SHINNIHON CORPORATION

There is a risk that the shrinking construction market will intensify competition, leading to a decline in order intake. This risk is compounded by sharp increases in the prices of construction labor and materials and difficulty securing them, which could lead to construction delays and deteriorating profitability. As a countermeasure, the company continuously implements proposal-based sales activities to enhance added value and works to develop new subcontractors.

There is a risk that the prices of construction labor and materials will rise sharply, making it difficult to secure them. Cost increases directly squeeze construction profitability and may adversely affect business performance. In addition to existing subcontractors, the company strives to build a stable procurement system by developing new subcontractors.

Changes in economic conditions such as economic downturns or rising interest rates may reduce customers' purchasing willingness and cause the value of held inventory assets to decline. This is a risk peculiar to the real estate industry, which is susceptible to land price trends and property supply-demand conditions, and it directly affects the profitability of development business. The company enhances its resilience to market fluctuations by selecting properties near stations catering to genuine end-user demand and by carefully considering its sales strategy.

Rising interest rates may increase the financing costs for real estate purchasers, reducing customers' purchasing willingness. They may also affect the company group's own financing costs, creating a risk of deteriorating profitability in development business. The company addresses this by carefully considering its procurement and sales strategies in light of changing conditions.

If a business counterparty such as an ordering party or subcontractor experiences credit concerns, there is a risk that construction payments may become uncollectible or construction may be delayed. This could have a material impact on business performance and financial condition. The company strives to reduce credit risk through thorough credit checks of business partners and earlier collection of payments.

If legal violations, inappropriate contract execution, litigation, or other legal proceedings occur, there is a risk of impairment of held assets and a decline in social credibility. In the construction and real estate industries, ongoing amendments to relevant laws and regulations are also a continuing risk factor. The company addresses this through legal risk management by the Legal Affairs Office and enhancement of internal controls.

If internal information leaks or a system failure occurs, there is a risk of disruption to business continuity and a decline in social credibility. Operational risks are wide-ranging, including the occurrence of fraud and clerical errors. The company seeks to reduce these risks by strengthening information security and conducting internal audits through the Audit Office.

There is a risk that fraud or clerical processing errors could cause asset impairment or operational losses. If internal controls fail to function properly, this could also adversely affect the reliability of financial reporting and operational efficiency. The company strives for early detection and deterrence of such risks through internal audits conducted by the Audit Office and the enhancement of internal controls.

If natural disasters such as earthquakes or storm and flood damage, human-caused disasters such as fires or terrorism, or a pandemic of infectious disease occur, there is a risk of impairment of held assets and impacts on employees and business partners, which could have a material effect on business performance. It is difficult to reasonably determine the likelihood or timing of occurrence, and this includes unpredictable events. The disclosure in the securities report contains only limited description of specific countermeasures.

Amendments to laws and regulations related to the construction and real estate industries may increase constraints on business operations or generate additional costs. Delayed responses to such legal amendments could lead to legal violations or a decline in competitiveness. The company works to respond in a timely manner to legal amendments through continuous legal risk management by the Legal Affairs Office.