TAISEI CORPORATION

As the domestic construction business accounts for a high proportion of the Group's operations, a sharp contraction of the domestic construction market or intensifying competitive conditions poses a risk of decreased orders received, net sales, and gross profit. As countermeasures, the Group is engaged in business development in the upstream and downstream areas of the construction domain, such as the renewal field, the Engineering Business, and the O&M business, as well as establishing new business models.

When it is difficult to reflect surging raw material prices in contract prices, there is a risk that construction profit and loss will deteriorate. Logistics disruptions due to geopolitical tensions can also cause delays in material procurement and price increases. As countermeasures, the Group is working to monitor material price trends and improve forecasting accuracy, reduce costs through consolidated purchasing and international procurement, and negotiate prices with clients and adopt price escalation clauses.

The aging of construction skilled workers and the decline in the number of young workers entering the industry make it difficult to secure a construction workforce, which may lead to lost order opportunities and increased costs through schedule delays and deterioration in construction quality. In addition, due to the declining birthrate and intensifying competition to acquire talent, there is a risk that it will become difficult to secure the necessary human resources within the Group, constraining construction management capability and technical capability. The Group addresses this through collaboration with partner companies, enhancement of education and training, promotion of work-style reforms, and improvement of treatment/compensation.

External factors such as computer virus infections and cyberattacks, as well as internal factors such as loss of devices by officers and employees, operational errors, and improper handling of customer information, pose a risk of system downtime or leakage of Group or customer information, which could seriously impact business activities through post-incident response costs and the burden of damages. The Group is enhancing information security measures by introducing multi-factor authentication, strengthening access management, and establishing a CSIRT.

Delays in investment decisions regarding advanced technologies such as digital technology, AI, and robotics, and delays in their adoption at construction sites, pose a risk that productivity improvements will not be sufficiently realized, affecting business competitiveness. As countermeasures, the Group is working on selecting strategic technology development fields and formulating investment plans, setting technology development milestones and managing progress, and developing human resources capable of utilizing generative AI and establishing rules for its use.

The occurrence of serious personal injury or construction-related accidents at construction sites poses a risk of deteriorating construction profit and loss due to compensation for victims and additional construction costs, as well as restrictions on sales activities due to suspension of qualification for bidding, etc. In addition, if construction defects or design defects occur, additional costs associated with rework and the burden of damages may arise. The Group addresses this through promotion of occupational health and safety management systems, establishment of a quality control supervisory department, and implementation of quality patrols.

If terrorism, war, riots, or deteriorating political conditions occur in countries or regions where overseas business is conducted, there is a risk that it will become difficult to continue business in that region. In addition, if extremely disadvantageous contracts are concluded due to insufficient understanding of local laws and business customs, risks such as deterioration of construction profit and loss and inability to collect construction payments may arise. The Group addresses this by establishing means to ensure the safety of officers and employees and building a cooperative framework with the Japanese government, local embassies, and external experts.

If violations of the Antitrust Act, the Construction Business Act, or other laws occur due to errors by personnel in charge, resulting in criminal penalties or administrative sanctions, there is a risk that sales activities will be restricted. The Group works to deter violations through the establishment of internal regulations regarding procedures for confirming the appropriateness of bidding operations, operation of an internal whistleblowing system, and formulation and disclosure of the "Declaration of Partnership Building."

There is a risk that invested capital will not be recovered as planned due to troubles with investment projects or changes in the business environment, as well as a risk that expected synergies will not be achieved after M&A. A decline in the value of held real estate, securities, and other assets due to worsening market conditions may also affect business performance and financial condition. The Group addresses this through investment decisions based on hurdle rates for each project, setting a total volume regulation limit on risk asset balances, and conducting due diligence before M&A and monitoring after M&A.

Insufficient efforts and information disclosure regarding environmental issues such as climate change pose a risk of decreased corporate competitiveness and lower evaluation from stakeholders. In addition, insufficient efforts to respect human rights, including within the supply chain, may lead to human rights violation risks and a decline in social reputation. The Group addresses this through formulation of the Group's long-term environmental target "TAISEI Green Target 2050," implementation of human rights due diligence, and establishment of a grievance mechanism.