KAJIMA CORPORATION

If a significant decline in construction demand or a sharp contraction in the real estate market occurs due to economic deterioration or other factors, the Group may be affected by declines in construction orders and real estate sales/rental income. In addition, if the Group is unable to maintain competitiveness in quality, cost, and service due to intensifying competition with other general contractors, business performance may deteriorate. The Group aims to achieve its management targets and enhance corporate value by promoting the various measures set forth in the "Kajima Group Medium-Term Management Plan (2024-2026)."

In construction projects with long construction periods, if unexpected cost increases due to sharp rises in prices of major materials or labor unit costs cannot be reflected in the contracted construction amount, profitability on the work may deteriorate. The Group is implementing measures such as early procurement and securing diverse procurement sources, as well as including price escalation clauses in contracts with clients.

If the profitability of real estate held for sale (consolidated balance sheet amount of ¥278,700 million) declines, or if the fair value of rental and other real estate (¥369,300 million) and investment securities (¥478,600 million) declines significantly, valuation losses or impairment losses may occur. For development business assets, the Group manages value decline risk on a project-by-project basis, keeping it within a certain level relative to consolidated shareholders' equity, and for cross-shareholdings, the Group has set a target to reduce them to less than 20% of consolidated net assets by the end of fiscal year 2026 and is proceeding with reductions.

While conducting construction and development businesses in North America, Europe, Asia, Oceania, and other regions, significant changes in the political and economic conditions, legal systems, or exchange rates of the countries in which the Group operates may affect business performance. When undertaking overseas M&A or entering new markets, risks are deliberated by the Overseas Business Operations Committee and other bodies before being discussed by the Board of Directors and the Management Committee, and an International Crisis Management Committee has been established to prepare for terrorism, riots, and similar events.

Amid a continuing decline in the number of skilled construction workers, if sufficient measures are not taken, it may become difficult to maintain the construction execution system, potentially affecting business performance through declines in sales and reduced construction profit margins due to rising labor procurement costs. Based on the Medium-Term Management Plan, the Group plans to continue implementing various measures, including improving treatment of skilled construction workers, reforming the multi-layered subcontracting structure by limiting it in principle to second-tier subcontractors, and enhancing support for partner companies.

If the Construction Business Act, the Building Standards Act, occupational health and safety-related laws, the Antimonopoly Act, or other laws and regulations are revised, or if new legal regulations are established, business performance may be affected through impacts on the order environment and costs. In addition, if violations of laws or harassment occur, there is a risk of lost business opportunities and reputational damage due to criminal or administrative sanctions. The Group promotes appropriate business activities through the development and revision of a compliance manual and the ongoing implementation of e-learning training.

If a serious personal injury accident, environmental accident, quality-related accident, or similar incident occurs in design, construction, or other services, business performance may be affected through reputational damage, damages, construction delays, rework costs, and other consequences. The Group implements appropriate management through COHSMS-compliant safety and health management, operation of an environmental management system compliant with ISO 14001, and ISO 9001 certification in the civil engineering and building construction divisions, among other measures.

If information related to buildings, customers, management, technology, intellectual property, or personal data is leaked or lost due to external cyberattacks or employee negligence, business performance may be affected through reputational damage, damages, and recovery costs. The Group conducts focused risk management through the establishment of an information security policy, training exercises simulating cyberattacks, e-learning education for officers and employees, and awareness activities targeting partner companies.

If clients, partner companies, or other counterparties fall into financial distress, business performance may be affected through the inability to collect construction payments or construction delays, with particularly large impacts in cases involving high-value contracts where payment cannot be collected. For new projects, the Group verifies the client's creditworthiness, funding plan, and payment terms, and for projects with unfavorable conditions, the Management Committee deliberates on whether to proceed with head office involvement; contracts with partner companies are concluded after reviewing their financial condition and other factors.

Both physical risks, such as damage to construction projects in progress and construction delays caused by large-scale natural disasters like typhoons and floods, and transition risks, such as construction volume restrictions due to greenhouse gas emission caps and cost increases from the introduction of carbon taxes, may affect business performance. The Group is working to enhance disaster preparedness through BCP formulation and training, while also promoting CO2 emission reductions, investment in renewable energy, and technology development such as low-carbon concrete based on the "Kajima Environmental Vision 2050plus."