TENOX CORPORATION

Because the company operates a construction business specialized in foundation work, decreases in public works and private capital investment due to economic fluctuations, as well as intensifying price competition with competitors, directly affect business performance. In a market contraction phase, there is a risk that order volume declines and profit margins deteriorate simultaneously. Although this is not included among the priority risk management items for FY2026 (ending March 2026), it is recognized as a risk fundamental to the business environment.

There is a risk that construction profitability deteriorates due to surges in construction material and fuel prices, rising labor costs, and discrepancies between estimated and actual construction periods. The company addresses this through improved cost estimation accuracy at the bidding stage, cost management during construction, and efficient use of equipment, but cost increases due to external factors cannot be fully controlled. This risk is designated as a priority risk management item for FY2026 (ending March 2026), and regular monitoring is conducted.

Although preliminary surveys are conducted for pile work and ground improvement work, the possibility of unforeseeable construction defects cannot be ruled out because the ground consists of diverse soil types. If a quality defect occurs, rework and damage compensation claims could adversely affect business performance and financial condition. This risk is designated as a priority risk management item for FY2026 (ending March 2026), and enhanced focused management and countermeasures are being pursued.

In the construction business, securing qualified personnel and evaluating construction track records form the foundation for business continuity and expansion, and for some construction projects, the assignment of a chief engineer is legally mandatory. The company focuses on hiring qualified personnel and providing education to support qualification acquisition, but if it cannot continuously secure human resources, business expansion will be constrained. This risk is designated as a priority risk management item for FY2026 (ending March 2026), and management is conducted in conjunction with human capital initiatives.

The company holds a special construction business license and a general construction business license from the Minister of Land, Infrastructure, Transport and Tourism, and revocation of these licenses due to legal violations, etc. would have a material impact on business continuity. In addition to the Construction Business Act, the company is subject to a wide range of laws and regulations, including the Road Traffic Act and the Waste Management Act, and must also respond to regulatory revisions and new regulations. A Compliance Committee has been established to build a response system, and this risk is also designated as a priority risk management item for FY2026 (ending March 2026).

Outdoor construction site work using large heavy machinery carries a higher risk of serious labor accidents compared to other industries. If a serious disaster such as a fatal accident occurs, in addition to human loss, it could result in a loss of social credibility, disaster response costs including compensation, and deteriorated earnings due to construction delays. The company addresses this through thorough safety and health education and various insurance coverage, but the risk cannot be completely eliminated.

There is a risk that business costs will increase due to the introduction of carbon pricing (carbon taxes, emissions trading) accompanying the transition to a decarbonized society. In addition, insufficient decarbonization measures could result in exclusion from supply chains. As countermeasures, the company is expanding the use of carbon-neutral fuel and CO2-reducing additives for construction machinery, promoting the practical application of electric construction machinery, and developing CO2 underground fixation methods.

If a system failure or leakage of important information occurs due to virus infection or unauthorized access, there is a risk of temporary business suspension, loss of credibility with customers and business partners leading to suspension of transactions, and damage compensation claims. The company addresses this through constant updates of antivirus software and strengthened network security, but complete protection is difficult given the increasing sophistication of cyberattacks.

In overseas business operations, unforeseeable changes in legal systems or political and economic conditions may adversely affect business performance and financial condition. In addition, foreign exchange losses arising from sharp fluctuations in exchange rates may also affect business performance. This is recognized as a risk specific to overseas business, but there is no explicit description of specific hedging measures in the securities report.

There is a risk of bad debt losses and provisions arising from deterioration in the creditworthiness of business partners, as well as delayed collection of receivables due to concentration of receivables from specific customers associated with large-scale construction orders. Concentration of receivables in specific customers is difficult to avoid given the nature of large-scale construction orders, and deterioration in the financial condition of such a customer could directly lead to losses.