DAI-DAN CO., LTD.

The risk that construction demand significantly decreases and the order environment deteriorates due to a decline in capital investment resulting from deterioration in the domestic and overseas economic environment, or changes in the external environment such as technological innovation. If this risk materializes, it may affect the financial position, business results, and cash flows. The Company works to reduce this risk through monitoring of the external environment and business diversification.

The risk of industrial accidents due to inadequate safety environments at construction sites or lack of employee training, and the risk of deterioration in construction quality or serious quality incidents. If this risk materializes, it may lead to substantial damages, deterioration of profit and loss due to rework in the construction process, costs arising from non-conformity with contracts, and loss of social credibility. Construction managers set occupational safety and quality environment risks as construction management targets and strive for reliable construction work.

The risk of surging materials and labor costs due to deterioration in the economic environment, and the risk of prolonged construction periods due to delays in the delivery of materials and equipment. If this risk materializes, it may lead to a surge in construction costs and the incurrence of costs to address non-conformity with contracts, affecting the financial position, business results, and cash flows. Construction managers formulate construction plans and conduct cost calculations while recognizing this risk.

The risk that securing a construction workforce becomes difficult due to the aging of skilled workers in the construction industry and the decline in the number of young new entrants amid the declining birthrate and aging population. If this risk materializes, it may result in construction delays due to inadequate workforce arrangements, affecting the financial position, business results, and cash flows. The Company works to reduce this risk through cooperation with partner companies in recruiting activities, among other measures.

The risk that failure to meet engineer recruitment plans, loss of personnel due to attrition or resignation, and increased burden and decreased morale among existing employees may affect business activities and business continuity. If this risk materializes, it may become difficult to establish a construction workforce, potentially impeding business continuity. The Company addresses this through measures such as raising the retirement age, promoting the use of IT tools, outsourcing operations, actively recruiting experienced personnel, and introducing a region-limited regular employee system.

A wide range of risks including changes in political, social, and economic conditions overseas, rapid inflation or sudden currency depreciation, terrorism, war, civil unrest, unexpected changes in legal regulations, differences in business customs, and health hazards such as infectious diseases. If this risk materializes, it may result in the inability to collect receivables, a decrease in orders received and completed construction revenue, and foreign exchange losses. The Company has established pre-assignment training for personnel posted overseas and a system for the timely communication and alerting of overseas risk information.

The risk of violations of laws and regulations such as the Construction Business Act, the Antimonopoly Act, and the Industrial Safety and Health Act, bribery and corruption, and new obligations or increased cost burdens due to changes in laws and regulations. If this risk materializes, it may result in a decrease in orders received due to administrative dispositions or business suspension, and the incurrence of costs such as fines and surcharges. The Company strives to prevent violations of laws and regulations through thorough compliance with each applicable law.

The risk that, following the application of the overtime work cap regulation from April 2024, a reduction in the working hours of technical staff may make it impossible to establish design and construction systems, resulting in a decrease in completed construction revenue and operating income. If this risk materializes, it may lead to a marked deterioration in reputation due to legal sanctions and a reduction in construction capacity, affecting the financial position, business results, cash flows, and employee motivation. The Company has launched a project to reduce total working hours through operational streamlining and efficiency improvements in response.

The risk of leakage or falsification of personal information and confidential information of business partners, or destruction or disruption of information systems, due to cyberattacks such as targeted attack emails or malware, or internal misconduct. If this risk materializes, it may result in the incurrence of response costs and damages, and a decrease in orders received due to reputational decline. The Company addresses this through the development of rules and manuals, conclusion of confidentiality agreements and pledges, creation of backups, and employee security training.

Risks related to increased costs from the strengthening of policies and regulations accompanying the transition to a low-carbon economy, failure to respond to changes in demand for decarbonization, and physical changes due to climate change such as an increased frequency of weather disasters and rising average temperatures. If this risk materializes, it may result in a decrease in order opportunities, increased business operation costs due to damage to office buildings or the suspension of construction work, and reduced productivity of employees at construction sites. The Company has established a system in which the Sustainability Committee identifies and assesses climate-related risks and shares information with the Risk Management Committee.