OKUMURA CORPORATION

Since the construction business accounts for the majority of the business portfolio, there is a risk that if public investment is reduced due to changes in fiscal policy or private capital investment shrinks due to domestic or overseas economic downturns, the order-receiving environment could deteriorate significantly and competition for orders could intensify. While the company strives to expand its business domains and build a robust earnings base, its high dependence on the construction business could remain a primary cause of performance fluctuations.

There is a risk that material prices or labor costs could surge due to soaring raw material and crude oil prices, shortages of skilled construction workers, or imbalances in supply and demand. If cost increases cannot be reflected in contract prices, profit margins could decline significantly, adversely affecting performance. Although the company strives to procure at appropriate prices through adjustments to contract timing and other measures, it may be difficult to respond to sudden market changes.

There is a risk that if a serious defect occurs during the design and construction cycle, it could lead to reputational damage and the payment of damages based on liability for non-conformity with contracts. While the company strives for thorough quality control through the operation of its quality management system, it is difficult to completely eliminate potential quality risks in large-scale and complex construction projects.

Regarding real estate held for the purpose of strengthening the real estate business, there is a risk that a significant decline in market value could affect performance if there are significant changes in domestic and overseas economic conditions, interest rate trends, or real estate market conditions. In addition, a significant decline in the market value of securities held for the purpose of maintaining business relationships could similarly have an adverse effect on performance. Although the company conducts regular reviews and reductions, risks remain in the event of sudden market changes.

As the company strengthens its overseas business base, there is a risk that changes in the political and economic conditions or legal systems of the countries in which it operates, or sudden fluctuations in exchange rates, could have a material impact on performance. While the company is considering hedging measures to avoid exchange rate risk, political risks and legal system change risks unique to emerging and developing countries cannot be completely controlled. Although the company gathers information through detailed local surveys, there are limits to its ability to respond to unforeseen circumstances.

In the unlikely event that a violation of laws or regulations occurs, there is a risk of a significant loss of social credibility, as well as a material impact on performance due to administrative sanctions from relevant authorities or suspension of qualification for bidding by public ordering entities. While the company has established a Compliance Committee and a Bid-Rigging Prevention Committee and conducts compliance training for officers and employees, risks such as bid-rigging, which are unique to the construction industry, require ongoing management.

There is a risk that if a large-scale natural disaster such as an earthquake, tsunami, or storm/flood damage, or a global pandemic occurs, it could affect performance through damage to employees and held assets or deterioration of the business environment. While the company has established a Business Continuity Plan (BCP) and strives to build a system for prompt recovery, interruptions or delays to projects under construction and the occurrence of additional costs may be unavoidable in the event of a large-scale disaster.

There is a risk that if the company suffers a cyberattack such as unauthorized access, it could experience system failures or leakage of confidential customer information or personal information, affecting performance. While the company has implemented measures such as the use of cloud environments and access control and backups, as cyberattacks become more sophisticated and elaborate, an information leak could result in a loss of trust from customers and society, as well as the payment of damages.

There is a risk that if it becomes difficult to recruit employees as planned, or if securing personnel does not proceed as planned due to increased turnover, the company may be unable to allocate personnel appropriately, forcing it to hinder expansion of its business scale or scale it back. As the labor shortage across the construction industry as a whole becomes more severe, the company is working to improve engagement through planned recruitment of new graduates and mid-career hires, work-style reforms, and improved treatment, but competition for talent with other companies is intensifying.

In long-term projects such as PFI (Private Finance Initiative) projects, there is a risk that a significant change in the business environment—such as economic trends, changes in legal regulations, or market changes including a decline in the number of users—could affect performance. While the company carefully examines business content and profitability to determine whether to participate, the nature of long-term contracts may limit the company's ability to respond to environmental changes after the contract has been concluded.