DAIICHI KENSETSU CORPORATION

The Company's orders received and net sales are directly linked to trends in domestic construction investment, and if government and private-sector construction investment declines more sharply than expected, this could have a material impact on business results. Construction investment is affected by economic conditions and government fiscal policy, and thus the Company is vulnerable to changes in the external environment. Although the Company seeks to diversify risk by specializing in highly public-oriented businesses centered on railway construction work, it may be difficult to respond to a contraction of the overall market.

The Company has a high proportion of sales derived from East Japan Railway Company, and if this company reduces its capital investment or scales back transactions, this could have a severe impact on the Company's business results. This dependent relationship is based on the specialized technical capabilities in railway construction cultivated since the Company's founding and long-standing relationships of trust, and while it is also a source of the Company's competitive advantage, it inherently carries customer concentration risk. Since changes in the customer's management policy or revisions to its investment plans directly affect the Company's order volume, this is a risk that requires continuous monitoring.

If major construction materials or labor costs rise sharply, and it is difficult to pass such increases on through contract prices, project profitability may deteriorate, potentially affecting business results. In the construction industry, there is a structure in which the contractor bears the risk of price fluctuations after contract conclusion, and sharp increases in material and labor costs directly compress profit margins. Although the Company negotiates price pass-throughs, sufficient pass-through may not be achieved depending on the contractual terms with the client.

As the Company undertakes many highly public-oriented businesses, including railway construction, the occurrence of a major accident such as a fatality could lead to a loss of credibility and trust from clients, potentially affecting business results through the loss of order opportunities and other effects. The Company implements initiatives that prioritize "ensuring safety" above all else, but given the nature of construction sites, it is difficult to reduce risk to zero. In the event of an accident, the Company may also face administrative sanctions or work suspension orders, representing a high risk to business continuity.

Although the Company implements strict quality control as a construction contractor, if a serious defect occurs, repair costs or claims for damages may arise, potentially affecting business results. In particular, if a defect occurs in a highly public-oriented structure such as railway infrastructure, the societal impact would be significant and could seriously damage the relationship of trust with the client. The Company strives to strengthen its quality control system, but the complexity of construction work and the long construction periods inherently carry risk.

The Company's business is subject to a wide range of legal regulations, including the Construction Business Act, the Building Standards Act, the Industrial Safety and Health Act, the Antimonopoly Act, and the Building Lots and Buildings Transaction Business Act, and amendments, abolitions, the establishment of new regulations, or changes to operational standards under these laws could affect business results. Stricter regulations may lead to increased construction costs or restrictions on the scope of business, and additional investment may be required to respond. Continuous monitoring of regulatory trends and timely responses are required.

The Company has established a compliance framework through the enactment of the "Corporate Ethics Rules" and the "Ethics and Compliance Committee Rules," the activities of the Ethics and Compliance Committee, and the development and provision of various manuals and training. However, if a compliance violation occurs for some reason, it could lead to a loss of societal credibility and trust, potentially affecting business results. In the construction industry, administrative sanctions such as suspension of bidding eligibility directly affect order opportunities, so the risk of compliance violations can become a serious issue related to business continuity.

If a bad debt loss arises due to the unexpected bankruptcy of a business partner, this could affect the Company's business results. In addition, if a partner company or joint contractor goes bankrupt during construction work, this could affect the construction schedule and result in unplanned costs, creating a risk of deteriorating business results. The Company conducts credit management of business partners to avoid such risks, but in the event of a sudden change in the economic environment, situations beyond the scope of anticipated credit management could arise.

If restrictions on economic activity due to the spread of an infectious disease make it difficult for the Company to maintain and ensure safety and construction systems, this could affect business results. The Company strives to prevent infection and its spread through thorough hygiene management and the establishment of telework regulations, but on-site response is essential for construction work at job sites, and there are limits to continuing construction work during an outbreak. Delays in construction schedules and the occurrence of additional costs could directly affect business results.