SHIMIZU CORPORATION

As skilled workers continue to age, if generational turnover through new hires does not keep pace with the mass retirement of the baby-boomer generation before it occurs, this could disrupt the production system and affect business activities and performance. This risk is assessed as having a "high" likelihood and "large" impact, and although it is not included among the FY2026 priority risk management items, it is ranked as the highest risk. The company is working to secure workers and improve productivity through skilled worker development using the Shimizu Takumi Gijuku (craftsman training school), promotion of the two-day weekend system, utilization of foreign workers, and labor-saving measures using construction robots and ICT.

If domestic and overseas economic downturns lead to a contraction in private-sector capital investment, or if public investment declines due to fiscal consolidation efforts, this could significantly affect order trends. This risk is assessed as having a "medium" likelihood and "large" impact. The company addresses this through monthly monitoring of order outlook by the Board of Directors, transformation of the earnings structure based on the long-term vision "SHIMZ VISION 2030," and execution of growth strategies under the Medium-Term Management Plan <2024-2026>.

In investments and strategic capital expenditures related to real estate development, PFI projects, renewable energy projects, and other businesses, significant changes in the business environment such as market downturns, financial market fluctuations, and rising prices could affect performance. This risk is assessed as having a "low" likelihood and "large" impact. The company manages this through planned investments including exit strategies based on investment decision criteria, and regular monitoring of the business portfolio and fair value assessments by the Board of Directors.

Damage from cyberattacks such as targeted emails, ransomware, and unauthorized access could result in system outages, halted production activities, financial losses, and damage to brand image. This risk is assessed as having a "low" likelihood and "large" impact. It is selected as a FY2026 priority risk management item (integrated with the risk of leakage of confidential information, etc.), and under the leadership of the DX Committee, the company conducts targeted email training, vulnerability assessments, continuous virus monitoring, and formulation of a cyber BCP (business continuity plan).

The occurrence of natural disasters such as earthquakes, tsunamis, and wind/flood damage, or a global outbreak of infectious disease, could cause direct damage to held assets and employees, and could also affect performance through changes in the business environment such as surging construction material prices and reduced power supply. This risk is assessed as having a "low" likelihood and "large" impact. The company has established a BCP Committee, and conducts regular drills assuming scenarios such as a Tokyo metropolitan earthquake, Nankai Trough earthquake, and Mt. Fuji eruption, has developed an information-sharing system for disaster response, and has built a data center backup system.

Deterioration in domestic and overseas financial and economic conditions could restrict fundraising and increase financing costs, and sharp rises in interest rates or significant exchange rate fluctuations could affect performance. This risk is assessed as having a "low" likelihood and "large" impact. The company works to maintain and strengthen close relationships with its main financial institutions, while securing liquidity in emergencies through committed credit lines and spot borrowing facilities.

If construction material prices or labor unit costs rise significantly beyond expectations after a construction contract is signed, and it is difficult to pass such increases through to the contract amount, profit and loss could deteriorate due to increased construction costs. This risk is assessed as having a "high" likelihood and "medium" impact, with particularly high risk of profit pressure in fixed-price contracts. The company works to reduce this risk through thorough enforcement of contract terms, including escalation clauses, and rigorous pre-order screening.

The physical effects of climate change could disrupt operations at construction sites, while stricter regulations accompanying the transition to a decarbonized, nature-positive society could shrink demand for new construction, and trends in systems such as carbon pricing could also affect performance. This risk is assessed as having a "high" likelihood and "medium" impact. The company has disclosed financial information based on TCFD recommendations since 2020 and TNFD recommendations since 2024, and discusses risks and opportunities at the Sustainability Committee and Board of Directors. The company is working toward goals such as using 100% green electricity at domestic construction sites and eliminating the use of non-certified foreign plywood formwork by 2030.

If a construction contract contains significantly stringent terms or unclear provisions, the results may fall short of the company's expected profitability. This risk is assessed as having a "medium-to-high" likelihood and "medium-to-large" impact, and is selected as a FY2026 priority risk management item, with particular emphasis on contract risk in large-scale projects. The company addresses this through order strategy deliberation at company-wide meeting bodies, strengthened review systems for large-scale projects, and the establishment of a contract risk management department.

Amid the chronic labor shortage in the construction industry, concentration of workload on specific employees during busy periods could lead to long working hours, which may negatively affect business operations through deterioration of employee health, reduced motivation, and loss of human resources. This risk is assessed as having a "medium-to-high" likelihood and "medium-to-large" impact, and is selected as a FY2026 priority risk management item. The company has established front-loading promotion, operational efficiency improvements through digitalization, regular engagement assessments, and a mental health follow-up system supported by occupational health staff.