SHO-BOND Holdings Co., Ltd.

The Group has a high proportion of construction business, and if the construction market contracts significantly or the competitive environment intensifies, this could affect business performance through a decline in the volume of orders received and deterioration in construction profitability. As a countermeasure, the Group has established strategies for responding to changes in the business environment in its medium-term management plan, and aims for sustainable growth through the reliable execution of various measures.

If there is a sharp rise in construction material prices or labor unit costs, or a shortage of skilled workers, this could lead to increased construction costs, resulting in reduced profitability and construction delays, which may affect business performance. As a countermeasure, the Group continuously monitors trends in material prices and labor costs, and works to minimize the impact on construction profit and loss through early procurement and securing stable business partners.

If construction defects occur and appropriate quality cannot be ensured, this could result in the occurrence of remedial construction work, loss of order opportunities due to suspension of qualification or business suspension, and the occurrence of damages claims, which may affect business performance. As a countermeasure, the Group ensures thorough quality control by confirming construction details and conditions before work begins at each construction site and by conducting regular internal inspections during construction.

If a serious accident or occupational injury occurs at a construction site during work, this could result in temporary suspension of construction and loss of order opportunities due to suspension of qualification, as well as compensation for the affected parties, which may affect business performance. As a countermeasure, the Group has established departments responsible for safety and health management at each site, and conducts regular safety patrols and safety education for employees and foremen of partner companies.

If legal regulations such as the Construction Business Act, the Industrial Safety and Health Act, and the Labor Standards Act are violated, this could result in loss of order opportunities due to administrative sanctions and suspension of transactions due to loss of credibility with business partners, which may affect business performance. As a countermeasure, the Group has established a department responsible for compliance, and works to instill compliance awareness among all officers and employees through the development of related regulations and manuals and regular training.

If a system outage or leakage of important information occurs due to virus infection or unauthorized access, this could result in temporary suspension of operations and suspension of transactions due to loss of credibility with customers and business partners, as well as damages claims, which may affect business performance. As a countermeasure, in addition to constantly updating antivirus software, strengthening network security, and building a backup system for important data, the Group is working to improve organizational response capabilities through targeted-attack email training and e-learning.

In private-sector construction projects, if a business partner falls into financial distress before payment for construction work is received, this could result in bad debts, which may affect business performance. As a countermeasure, the Group works to avoid risk by thoroughly managing credit both at the start of and during transactions, utilizing guaranteed factoring, and collecting construction payments based on the percentage of completion.

Large-scale natural disasters such as earthquakes, tsunamis, and wind and flood damage, as well as the emergence of new infectious diseases, could threaten the safety of employees and their families, and could also cause damage to construction sites and factories, construction suspension, and business site closures, affecting business activities. As a countermeasure, the Group strives to minimize the impact through the development of a business continuity plan (BCP), the introduction of a safety confirmation system for officers and employees, and the implementation of regular drills.

If the natural and social environment changes significantly due to further progression of climate change or the transition to a low-carbon economy, this could result in a decline in orders and sales and an increase in costs, which may affect business performance. As a countermeasure, the Group discloses climate-related information based on the TCFD recommendations, and implements initiatives to reduce identified risks.