with competitors exceeding anticipated levels, and changes in policy and trade trends in the North American region. In particular, if tariff policies are changed, additional tariffs may be imposed on finished vehicles exported from Japan to our U.S. sales subsidiary and on certain parts procured from overseas at U.S. production facilities, which may have an impact through increased costs. The Group’s business performance and financial position could be significantly affected by these factors.

<Countermeasures>
　To prepare for fluctuations in demand and market conditions, the Group continuously monitors supply and demand trends in key markets and flexibly revises its production and sales plans to maintain profitability. At the same time, in response to intensifying price competition, the Group will strengthen the competitiveness of its product lineup and review its cost structure, while pursuing improved profitability through the focused allocation of limited management resources. The Group aims to improve capacity utilization through flexible production adjustments and optimized operations according to demand trends, thereby minimizing the impact on its business. In addition, with respect to changes in policy and trade trends in the North American market, relevant departments work together to continuously gather information and analyze impacts, and strive to enhance resilience by considering necessary measures in production, procurement, and sales.

<Risks>
　The automotive industry, which is the Group’s core business, is undergoing major changes in its operating environment. Customer values, preferences and needs are becoming increasingly diverse due to such factors as the entry of companies from other industries accompanying the spread of mobility services, the shift toward electrification in response to environmental requirements, and the diversification of means of transportation resulting from the spread of ridesharing and autonomous driving. In the face of such discontinuous and rapid changes in the business environment, if the Group is unable to accurately identify customer needs and sales of new models and products fall short of plans, this could have a significant impact on the Group’s business performance and financial position.

<Countermeasures>
　Since the overhaul of our management structure in 2023, the Group has been firmly committed to two key initiatives: “Monozukuri Innovation” and “Value Creation.” In April 2024, we implemented organizational reforms, including the expansion of the Chief X Officer (CXO)^*1 structure within the automotive business, with the aim of strengthening cross-functional capabilities across the Company and clarifying executive responsibilities. Furthermore, in April 2025, we established two new CXOs^*2 and implemented organizational restructuring, including the creation of the Customer First Innovation Division and the reorganization of the sales division, in order to accelerate initiatives on core priority themes and achieve overall optimization. In addition, in the SUBARU Management Policy 2025 announced in November 2025, we indicated our intention to accelerate “Manufacturing Innovation,” advance product development centered on next-generation technologies, and significantly expand our product lineup so that we can respond to increasingly diverse market and customer needs. In this way, we strive to keep abreast of the market environment and demand trends, plan products based on customer needs, and work to develop and manufacture new products and introduce them to the market at an appropriate timing and price point.

*1:

Chief Monozukuri Officer (CMzO), Chief Battery Business Officer (CBBO), Chief Digital Car Officer (CDCO), Chief Connected Business Officer (CCBO), Chief Cost Innovation Officer (CCIO)

*2:

Chief Logistics Officer (CLO), Chief Human Resources Officer (CHRO)

<Risks>
　A large-scale recall, in addition to the major costs involved in quality-related expenses, could have a substantial impact on the Group’s business performance and financial position by damaging the brand image.

<Countermeasures>
　The Group has established the following Quality Policy, positioning high quality as an important foundation of the SUBARU brand and a source of added value.

(Quality Policy)
　At SUBARU, quality is our highest priority as we earn the trust of our customers.

1. We will deliver long-lasting products that our customers can use with peace of mind.
2. We will continually improve our products and services by always listening closely to our customers’ voice.
3. We will be a good corporate citizen in all markets where we do business by ensuring compliance with all internal rules, local laws, regulations and social norms.

　Since 2018, we have been pursuing “Quality Enhancement activities” and steadily achieving results, with a focus on innate quality.
　Going forward, we will continue to accelerate “quality enhancement” and work to ensure quality that enables customers to perceive value at various touchpoints, from the earliest stages of development to production, logistics, and after-sales service, including in response to new technologies such as electrification.
　To this end, we will maintain a rigorous final inspection system and deliver products with reliable quality, while also reforming our business processes so that, in the unlikely event a problem arises, minimizing the impact on customers and resolving it promptly are given top priority.
　In addition, we will further heighten awareness that quality is the top priority by ensuring that all employees understand that “quality” extends beyond the product itself to include sales and services, and that customers continue to perceive it as value over the long term after purchase.

