TANABE ENGINEERING CORPORATION

If capital investment by governments and companies is restrained due to a domestic or overseas economic slowdown or changes in the international situation, there is a risk of intensified competition for orders and a decline in order prices. The equipment installation industry is highly susceptible to economic fluctuations, raising concerns about a direct impact on business performance.

The sales of the Thai subsidiary Tanabe Thailand Co., Ltd. are highly dependent on HDD component surface treatment, and a decline in demand for such components could directly worsen the company's performance. The HDD market is undergoing structural change amid the ongoing shift toward SSDs, and a decline in sales could affect the overall performance of the Group.

Efforts to expand orders by developing new customers may increase transactions with customers whose creditworthiness has not been fully verified. If an unforeseen event occurs at a customer, this could result in uncollectible trade receivables and adversely affect the Group's performance. Although the Company has adopted a policy of strengthening receivables management, it is difficult to completely eliminate collection risk.

If material warranty liability or product liability arises from construction defects, this could result in a burden of damages compensation. In addition, if unprofitable projects arise due to unexpected additional costs incurred during the construction stage, this would directly impact the Group's profitability. Although utmost care is taken in construction management and product manufacturing, it is difficult to completely eliminate this risk.

While thorough safety management is enforced in construction work and product manufacturing, in the unlikely event of a serious industrial accident or incident, although various insurance policies would mitigate costs, this could damage corporate credibility and affect business performance. Given the business characteristics centered on construction and manufacturing sites, safety management remains an ongoing management issue.

If shortages or sharp increases in the prices of raw materials occur for key materials such as steel, piping, and electrical materials, construction costs could rise significantly, affecting the Group's performance. Although measures such as early ordering, diversification of procurement sources, and passing costs on to construction prices are being taken, there is a risk that responses may not keep pace with rapid and substantial price increases.

The Company holds licenses from the Minister of Land, Infrastructure, Transport and Tourism under the Construction Business Act (specified construction business: 8 categories and 1 category, general construction business: 6 categories). If the Company ceases to meet license requirements or falls under disqualification requirements, there is a risk that the license could be revoked under Article 29 of the Construction Business Act. Revocation of the license would directly impede business continuity and could have a material impact on the Group's performance. At present, the Company recognizes no facts that would constitute grounds for revocation.

Due to population decline from the falling birthrate and aging population, as well as the decrease and aging of workers in the equipment installation industry, there is a risk that securing new personnel will become difficult. If establishing a construction workforce becomes difficult, this could lead to lost order opportunities and a decline in construction quality, affecting business performance. Although the Company is promoting recruitment projects and utilizing its training center for personnel development and technology succession, this remains an ongoing risk as a structural issue across the entire industry.

The Company has overseas consolidated subsidiaries in ASEAN countries, and bears the risk that changes in local political, economic, and social conditions, or changes in legal regulations, could make continuing business operations difficult. If unforeseen political upheaval, natural disasters, or other large-scale changes in the business environment occur, this could affect the Group's performance. The Company strives to manage this risk by gathering information from various experts and business partners and coordinating with relevant departments.

In the course of business activities, the Company handles a large amount of customer equipment information and confidential information. If information is leaked outside the Company due to cyberattacks or other causes, this could result in a loss of customer trust and liability for damages, affecting business performance. Although measures are being taken through the establishment of information security regulations and the building of an information equipment management framework, continuous response is required in light of the increasing sophistication and diversification of cyberattacks.