Honda Motor Company (HMC) Risk Analysis

Shareholders of record as of an applicable record date may sell shares after the record date in anticipation of receiving a certain dividend payment based on the previously announced forecasts. However, since these

Honda engages in business operations through alliances and joint ventures with other companies in expectation of synergy effects and increased efficiency, or to meet the requirements of the countries in which business development is being undertaken. As Honda advances its initiatives for company-wide strategies, which are zero impact on the global environment, zero traffic collision fatalities, and creating new value, the utilization of alliances and other forms of partnership are gaining importance. If disagreements among partners regarding business, leakage of profit or technology, delays in decision-making or poor operating results at business partners occur in the context of an alliance or joint venture, or if conditions to an alliance or joint venture are changed or cancelled, it may have an adverse effect on Honda's business and operating results.

Honda's Financial services business offers various financing plans to its customers designed to increase the opportunity for sales of its products. However, customers can also obtain financing for the lease or purchase of Honda's products through a variety of other sources that compete with our financing services, including commercial banks and finance and leasing companies. The financial services offered by Honda involve credit risk as well as risks relating to lease residual values, cost of capital and access to funding. Competition for customers and/or these risks may adversely affect Honda's business and operating results.

Honda conducts its operations in Japan and countries throughout the world, including North America, Europe and Asia. A sustained loss of consumer confidence in these markets, which may be caused by an extended economic slowdown, recession, changes in consumer preferences and needs, rising fuel prices, financial crisis, increases in product prices due to increases in material costs or decreases in supply volume, intensifying competition with other companies or other factors could trigger a decline in demand for Honda's products that may adversely affect Honda's business and operating results.

Honda aims to sustain the procurement of good products at reasonable prices in a timely manner, purchases raw materials and parts from numerous external suppliers, and relies on certain suppliers for some of the raw materials and parts which it uses to manufacture its products. Honda's ability to continue to obtain these supplies in an efficient manner at appropriate cost levels is subject to a number of factors, some of which are outside of Honda's control. These factors include the ability of its suppliers to provide a continued supply of raw materials and parts and Honda's ability to compete with other users in obtaining the supplies. In case it becomes impossible to receive the supply of materials and parts from suppliers on a continuous basis, in case the prices of materials and parts rise, or in case of losing any key supplier, this could lead to delays in or the suspension of Honda's manufacturing operations and a loss of Honda's competitiveness, which could adversely affect Honda's business and operating results. For example, a shortage in the procurement of semiconductors has become manifest for Honda, which has led to such effects as the suspension or decrease of production of automobiles and motorcycles at some of Honda's production bases in Japan and overseas. For some other materials and parts as well, a rise in their prices has occurred, or is projected to occur looking ahead. Moreover, these purchasing and procurement risk could also significantly affect Honda's initiatives for company-wide strategies, which are zero impact on the global environment, zero traffic collision fatalities, and creating new value.

One of the important factors behind corporate sustainability is trust and support for the Honda brand from our customers, society and the communities in which Honda conducts business operations. In order to support this brand image, Honda endeavors to gain the trust of society in all types of corporate activities, including ensuring product quality and compliance with laws and regulations, conducting risk management, and enhancing internal controls related to corporate governance. However, if for some unforeseeable reason the Honda brand image is damaged or Honda is unable to communicate information in a timely manner and deal with such information appropriately, this could adversely affect Honda's business and operating results.

Honda owns or otherwise has rights in a number of patents and trademarks relating to the products it manufactures, which have been obtained over a period of years. These patents and trademarks include those that could significantly affect Honda's initiatives for company-wide strategies, which are zero impact on the global environment, zero traffic collision fatalities, and creating new value. The inability to protect this intellectual property generally, the illegal infringement of some or a large group of Honda's intellectual property rights, or the suspension of manufacturing and/or sales activities and the payment of large amounts of damages as a result of lawsuits on infringement of patent rights and license fees, could have an adverse effect on Honda's business and operating results.

Honda uses a wide range of information systems and networks relating to information services and driving support in its business activities and its products, including in areas managed by subcontractors. Especially, IoT and other information technologies have become indispensable for control of products. The means of cyber-attacks that take place have become more advanced and sophisticated, targeting organizations around the world. Moreover, any cyber-attacks could significantly affect Honda's initiatives for company-wide strategies, which are zero impact on the global environment, zero traffic collision fatalities, and creating new value. In addition, in recent years, personal information protection rules have been rapidly developed in countries around the world. In creating Honda's initiatives for the creation of new value, measures protecting personal information are also gaining importance due to possible differences in the amount and quality of the personal information handled in comparison to existing operations. There is a possibility that, in addition to external cyber-attacks, any equipment malfunction, any management deficiency or human error at Honda or any of our business partners or subcontractors, or any natural disaster, infrastructure failure or any other unforeseen circumstances could also result in the suspension of important operations and services at Honda, leakage of confidential or personal information, inappropriate processing of documents and information, or the destruction or falsification of important data. When such an event occurs, Honda's business and operating results could be adversely affected in terms of damage to its brand image or social reputation, liability to customers or parties affected, payment of financial penalties, delays in or suspension of Honda's manufacturing operations, and a loss of Honda's competitiveness.

Honda could be subject to lawsuits, various investigations and legal proceedings under relevant laws and regulations of various jurisdictions. A negative outcome in any such current or future legal proceedings brought against Honda could adversely affect Honda's business and operating results.

Laws and regulations requiring companies to address human rights are being enacted in many countries, and the need to address human rights risks throughout the supply chain is growing rapidly. Failure to respond to such laws and regulations in a timely and appropriate manner could damage Honda's brand image and social credibility, and result in stoppages or delays in Honda's production activities or lead us to incur countermeasure costs associated with development, purchasing, sales, and other business activities, which could adversely affect Honda's business and operating results.

Honda has various pension plans and provides other post-employment benefits, in which the amount of benefits is basically determined based on the level of salary, service years, and other factors. Contributions are also regularly reviewed and adjusted as necessary to the extent permitted by laws and regulations. Defined benefit obligations and defined benefit costs are based on assumptions of a variety of factors, including the discount rate and the rate of salary increase. Changes in assumptions could affect Honda's defined benefit costs and obligations, including Honda's cash requirements to fund such obligations in the future, which could adversely affect Honda's operating results.