<Risks>
　The Group procures parts and materials from numerous suppliers in Japan and overseas. In recent years, uncertainty surrounding the supply chain has increased further due to rising geopolitical risks, including the Middle East situation, changes in trade policies and regulations in various countries, fluctuations in resource and energy prices, supply constraints on key components, logistics constraints caused by labor shortages, and an increase in cyberattacks.
　In addition to these factors, if natural disasters such as major earthquakes and typhoons, factory fires, or outbreaks of infectious disease cause supply chain disruptions, supply-demand constraints, or disruptions in logistics networks, it may become difficult to maintain stable procurement and product shipment in terms of cost, delivery time, and quality, which could affect the Group’s production activities, business performance, and financial position.

<Countermeasures>
　To maintain a stable supply of parts and materials, the Group strives to reduce procurement risks by regularly checking suppliers’ quality assurance systems and supply capacity, as well as monitoring their business position as necessary. We are also strengthening our ability to respond to the risk of supply disruptions by diversifying suppliers, considering alternative sourcing, and securing appropriate inventory levels. Through these efforts, we strive to minimize the impact of supply chain disruptions by identifying at an early stage the suppliers and parts that may be affected, confirming the inventory levels necessary to continue production, considering the procurement and production of alternatives, and providing support for the restoration of production facilities.
　In logistics, we established the position of Chief Logistics Officer (CLO) and a Logistics Division in April 2025, building an integrated management system that provides a comprehensive overview of overall logistics operations. Through these efforts, we are responding more quickly and flexibly to environmental changes such as driver shortages and transportation constraints, while also strengthening compliance with laws and regulations, and promoting initiatives to realize safe and efficient logistics.

<Risks>
　The Group works to protect its technologies and know-how as intellectual property that are necessary to deliver the values of Enjoyment and Peace of Mind to customers through our products and services, and we are committed to maintaining and enhancing the SUBARU brand value. The Group’s business performance and financial position may be significantly affected if a third party makes unauthorized use of the Group’s intellectual property to manufacture similar products or if a dispute relating to intellectual property arises and a decision disadvantageous to the Company is made.

<Countermeasures>
　The Group has formulated an intellectual property strategy aligned with its business strategy and R&D strategy, promotes the acquisition of rights and development of know-how for technologies and brands that are sources of its competitiveness, and appropriately manages its intellectual property portfolio. In addition, in product development, the Group strives to reduce the risk of infringement of rights by respecting the intellectual property rights of third parties and conducting investigations and clearance activities from the development stage. The Group makes design changes, obtains licenses, and takes other measures as necessary to minimize the impact on its business. Furthermore, in response to counterfeit and infringing products, the Group conducts market surveillance in Japan and overseas and works to protect its brands and ensure customer safety through measures such as issuing warnings to infringers, requesting injunctions and crackdowns by administrative authorities and other relevant organizations, and requesting the removal of online listings. In addition, with the aim of enhancing its ability to respond to intellectual property-related risks, the Group continuously provides intellectual property education and has established a framework in collaboration with external experts to strengthen the prevention of intellectual property-related risks and responses to disputes.

<Risks>
　The Group makes extensive use of information technology, networks, and various information systems in product development, production, sales, and other business activities, and its products are equipped with electronic components and controlled by software. In recent years, cyberattacks have become increasingly advanced and sophisticated, and the risks of targeted attacks, ransomware, unauthorized access, and attacks via the supply chain continue to increase. In addition, while the Group is increasingly utilizing advanced technologies, including generative AI, to improve operational efficiency and create added value, concerns are also growing over the emergence of new risks associated with the use of generative AI, such as unintended external leakage of information, inappropriate handling of confidential information and personal information, errors in judgment and declines in quality resulting from the business use of incorrect outputs, infringement of third-party intellectual property rights, violations of laws, regulations, and agreements, and damage to social credibility and brand value. Furthermore, there is also an increasing likelihood that cyberattacks, such as sophisticated phishing scams, impersonation, and unauthorized access, will occur through the malicious use of generative AI. In addition, if malware infections, leaks of personal information or confidential information due to human error or misconduct, system failures, or large-scale power outages, fires, natural disasters, or other such events occur, they could result in the suspension of critical operations or services, data corruption or loss, impacts on the quality and safety of products and services, and declines in social credibility and brand value. As a result, this could have a significant impact on the Group’s business activities, business performance, and financial position.

