YAMAURA CORPORATION

If construction demand declines more than anticipated, key material prices rise sharply, or significant fluctuations occur in supply-demand balance and prices in the real estate market, this could affect the performance of the construction business, development business, and other operations. The Company will respond by monitoring demand, materials, and real estate market conditions in advance, securing order-taking, design, and construction capabilities, and strengthening procurement functions.

If quality problems arise due to construction that fails to meet client requirements, construction that deviates from design specifications, or inadequate inspections, this could adversely affect business performance and financial condition through damage claims, loss of social credibility, construction delays, and other factors. The Company aims to prevent quality defects through thorough advance planning via front-loading, record-keeping such as construction photographs, and comprehensive on-site inspections through site patrols.

Since numerous workers perform various types of work simultaneously in diverse environments such as urban and mountainous areas, there is a possibility of accidents causing harm to third parties, occupational accidents, and environmental pollution incidents. Should an accident occur, business performance and financial condition could be adversely affected through damage claims, construction delays, and suspension from bidding. The Company strives to prevent accidents through thorough implementation of procedures and rules based on ISO 45001, site inspections, and safety education and training.

For business-use real estate such as real estate for sale and real estate for lease, if land prices or rental prices decline due to deteriorating market conditions, or if the market value of investment securities and other assets falls significantly, this could affect business performance and financial foundation through recording of valuation losses, impairment losses, and other charges. The Company manages price fluctuation risk by formulating holding rationale and investment plans from a medium- to long-term perspective, and by regularly confirming the management status of investees, real estate market conditions, and economic indicators.

If counterparties such as clients, partner companies, or joint venture partners fall into credit distress, this could affect business performance through failure to collect construction payments or construction delays, among other effects. The Company will address sudden changes by maintaining contact with business partners, enhancing information sensitivity, and closely monitoring economic conditions and industry trends.

The Company is subject to various laws and regulations including the Construction Business Act, the Building Standards Act, the Building Lots and Buildings Transaction Business Act, the Antimonopoly Act, and environmental laws and regulations. If there are deficiencies in responding to new regulations or amendments and abolitions of laws, this could affect business performance and corporate reputation. The Company aims to prevent legal violations by closely monitoring trends in amendments to relevant laws and regulations, developing internal systems, and conducting ongoing education.

If misconduct by employees, human rights violations, or leakage of personal information or trade secrets occurs, this could affect business performance and corporate reputation through reduced morale and loss of social credibility, among other effects. The Company continuously conducts compliance education through e-learning and rank-specific training, reviews and improves its internal reporting system, strengthens internal controls and internal audits, and provides company-wide education including for directors.

In addition to decarbonization transition risks such as the introduction of a carbon tax, physical risks such as damage to the supply chain and construction sites due to rising average temperatures and the intensification of natural disasters could affect business activities and performance. Based on its expression of support for the TCFD recommendations and its acquisition of SBTi certification (SME version), the Company promotes analysis and response to climate change risks and opportunities through its Sustainability Committee.

As diverse information including structures, customers, management, intellectual property, and personal information is handled via IT systems, if information leakage occurs due to cyberattacks or employee negligence, this could adversely affect business performance through impacts on social credibility, damage claims, and system recovery costs. The Company aims to strengthen information security through technical measures and enhanced monitoring and detection tailored to emerging risks, development of information system management regulations, and thorough education and training.

In the construction industry, the number of construction engineers and skilled workers is on a declining trend, and if aging and further worker decline progress, this could cause construction delays and rising labor costs, affecting business performance. The Company works to enhance the appeal of the construction industry through work-style reform promoting "four weeks, eight days off," reducing burdens through the introduction of ICT-based construction and power-assist suits, and human resource development utilizing the Construction Career-Up System.