CHUDENKO CORPORATION

Failure to meet recruitment plans, employee turnover, and shortages of personnel holding national qualifications or technical skills may make it difficult to build sufficient construction capabilities and secure technical capacity, potentially hindering the securing of sales. As countermeasures, the Company is strengthening regular recruitment through scholarship repayment support programs and recruitment not limited by academic major or initial assignment to urban areas, securing immediately effective mid-career hires through referral recruitment, and promoting early-stage human resource development combining OJT and OFF-JT.

If significant changes occur in the order environment, such as intensified price competition due to shrinking construction demand or a decline in capital expenditure by the private sector and government agencies, the Company may be unable to secure orders, which could affect business performance. The Company is working to secure and expand orders by capturing demand in growth areas such as semiconductors, data centers, and grid-scale storage batteries, strengthening the ZEB and PPA businesses, and reducing order costs through collaboration among the sales, engineering, and procurement departments.

If violations of laws such as the Construction Business Act or the Labor Standards Act, or inappropriate business operations occur, the Company could face criminal penalties, substantial fines, damages claims, and suspension of transactions due to loss of social credibility, which could materially affect business performance. The Company works to prevent and detect inappropriate matters at an early stage through ongoing education based on its compliance policy, establishment of a corporate ethics helpline, and periodic evaluation of the development and operational status of internal controls.

If serious quality defects occur at the design or construction stage of a project, this could lead to substantial costs from repair work or damages claims, and loss of customer trust resulting in suspension of transactions, thereby affecting business performance. In addition to examining recurrence prevention measures based on root cause analysis of quality defects and thoroughly conducting in-process inspections and functional verification inspections, the Company seeks to reduce risk through assembly insurance and liability insurance, among others.

The occurrence of industrial accidents or traffic accidents could affect business performance through loss of human life, compensation to victims, and loss of social credibility. The Company strives to prevent industrial accidents and traffic accidents through the use of a safety training facility that provides simulated experiences of hazards such as electric shock and falls, on-site patrols by a safety management strengthening team, introduction of equipment based on a fail-safe perspective, and the practice and deepening of KY (hazard prediction) activities.

If increases in material costs, labor costs, and other expenses cannot be reflected in order prices, or if sharp cost increases occur during construction and reduce profitability, the Company may be unable to secure profit, which could affect business performance. The Company is working on advance execution of contracts including escalation clauses, leveling and improving efficiency of construction through front-loading, taking advantage of scale benefits through early procurement of materials and concentrated purchasing, and suppressing fluctuations in subcontracting costs through stable ordering to members of the Chuden Kogyo Kyoryokukai (cooperative association).

In M&A transactions or business investments aimed at business expansion or strengthening competitiveness, if the expected synergies or earnings benefits are not achieved, the Company may find it difficult to recover the invested funds, which could affect business performance. The Company makes careful investment decisions based on its "Guidelines for M&A Investment Criteria and Evaluation," taking into account evaluations by external experts, and after making an investment, has established a system to determine whether to make additional investments, withdraw, or scale down, through dispatch of Company personnel and continuous monitoring of business plans and earnings forecasts.

If confidential information such as customer information or sales information is leaked or lost due to unauthorized access from outside parties or cyberattacks, this could result in substantial damages claims and affect order opportunities due to loss of social credibility, thereby affecting business performance. The Company works to prevent information leakage and loss through the implementation of targeted attack email training, strengthening of intrusion monitoring, and data backup using external services with secured security such as cloud servers.

If business process reform utilizing AI and the introduction of digital technology do not progress and the response to DX (digital transformation) is delayed, the Company may miss opportunities to improve business efficiency and productivity, leading to a decline in competitiveness and affecting business performance. The Company is working to build a robust business foundation that keeps pace with technological innovation by databasing accumulated knowledge and utilizing it efficiently through AI, and by promoting labor savings, elimination of reliance on individual expertise, and improvement of work quality through generative AI and AI agents, among others.

Insufficient efforts to address climate change issues could damage corporate value and competitiveness due to a decline in evaluation by stakeholders, and if various regulatory tightening or the introduction of a carbon tax occurs, this could directly affect business performance. The Company is working to improve transparency by promoting its own decarbonization through the introduction of self-consumption solar power generation, converting its office buildings to ZEB standards, and electrifying vehicles, as well as by identifying climate change risks and opportunities based on the TCFD recommendations and conducting financial impact analysis and disclosure.