<Countermeasures>
　The Group recognizes the significance of the impact that risks associated with cybersecurity and the use of advanced technologies, including generative AI, may have on business activities and management, and is working to strengthen security and IT governance across the Group. As part of these efforts, we have established a Basic Cybersecurity Policy and established a Cybersecurity Committee chaired by the Chief Information Security Officer (CISO). By building a framework for regular reporting to and deliberation by management, we have clarified the reporting lines to management.
　In practice, the Cybersecurity Division takes the lead in establishing and operating a security management system for information technology, networks, systems, and products, and promotes various measures under the policies and supervision of the committee.
　In addition, with respect to risks associated with the use of generative AI, in light of risks such as information leakage, infringement of intellectual property rights, violations of laws, regulations, and agreements, and the business use of incorrect outputs, we have established rules and guidelines for the use of generative AI and are monitoring and controlling its use. Furthermore, while leveraging external experts and the latest technological trends and threat intelligence, we are working to improve our ability to respond to cyberattacks and new threats arising from the misuse of generative AI, while continuously enhancing our IT governance and security measures. Specifically, we continuously conduct education and awareness activities for employees and relevant parties regarding cybersecurity and the appropriate use of generative AI, while also verifying operational status and implementing improvements through internal audits and other measures.
　Furthermore, by strengthening our security defense systems and monitoring frameworks, we are working to ensure the early detection of ever-evolving cyberattacks and unauthorized use and to minimize damage. In addition, to ensure a swift and appropriate response in the event of incidents such as cyberattacks and information leaks, we have established a Security Incident Response Team (SIRT) structure. From a business continuity perspective, we have also built a multi-site data backup system utilizing our own data centers and cloud environments, and strive to achieve rapid recovery and reduce the impact in the event of disasters or system failures.

<Risks>
　The occurrence of a material legal violation at the Group or one of our subcontractors, or fraudulent or inappropriate conduct by officers or employees, could have a significant impact on the Group’s business foundations and adversely affect the Group’s business performance and financial position due to loss of customer confidence and trust, or damage to the brand image as a result of the fall of the Group’s reputation in society.

<Countermeasures>
　The Group considers rigorous compliance to be one of its most important management priorities, and strives to avoid or minimize compliance risks by constructing and managing a compliance system and organization that ensure all officers and employees are aware of the importance not only of compliance with all laws, regulations, and internal rules, but the execution of fair and equitable corporate activities in conformity with social norms, and we carry out training activities to this end.

　In the course of our business activities, the Group may become a party to a variety of litigation or other legal proceedings involving customers, suppliers, or third parties. If a judgment unfavorable to the Group is rendered in cases currently under dispute or in future legal proceedings, it could damage our brand image and significantly affect the Group’s business performance and financial position.

<Risks>
　If constructive dialogue with shareholders or communication with stakeholders is insufficient, or if a material legal violation, such as insider trading or fraudulent misstatements, results in the imposition of a significant fine on the Group, this could lead to a loss of trust among shareholders, investors, and other stakeholders, as well as reputational damage. Consequently, the Group’s business operations, business performance, and financial position could be significantly affected.

