Business Risks JS Group Corporation and Consolidated Subsidiaries This annual report contains the following  information about business conditions,  the financial situation and other factors  that may influence investor decisions. Forward-looking statements are  based on the judgments of the JS  Group’s management as of June 2010.  Statements concerning the future and  assumptions are subject to uncertainty  and risks, and actual results may vary  significantly. Operating revenues of most companies in  the JS Group are significantly affected by  domestic demand in Japan. In particular,  major fluctuations in the number of new  housing starts or the level of construction  orders received could have a negative  effect on business performance and  financial positions of the JS Group. affect the Group’s business performance  and financial positions. The JS Group faces severe competition in  most of the markets in which it operates.  For this reason, it is difficult to always set  prices at levels that are advantageous to  the JS Group. The Group takes pride in its  status as a leading enterprise capable of  bringing attractive, high-quality products to  market. However, there is no guarantee  that the Group will enjoy a competitive  advantage in terms of pricing. The JS  Group’s products and services are  exposed to intense price competition,  which could have a negative effect on  business performance and financial posi- tions of the JS Group. The JS Group engages in production and  sales activities overseas, mainly in certain  Asian countries, including China and   Thailand. The following latent risks exist  because of the rapid pace of development  in these countries. These factors could have an adverse  impact on the business performance and  financial positions of the JS Group. In its operations, the JS Group is dedi- cated to comprehensive provision of  agreeable residential and urban environ- ments for the 21st century. The Group  creates high-quality living spaces that are  healthy, comfortable and safe by continu- ally developing attractive products based  on an accurate understanding of available  technology and consumer needs. However,  the Group’s business performance and  financial positions could be adversely  affected if a failure to respond appropri- ately to changes in market or industry  needs were to result in a decline in growth  and earning potential. Exchange rate fluctuations have the potential  to affect the yen equivalents of assets and  liabilities resulting from the foreign currency  denominated transactions of the JS Group.  Where transactions are denominated in  foreign currencies, the prices of goods and  amounts of sales could also be affected.  These factors could have an adverse impact  on the business performance and financial  positions of the JS Group. The JS Group plans to expand its business  operations through financial activities,  including corporate acquisitions and capi- tal participation. To maximize the benefits  of these acquisitions, the JS Group seeks  to integrate them into their corporate cul- tures and management strategies. How- ever, there is no guarantee that the  anticipated returns and synergy benefits  will be realized. It is possible that the busi- ness performance and financial positions  of the JS Group will be adversely affected  by these acquisitions and capital participa- tion activities. The JS Group procures materials, parts,  services and other supplies as required for  its production activities. There is a possibil- ity that the amounts paid for these sup- plies will rise because of increased industry  demand or increasing raw material prices.  There is also a possibility that the reliability  or reputation of the JS Group’s products  will be adversely affected by defects in  materials, parts, services or other supplies.  These factors could, in turn, adversely  JS Group Corporation Annual Report 2010 56 (3) New Product Development Risk (6) Foreign Exchange Risk (7) Acquisition/Merger Risk (4) Procurement Risk (5) Overseas Market Risk (1) Economic Risk (2) Competitive Risk 1) Major exchange rate fluctuations caused  by currency policies 2) Changes in export or import regulations 3) Dramatic increases in labor costs and  prices, etc. 4) Interruption of production activities due  to strikes, etc. 5) Unanticipated changes to legislation or  financial regulation and international tax  risks such as transfer pricing legislation 6) Other economic, social and political  risks (1) Economic Risk (2) Competitive Risk (3) New Product Development Risk (4) Procurement Risk (5) Overseas Market Risk (6) Foreign Exchange Risk (7) Acquisition/Merger Risk (8) Business Restructuring Risk (9) Regulatory Risk (10) Product Liability Risk (11) Disaster and Accident Risk (12) Environmental Preservation Risk (13) Risk of Default on Receivables (14) Risk of Fixed Asset Value  Reduction (15) Retirement Benefit Risk (16) Risk of Personal Information  Leaks