THE ZENITAKA CORPORATION

If the construction market contracts sharply due to a domestic or overseas economic downturn or other factors, it could have a material impact on operating results through a decline in order volume. The construction industry is highly susceptible to economic cycles, and both private and public construction investment trends affect performance.

There is a risk that a sharp rise in construction materials prices and labor costs stemming from a shortage of skilled workers could lead to decreased construction profits and extended construction periods. Although the Group responds through early procurement and other measures, if cost increases exceeding expectations cannot be passed on to contract amounts, it could adversely affect operating results.

If credit concerns materialize among clients, partner companies, or joint construction companies, situations such as failure to collect funds or construction delays may occur, potentially affecting operating results. Since the construction business is carried out in cooperation with numerous external parties, the financial soundness of business partners is directly linked to performance.

Although the Group has established a production system to ensure quality and takes thorough care with quality control, if a quality defect were to occur, the associated response costs could affect operating results. Because defects in constructed buildings entail repair obligations over an extended period, the potential cost burden is significant.

The Group holds assets such as securities and real estate, and if their market value declines significantly or their profitability deteriorates significantly, this could affect operating results through the recognition of valuation losses and similar measures. This entails a risk that deterioration in the market environment will directly spill over into asset values.

In overseas construction projects, large fluctuations in exchange rates, unexpected changes in laws and tax systems, and sudden changes in political and economic conditions due to terrorism or conflict, among other factors, could affect operating results. Country risk and foreign exchange risk unique to overseas operations are more difficult to manage compared with domestic operations.

The Group operates ISO9001, ISO14001, and COHSMS and works to eliminate accidents and disasters, but should a serious accident occur, it could damage social credibility as well as affect operating results. Construction sites involve hazards such as work at height and the use of heavy machinery, meaning that the risk of industrial accidents is ever-present.

Natural disasters such as earthquakes, tsunamis, and wind and flood damage may cause harm to employees, their families, and held assets. In addition, such disasters could affect operating results through reviews of construction investment, delays in construction periods, and surges in construction materials prices, posing a risk to business continuity.

In addition to numerous legal regulations such as the Construction Business Act, the Building Standards Act, and the Antimonopoly Act, the Group is also subject to environment-related regulations concerning water pollution, waste disposal, CO2 reduction, and other matters. Amendments, abolitions, or new enactments of laws, changes in applicable standards, or violations of laws and regulations could constrain business activities and adversely affect operating results.

Although the Group has established an information security management system and conducts internal training, if a cyber attack—such as a targeted attack email, virus infection, or unauthorized access—or a leakage of confidential customer information or personal data were to occur, it could damage trust among customers and society and affect operating results. Cyber risk is increasing year by year with the advance of digitalization.