<Countermeasures>
　To achieve sustainable growth and increase corporate value over the medium to long term, and to gain the satisfaction and trust of all stakeholders, the Group has established Corporate Governance Guidelines and works to strengthen corporate governance as one of its top management priorities. The Group also works toward fair disclosure in accordance with our Disclosure Policy, and discloses information in accordance with the relevant laws and regulations. We also disclose promptly, fairly and impartially, and appropriately any corporate information that we believe will be useful in terms of allowing a deeper understanding of the Group’s management strategies and business activities. In addition, as part of our communications aimed at the sustainable growth of our Group, we are striving to improve stakeholder communication through constructive dialogue with shareholders, investors, and other stakeholders regarding the progress of each initiative under the SUBARU Management Policy 2025 announced in November 2025, ESG information on electrification, human capital, intellectual property, governance, and other matters, and management that is conscious of cost of capital and stock price, as well as through feedback to relevant personnel within the Company.

<Risks>
　If the Group, or one of its business partners or other parties, were involved in a case involving a problem in the working environment, health and safety at work, harassment of any kind, infringement of workers’ rights and equal opportunity or procuring raw materials associated with human rights issues, this could have a significant impact on the foundations of the Group’s business owing to violations of relevant laws and regulations, in addition to loss of customer trust and confidence and damage to the Group’s brand image and reputation in society, sluggish sales, talent outflows, and difficulties in procuring materials and funds, and possibly have a significant impact on business performance and financial position.

<Countermeasures>
　The Group puts people first and engages in people-oriented manufacturing. We regard respect for the human rights and individuality of each and every person as an important management issue for SUBARU and have established the SUBARU Group’s Human Rights Policy. Based on this policy, we conduct human rights due diligence to identify human rights risks in our business and formulate and implement measures to address them. We are steadily implementing measures to address the significant risks identified through these processes and are continuously working to mitigate them. We are also engaged in undertakings to encourage respect for human rights by exhorting business partners and others involved in our business, including in our supply chains, to respect human rights based on this policy.

<Risks>
　An inability to secure human resources due to a tight labor market, intensifying competition for human resources, including from other industries, or labor problems that could lead to compliance issues, as well as inadequate responses to occupational health and safety, or a continued outflow of human resources, could have an impact on the Group’s business activities and management. Similarly, insufficient human resources development or a failure to put in place a work environment that respects diversity and allows all employees to perform a full role could also have an impact on the Group’s business activities.

<Countermeasures>
　Based on the belief that each and every employee is a driving force behind achieving both the SUBARU Group’s sustainable growth and the realization of a sustainable society, we aim to create “truly competitive people and organization,” and we are also fostering a culture in which employees can think about their own career development and take on challenges, while developing an environment in which diverse human resources can thrive. With the aim of becoming a global leader in “manufacturing” and “value creation,” we are actively recruiting human resources in specialized fields such as electrification, advanced safety technologies, and IT. In December 2020, we established “SUBARU Lab” as a new development base in Shibuya, Tokyo, where IT companies are concentrated, and have since been working to recruit the human resources necessary for AI development. In February 2025, we expanded the site and broadened its functions to encompass software development in general, thereby driving innovation. In order to continue to realize our distinctive values, we strive to promote personnel with respect for diversity in terms of gender, nationality, culture, lifestyle, and other areas and to create a comfortable work environment so that employees with diverse attributes and values can develop their potential to the fullest of their abilities. In particular, we regard health and safety as a critical management issue. Guided by the fundamental principle that “health and safety take precedence over all operations,” we are implementing company-wide initiatives aimed at preventing workplace accidents, preventing illness, and improving the working environment.

<Risks>
　If the SUBARU Group’s climate change initiatives do not progress appropriately, or if procurement, production, and logistics activities are disrupted by extreme weather, then depending on the impacts and extent of manifestation of transition risks and physical risks, which are extremely difficult to forecast at present, the SUBARU Group’s business performance and financial position could be significantly affected through increases in research and development costs, loss of sales opportunities due to declines in customer satisfaction and brand image, and disruptions to procurement, production, and logistics activities caused by extreme weather.

Key opportunities recognized in relation to climate change
　Appropriate initiatives to address climate change are expected to create new markets and jobs, and enable the efficient use of capital and energy.

*

Please note that the risks and opportunities described are based on past facts and currently available information, and may differ significantly due to factors such as future economic trends and the business environment surrounding SUBARU. Furthermore, this represents opportunities for SUBARU products adapted to climate change to make a contribution, and does not imply that we anticipate that climate change will worsen.

