Sekisui House, Ltd.

Violation of licensing laws such as the Building Lots and Buildings Transaction Business Act, the Construction Business Act, and the Architects Act may result in significant remediation costs or administrative sanctions such as business suspension, potentially affecting business results. As countermeasures, the Company has introduced a legal compliance check system based on the Building Standards Act, established a double-check system at branches and head office, and implemented appropriate operational management of assigned engineers.

If a serious quality problem arises due to unforeseen human error in design, production, or construction, it could lead to significant costs and damage to corporate reputation, potentially affecting business results. The Quality Control Committee under the Risk Management Committee oversees five subcommittees covering products, design, production, construction, and customer satisfaction (CS), and works on priority improvements based on an annual construction quality control plan as well as securing construction capacity (leveling of construction volume, training of technical intern trainees, etc.).

If personal information or confidential information is leaked or tampered with, or if systems are halted due to cyberattacks or computer virus intrusion, this could lead to damages claims from customers and loss of trust, potentially affecting business results. Under the Information Security Committee, the Company regularly strengthens access control systems, conducts email training, and undergoes security assessments by external organizations, while also promoting awareness of personal information protection among all employees through e-learning.

Inadequate response to human rights risks affecting stakeholders in Japan and overseas could result in a decline in social reputation. Based on the "Sekisui House Group Human Rights Policy" established in April 2020, the Company has adopted a human rights due diligence process, identifying material risks for each business through the creation of a human rights risk map and advancing responses through a PDCA cycle.

Stricter regulations such as carbon taxes could lead to substantial cost increases, and intensifying natural disasters could make business continuity difficult. The Company identifies key risks through scenario analysis, promotes decarbonized products such as ZEH, utilizes renewable energy through "Sekisui House Owner Denki," and works toward having 80% of major suppliers set SBT targets by 2030.

In addition to the risk of health impairment or long-term absence among employees due to long working hours, the occurrence of serious accidents such as fatalities at construction sites could result in liability for damages and loss of social trust. The Company conducts monthly checks of working conditions, monitoring by the Human Resources and General Affairs Department, and labor management training, while also holding regular meetings of the Health and Safety Committee based on a company-wide annual construction safety and health plan and developing a system for compliance with work procedures.

The business structure is highly susceptible to changes in personal consumption trends, interest rates, land prices, housing-related policies and tax systems, rental market conditions, and regional economic trends. A domestic executive meeting centered on the business division heads and sales division heads is held once a month to share progress on measures based on market trends and to flexibly formulate the next set of measures.

A decline in the fair value of real estate for sale, fixed assets, or investment securities could result in impairment losses or valuation losses being recorded, potentially affecting business and financial results. Projects above a certain amount are carefully judged through head office approval review and deliberation at the Management Committee, the appropriateness of holding policy shareholdings is reviewed annually by the Board of Directors, and the Company regularly assesses impairment and valuation loss risks on held assets, implementing appropriate accounting treatment as needed.

Procurement difficulties caused by abnormal weather, war, terrorism, infectious diseases, geopolitical risks, and other factors could lead to construction stoppages or delays in completion, and a sharp rise in procurement prices due to global increases in raw material and energy prices could also affect business results. The Company is preparing on three fronts: diversifying component lineups, multiple suppliers, and multiple production sites (supply aspect); standardizing components (specification aspect); and databasing supplier locations (information aspect), striving to strengthen the resilience of the entire supply chain.

A shareholder derivative lawsuit is ongoing against former directors in connection with damages of ¥5,559 million arising from a fraud incident involving land transactions for condominiums for sale (as of the filing date, lawsuits against a former representative director and chairman and a former representative director and vice chairman continue). Depending on the progress of the litigation, reputational risk may arise. The Company has determined that the plaintiffs' claims are without merit and has taken the position of joining the defense in the litigation to clearly refute the claims.