TAIHEI DENGYO KAISHA,LTD.

Sales are highly dependent on the power generation facilities business, and if there is a deterioration in trends within the electric power industry, cost reductions by electric utilities due to power market liberalization, or suspension/cancellation of power plant construction, this could have a material adverse effect on business performance. As countermeasures, in addition to distributed order-taking activities through 9 branches nationwide, the Group is diversifying risk through active order-taking activities in steelmaking, environmental conservation, chemical plants, and other fields.

There is a risk that scheduled construction work will be delayed due to the review status of the Nuclear Regulation Authority, additional responses to new regulatory standards, natural disasters, and other factors. Construction delays may lead to inefficient staffing allocation and disruption of profit plans, and the Group addresses this through personnel adjustments between business sites, leveraging its strength of nationwide operations.

If a fatal or serious accident occurs during construction work, there are concerns about loss of social credibility and deterioration in business performance due to work stoppages. The Group implements thorough physical measures focused on "inherently safe design" across all construction sites, regular safety and health education, on-site support patrols by management and supervisors, and stationed-type patrols under the "Laws, Safety, and Quality Enhancement Project."

If significant cost increases occur due to soaring material and labor costs during construction, profits may be severely squeezed under fixed-price contracts, potentially adversely affecting business performance. The Group strives to avoid and minimize this risk through construction method improvements, grasping supply volumes based on forecasts of future construction demand, and information sharing and collaboration with construction contractors and equipment/material suppliers.

If appropriate price pass-through to contract amounts does not progress amid the recent surge in material prices, labor costs may be squeezed, making it difficult to secure appropriate labor unit prices across the entire supply chain. The Group addresses this by setting labor unit prices at the time of cost estimation based on appropriate grounds and thoroughly communicating this throughout the Group.

In business operations in Hong Kong, the Philippines, and other locations, revenue may decrease due to changes in laws, regulations, and tax systems, political instability, terrorism/natural disasters, and sharp exchange rate fluctuations. In the event of an emergency, the Group gathers information through local, construction, and sales departments and consults with experts, and considers avoiding foreign exchange risk by concluding contracts in both local currency and Japanese yen.

If various information is leaked externally due to cyber attacks such as malware, the leakage of customer information or confidential information could lead to loss of social credibility and suspension of business dealings. In addition to technical measures such as software updates and multi-layered defense, the Group provides information education and training for users.

If the Group violates related laws and regulations such as the Construction Business Act, the Industrial Safety and Health Act, and the Labor Standards Act, it may be subject to business suspension or revocation of various licenses through administrative disposition, potentially damaging social credibility. The Group holds a Compliance Committee meeting monthly and strives to prevent similar occurrences through education and awareness activities using administrative disposition cases from other companies in the same industry as examples.

If a personnel shortage occurs due to difficulties in recruitment stemming from the declining birthrate and continued employee turnover, this could adversely affect performance through reduced construction capacity and lost order opportunities. The Group aims to avoid this risk and minimize its impact by strengthening recruitment activities aimed at diverse hiring, and implementing work-style reforms and childcare support.

If occupational safety and health issues arise, or if human rights issues occur within the supply chain such as child labor, forced labor, or discrimination against foreign workers, this could significantly impact performance through loss of social credibility, suspension of business dealings by customers, and withdrawal from certain businesses. The Group has established a system to take corrective measures against deviations from its code of ethical conduct through various investigations and audits within the supply chain and communication with stakeholders.