TECHNO RYOWA LTD.

Since net sales of completed construction contracts (based on individual orders) account for the majority of revenue, a decline in such sales due to reductions in public investment budgets by government agencies or cutbacks in capital expenditure by private companies could affect business performance. The revenue structure, which is highly susceptible to economic conditions, poses a challenge; the company addresses this by capturing demand for maintenance and repair work and by adopting a basic policy of promoting a balanced order intake.

Because construction projects take time from commencement to completion, there is a risk that a sharp rise in raw material prices occurring after the estimated construction cost has been prepared could prevent the company from securing the initially expected profit. The company addresses this through centralized company-wide procurement by the Procurement Division to leverage scale benefits, together with close monitoring of materials price trends and thorough management of long-duration construction projects.

The company holds listed and unlisted shares of financial institutions and important business partners, exposing it to the risk of stock market price fluctuations and the risk of recognizing valuation losses due to poor performance of investees. The company addresses this by having the Board of Directors annually review the purpose of holding each strategic shareholding and assess it against the cost of capital, and by selling and disposing of holdings deemed inappropriate.

If a personal injury or property damage accident occurs during renovation work at an operating plant or similar facility, this could result in the suspension of plant operations and substantial liability for damages. While insurance coverage provides a certain degree of protection, there is also a risk that a significant increase in insurance premiums following an accident could affect business performance. The company has established safety and quality assurance departments at all business sites and works to eliminate accidents through regular patrols and inspections.

Unforeseen additional costs arising from design changes or rework during the construction process may prevent the company from securing the initially projected profit. The company addresses this by compiling monthly data on cost incurrence and profit forecast progress for all ongoing construction projects, and by verifying appropriateness at both the head office and each business site.

If collection of trade receivables becomes difficult due to credit concerns regarding business partners, this could affect business performance. The company works to reduce this risk through credit investigations conducted at the start of transactions and on a periodic basis, as well as through receivables management by business partner and by construction project.

As the proportion of elderly workers in the construction industry rises amid the ongoing decline in the birthrate and aging population, a shortage of skilled workers and stagnation in continuous recruitment could lead to a shortage of construction personnel, a decline in technical capabilities, and lost order opportunities. The company addresses this by extending retirement age, improving treatment of rehired employees, reviewing personnel systems and compensation structures, and strengthening recruitment activities for new graduates and mid-career hires as well as specialized technical training.

A downturn in domestic and overseas stock markets could reduce the value of pension assets, potentially requiring an increase in retirement benefit expenses or additional pension asset contributions, thereby affecting business performance. The company works to reduce this risk by formulating an asset allocation that avoids excessive concentration in high-risk products based on its "Basic Policy for Pension Asset Management," and by monitoring the entrusted asset management institutions.

In its business activities in Southeast Asia, unforeseen events such as unexpected changes in local laws and regulations, political instability, terrorism, or currency fluctuations could affect business performance. The company works to avoid these risks by strengthening governance through the development of internal regulations and manuals, maintaining close information sharing with local operations, and utilizing specialist consultants.

In the course of business operations, including at construction sites, there are opportunities to access confidential information and personal information of business partners; if important information is leaked due to unauthorized external access or removal of data by employees, this could result in a loss of social trust and liability for damages, thereby affecting business performance. The company works to prevent information leakage by strengthening on-site security measures and conducting e-learning on IT security as well as security training at construction sites.