FUKUDA CORPORATION

If public construction investment declines due to deteriorating national or local government finances, or if private construction investment contracts due to changes in domestic or overseas economic conditions, this may affect the Group's business results. Given the business structure in which the construction business accounts for more than 90% of net sales, trends in construction investment have a significant direct impact on business results. As a countermeasure, order status and project volume are checked monthly at head office and branch manager meetings, and necessary measures are taken while considering medium- to long-term market trends.

If construction-related materials and labor unit prices fluctuate sharply, this may affect business results through an increase in construction costs. Rising labor unit prices amid recent surges in material prices and labor shortages have become an industry-wide challenge. As a countermeasure, the Company discusses with clients the adoption of contract price revision provisions such as escalation clauses, and works to mitigate the impact through advance procurement and proposals for alternative construction methods.

If the market value of held assets such as real estate for sale, business-use real estate, and investment securities declines significantly, or if their profitability deteriorates significantly, this may affect business results through the recording of valuation losses, among other effects. As a countermeasure, the significance of holding real estate for sale and business-use real estate is reassessed every fiscal period, and early sale is carried out when the benefit of holding is judged to be low. Regarding investment securities, the Board of Directors reviews the appropriateness of holding them every fiscal period, and they are held only when reasonableness is recognized.

If a client falls into credit difficulty, it may become difficult to fully collect construction payments, which may affect business results. Given the construction industry's structure in which payment is received after work completion, deterioration in a client's financial condition poses a risk directly linked to the occurrence of uncollectible receivables. As a countermeasure, in addition to thorough credit management, the Company strives to secure receivables through ongoing information gathering and management of the status of construction payment receipts.

The Group is expanding its development business as a response to changes in the construction investment business field, but if the business does not progress as planned due to unforeseen factors such as delays in development permits and approvals or sluggish sales, this may affect business results. As a countermeasure, the Company works to identify business risks and signs of environmental change, and reduces risk by reviewing and revising business plans as appropriate when plans are not achieved.

If a serious industrial accident occurs in the construction business, which accounts for more than 90% of net sales, this may affect business results and corporate reputation through administrative dispositions from relevant government authorities, among other effects. Construction sites involve many hazardous operations such as working at heights and use of heavy machinery, making industrial accident risk a key industry-specific issue. As a countermeasure, the Company works to prevent accidents before they occur through regular on-site safety patrols and safety education that includes subcontractors.

Due to the declining birthrate, aging population, and the diminishing image of the construction industry, the number of construction workers has been notably decreasing, which may affect business results through difficulty in securing excellent personnel and loss of order opportunities due to staff shortages. The worsening shortage of construction engineers and skilled workers is a structural challenge for the industry as a whole and poses a risk to medium- to long-term business continuity. As a countermeasure, the Company works to secure human resources by strengthening employee education, training, and technical skill transfer, as well as improving the working environment through the promotion of "work-style reform."

If important internal information is lost or leaked externally due to unauthorized intrusion by outside parties, malware infection, or employee carelessness, this may result in financial damage and loss of social trust, affecting business results. As digital technology advances, cyberattack methods are becoming more sophisticated, requiring the construction industry to strengthen its information management systems as well. As a countermeasure, the Company conducts real-time monitoring through the installation of security software on all communication devices, and works to improve employees' information literacy through internal training.

If laws such as the Construction Business Act are revised, abolished, or newly enacted, application standards are changed, or violations of laws and regulations occur, this may affect business results. The construction industry is subject to a wide range of legal regulations including the Construction Business Act, and ongoing response to changes in the regulatory environment is required. As a countermeasure, the Company works to enhance its compliance system by developing related rules and regulations, conducting internal education and training, and preparing and disseminating a compliance manual.

If a large-scale natural disaster or similar event occurs, this may affect business results through damage to employees and held assets, as well as delays in construction periods and additional costs for projects under construction. The construction industry involves a great deal of outdoor work, making it susceptible to direct damage from natural disasters such as earthquakes, typhoons, and heavy rain. As a countermeasure, the Company works to build a system for rapid recovery through the development of a business continuity plan (BCP), securing disaster-response stockpiles, and disseminating disaster action manuals internally.