Management system

Business Risks

The Mitsubishi Electric Group (hereinafter "the Group") is involved in development, manufacturing and sales in a wide range of fields including Energy and Electric Systems, Industrial Automation Systems, Information and Communication Systems, Electronic Devices, Home Appliances and Others, and these operations extend globally, not only inside Japan, but also in North America, Europe, Asia and other regions. Therefore, various factors may affect actual financial standings and operating results of the Group.

Major factors that may affect actual financial standings, operating results, and the decision of investors are as follows:

  1. (1) The impact of COVID-19

    The Group is executing business in countries and regions affected by COVID-19. The Group is implementing countermeasures as it continues its business operations. However, if the disease spreads or the pandemic becomes protracted, declines in demand and other factors may adversely affect the Group’s performance.

    The Group disclosed the financial performance forecast for the fiscal year ending March 31, 2021 based on the assumption that COVID-19 continues to have a significant impact on revenue and operating profit, etc., until the second quarter of fiscal 2021. The Group’s performance may be affected to a greater extent than currently expected, due to delays in the situation returning to normal, market declines in individual countries and regions, status changes in market recoveries thereafter, and changes in demand structure following sudden changes to societal values or behavior.

  2. (2) Any change in worldwide economic and social conditions, as well as laws, regulations, taxation and other legislation

    The Group conducts business in a wide range of fields as diverse as Energy and Electric Systems to Home Appliances, and roughly 40% of the Group’s revenue are from overseas. Domestic revenue includes products not only used in Japan but also that are incorporated in customers’ products and exported overseas. Therefore, if economic growth from the third quarter of fiscal 2021 onwards is slower than expected due to economic and social conditions in various countries and regions, and there are changes in demand for the Group’s products or sales of customer products containing the Group’s products, this may adversely affect the Group’s performance.

    Furthermore, roughly half of the Group’s overseas revenue are to Asian markets. A slowdown in the Asian economies due to export industry stagnation or a slump in personal consumption resulting from the U.S.-China trade friction and National Defense Authorization Act trends, etc., may adversely affect the Group’s performance, especially in the Industrial Automation Systems business, due to changes in capital investment and sales trends of durable goods.

  3. (3) Foreign currency exchange rates

    In addition to North America, Europe, and China each accounting for roughly 10% of total Group revenue, the Group purchases imported materials that are denominated in U.S. dollars or euros, and sells export goods and purchases imported materials that are denominated in foreign currencies in its Asian production bases. The Group strives to avoid foreign currency exchange rate fluctuations through the use of forward exchange contracts, etc. However, sudden changes in exchange rates that cause major deviations from the exchange rates expected by the Group (105 yen to the U.S. dollar, 115 yen to the euro, and 15.0 yen to the Chinese yuan) may affect the Group’s performance.

The above are forward-looking statements based on the judgement of the Company as of the date of submission of the Annual Securities Report (June 26, 2020).