JDC CORPORATION

If the construction market contracts significantly due to a domestic or overseas economic downturn or reductions in public investment budgets, or if order prices for private-sector construction work decline due to intensifying competition with rival companies, this could affect business performance. As countermeasures, the Company is focusing on establishing labor-saving technologies through ICT construction and DX strategies, and on expanding stable earnings from related businesses centered on real estate development and renewable energy, which have become the core of the Company's profits over the past three years. In addition, the Company is promoting a transformation of its earnings base through strengthened investment in new businesses.

The construction industry is experiencing an aging workforce of engineers and skilled workers, and if a sharp tightening of supply and demand makes it difficult to secure personnel, issues such as lost order opportunities and delivery delays may arise, potentially affecting business performance. As countermeasures, the Company is working to raise the status of skilled workers through promotion of a career-up system, a certified excellent foreman system, and recommendations for Construction Master certification, as well as labor and manpower savings through DX and ICT construction, building a performance-based personnel system, and promoting "work-style reform" and "job satisfaction reform." The Company has been selected four times for the "Health and Productivity Stock Selection" jointly sponsored by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange (the most among construction companies), and has been selected for the "Certified Health and Productivity Management Organization – White 500" for six consecutive years.

Since construction work extends over long periods, if unexpected surges in labor unit costs or construction material prices occur during the contract period, and the increase cannot be reflected in the contract amount, this could affect business performance. As countermeasures, the Company continuously monitors labor conditions and conducts market price surveys of key materials, responding to sharp fluctuations through advance procurement and proposals for alternative construction methods. In particular, for the building construction business, where the impact is significant, the Company makes it a principle to include price escalation clauses in contracts.

If credit concerns regarding clients, partner companies, or joint construction companies materialize due to an economic slowdown or contraction of the construction market, this could lead to uncollectible funds or construction delays, potentially affecting business performance. As countermeasures, the Company conducts credit investigations of clients when selecting projects, and has established a procedure whereby projects are approved by the Management Committee (or the Board of Directors for large-scale projects) following deliberation by a review committee, working to secure transaction terms such as receipt and payment of construction fees in accordance with credit assessments.

Although the Company thoroughly implements construction management through continuous construction education and quality control methods such as ISO standards, if a serious defect were to occur in a constructed work, this could affect business performance. As countermeasures, the Company has substantially revised the management structure of its head office and branch offices, newly established departments providing construction support and technical guidance, and is working to review business processes and standardize management criteria. It is also strengthening monitoring of schedule and cost progress, with a focus on priority-managed construction sites.

Due to the nature of the working environment and methods involved, the construction business often entails hazards, and the accident rate is higher compared with other industries. If a serious accident involving personal injury or damage to constructed works occurs, this could affect business performance and corporate reputation. As countermeasures, the Safety and Health Management Office, under the direct control of the President, conducts safety patrols at each site and provides education based on past case studies, and the Company hedges risk by taking out construction work insurance and liability insurance for all projects.

The Company operates a real estate development business that requires know-how different from its core civil engineering and building construction businesses, and since project periods extend over long durations, significant changes in the business environment or development not proceeding as planned could affect business performance. As countermeasures, decisions are made strictly by the Management Committee and the Board of Directors following prior deliberation by relevant departments, and business risks and signs of environmental change are continuously monitored from the planning stage through implementation, with timely and appropriate review and revision of business plans.

In overseas construction projects, unexpected changes in laws, regulations, or policies, the occurrence of terrorism, conflict, or infectious disease, or the scaling back or postponement of projects due to changes in economic conditions could affect business performance. In addition, since the Company holds foreign-currency-denominated assets and liabilities, there is a risk of foreign exchange losses arising from exchange rate fluctuations. As countermeasures, the Company is strengthening its crisis management system based on the "Overseas Emergency Response Manual" and hedges exposure through foreign exchange forward contracts and other means as necessary.

The Company is subject to numerous legal regulations, including the Construction Business Act, the Building Standards Act, the Real Estate Brokerage Act, and the Antimonopoly Act, and holds licenses such as the Specific Construction Business License, registration as a First-Class Architect Office, and a Real Estate Brokerage license. If, for some reason, a license is revoked or not renewed in the future, or if laws are abolished or amended, new regulations are introduced, or applicable standards are changed, this could affect business performance. As countermeasures, the Company works to identify in advance trends in the enactment and revision of relevant laws and regulations, and conducts awareness-raising activities on legal compliance and monitors compliance status among officers, employees, and specialized contractors.

As natural disasters intensify due to climate change, physical risks such as damage to ongoing construction projects, construction delays, and damage to the Company's own properties could affect business continuity. There is also a transition risk of a significant increase in construction costs associated with the introduction of a carbon tax or the strengthening of regulations. As countermeasures, the Company announced its endorsement of the TCFD recommendations in October 2021, and has set CO2 emission reduction targets for fiscal year 2030 (a 42% reduction in Scope 1 and 2, and a 25% reduction in Scope 3, both versus fiscal year 2020) as well as a goal of achieving net-zero emissions by 2050.