<Countermeasures>
　The Group extensively gathers information through various specialized divisions with regard to transition risks in areas such as policy and regulations, technology, and markets related to climate change, and works to develop a sound awareness of the uncertain risks caused by climate change based on future forecasts. Furthermore, with regard to operational risks associated with natural disasters such as flooding, which are linked to the physical risks of climate change, as part of its BCP efforts, the Risk Management and Compliance Office is taking the lead in developing the relevant rules, while establishing a system to centrally manage information across the entire SUBARU Group during emergencies and to oversee and coordinate the response.

<Risks>
　The Group does business in countries around the world, with the bulk of our international business in North America, and our business activities in overseas markets entail inherent risks, including political and economic factors, changes in laws or regulations, taxation, tariffs, and other changes in tax systems. If such risks materialize, or if changes in political factors, tighter trade policies, or trade disputes arise in the countries and regions where we operate, the Group’s business performance and financial position could be significantly affected.
　In particular, with regard to U.S. tariff policies, policy changes in the previous fiscal year had a certain impact on the Group’s earnings, such as the imposition of additional tariffs on finished vehicles imported from Japan by our U.S. sales subsidiary and on parts imported from certain countries by our U.S. production facilities. If tariff policies continue for a prolonged period, or if they lead to significant fluctuations in foreign exchange and financial markets or a decline in demand, the Group’s business performance and financial position could be significantly affected.
　In addition, the main legal regulations relating to the environment and other matters concern automobile fuel consumption, exhaust emissions, measures to promote more efficient use of energy, noise levels, recycling, and levels of pollutants emitted from manufacturing plants, and these regulations could change significantly in the future. If our response to various regulations is inadequate, the Group’s business performance and financial position could be significantly affected.

<Countermeasures>
　The Group closely monitors developments in the countries and regions where we operate with respect to risks such as political and economic factors, changes in laws or regulations, taxation, tariffs, and other changes in tax systems. In particular, we continue to closely monitor developments in the U.S. market, and to minimize the impact of tariff policies, relevant departments in Japan and the United States work closely together to gather information and consider countermeasures. The Group will work as one to improve the sales mix, curb sales incentives, reduce costs, and cut expenses, while striving to secure earnings through strengthening product competitiveness.

<Risks>
　The Group operates businesses in countries around the world, but if terrorism, war, civil war, political instability, deterioration in public security, or similar events occur in any of these countries or regions, its business activities could be impeded. As a result, the procurement of raw materials and components, production, product sales and logistics, and the provision of services could be delayed or suspended, and if such disruptions are prolonged, the Group’s business performance and financial position could be significantly affected.

<Countermeasures>
　To respond to changes in conditions in the various countries where the Group operates, the responsible division conducts daily information-gathering and monitoring activities and shares information among the relevant divisions. Through these efforts, the Group monitors conditions in each country and region and takes measures to minimize the impact on its business activities.

<Risks>
　Natural disasters such as major earthquakes, typhoons, torrential rain, and related fires and floods, as well as accidents such as fires, could impede the Group’s business activities. If this results in prolonged delays or suspensions in the procurement of raw materials and components, production, product sales and logistics, and the provision of services, or in a prolonged suspension of corporate functions, the Group’s business performance and financial position could be significantly affected.

<Countermeasures>
　The Group regularly maintains and updates its rules and conducts training and other measures to prepare for business continuity. In addition, each business site is strengthening BCP by identifying critical operations and establishing emergency contact systems, while working closely with company-wide corporate divisions to advance measures for ensuring accurate and swift business continuity and early recovery.

<Risks>
The outbreak of infectious disease or other unforeseen disasters (such as pandemics) could impede the Group’s business activities, and if delays or suspensions in production, product sales, or the provision of services are prolonged, or if the suspension of corporate functions is prolonged, the Group’s business performance and financial position could be significantly affected.

<Countermeasures>
　The Group has systems in place to respond swiftly in the event of an emergency by setting up cross-departmental and cross-site organizations as necessary in preparation for risks that could have a significant impact on management and that are highly urgent and difficult to address through normal decision-making routes.