NAKANO CORPORATION

In the domestic construction business, which is the Group's core business, if changes in the business environment occur that exceed expectations—such as a contraction of the construction market, a sharp rise in major material prices, or a significant decrease in skilled workers—this could have a material impact on business performance. Rising construction costs and labor shortages are risks that directly lead to deteriorating order profitability, and this is the most fundamental risk factor for the company, whose mainstay is the domestic construction business. The securities report does not describe specific countermeasures.

The Group operates an overseas construction business centered on Southeast Asia, and significant changes in the political or economic situation or legal systems of the countries in which it operates could affect business performance. There is a risk that political instability, regulatory changes, and currency fluctuations specific to emerging countries could hinder business continuity and the collection of earnings. The securities report does not describe specific countermeasures.

The Group mainly operates a real estate leasing business in Japan, and changes in the supply-demand trends of the leasing market could affect business performance. Rising vacancy rates and declining rent levels directly lead to a decrease in rental income, posing a risk of reducing the contribution of the real estate business as a stable revenue source. The securities report does not describe specific countermeasures.

If unexpected serious accidents occur during construction work or defects arise in completed properties, this could result in substantial repair costs or damages from litigation, affecting business performance. Given the nature of the construction industry, which involves on-site work, there is an inherent risk of industrial accidents and construction quality issues, which could also damage the company's reputation. The securities report does not describe specific countermeasures.

If a business partner such as a client or subcontractor falls into credit difficulty, this could result in an inability to collect funds or construction delays, affecting business performance. In the construction industry, collection of construction payments often occurs after work completion, so a deterioration in a client's financial condition poses a risk of directly leading to bad debt losses on accounts receivable. The securities report does not describe specific countermeasures.

If the market value of held assets such as real estate or securities declines significantly, this could affect business performance through the recognition of valuation losses. In periods of sharp decline in the stock or real estate markets, impairment of held assets poses a risk of worsening the financial condition. The securities report does not describe specific countermeasures.

The Group's businesses are subject to legal regulations such as the Construction Business Act, the Building Standards Act, and the Real Estate Brokerage Act, and changes in laws or applicable standards could affect business performance. In addition, if a legal violation occurs within the Group, there is a risk of significant impact from criminal or administrative penalties, business restrictions, and reputational damage. The securities report does not describe specific countermeasures.

If a large-scale natural disaster such as an earthquake or flood/storm damage occurs, this could affect business performance through damage to ongoing construction projects, construction delays, or damage to company-owned buildings. Japan carries a high risk of natural disasters such as earthquakes and typhoons, and if simultaneous damage occurs at multiple sites, losses could expand. The securities report does not describe specific countermeasures.

If an outbreak of infectious disease occurs, this could affect business performance through a decrease in construction orders due to economic deterioration or a decrease in sales due to construction suspensions. As past pandemic examples have shown, the spread of infection poses a risk of significantly pressuring earnings through the suspension of construction site operations and clients' restraint on investment. The securities report does not describe specific countermeasures.