Hibiya Engineering, Ltd.

The Group's sales are highly dependent on the NTT Group, and if the NTT Group's construction investment fluctuates or decreases more than expected, it could adversely affect the Group's business results and financial condition. As countermeasures, the Group is expanding orders in real estate redevelopment, data centers, and new business fields, and is working to apply renewal construction skills developed through work for the NTT Group to other customers.

If prices of equipment and materials surge or delivery is delayed due to the impact of Middle East tensions or supply chain disruptions, the profitability of construction projects may deteriorate, adversely affecting the Group's business results and financial condition. As countermeasures, the Group strives to comply with delivery schedules and reduce costs through expanding the number of partner companies, planned procurement and centralized purchasing, and appropriate price calculation and determination.

Insufficient cost estimation at the time of order receipt, quality defects or additional construction costs occurring during construction, or repair costs arising from contract non-conformity in past projects could adversely affect the Group's business results and financial condition. As countermeasures, the Group is enhancing estimation accuracy, strengthening follow-up systems according to risk factors, providing education utilizing past case studies, and conducting quality patrols by dedicated personnel.

If labor shortages become serious due to the declining birthrate, aging population, and changing attitudes toward work styles, business activities may be hindered, adversely affecting the Group's business results and financial condition. As countermeasures, the Group is engaged in active recruitment regardless of gender or new graduate/mid-career status, planned personnel development, business efficiency improvement through the use of data and AI, and efforts to create a comfortable workplace and improve employee engagement.

While handling important information such as technical data and customer data held by customers, if information leakage occurs due to unauthorized access or other causes, it could reduce customer trust and give rise to liability for damages, adversely affecting the Group's business results and financial condition. As countermeasures, the Group is technically strengthening security monitoring and operations, continuously implementing information security education and training for employees, and has obtained and maintained ISMS certification since 2013.

If construction investment centered on new construction projects contracts due to a domestic economic downturn caused by heightened geopolitical risk or changes in domestic and overseas industrial structures, order intake may decline, adversely affecting the Group's business results and financial condition. As countermeasures, the Group is working to expand renewal construction skills and know-how to other customers, review its focus areas, and promote its carbon neutrality business.

As technological innovation progresses, particularly in the air conditioning and energy fields, if the Group is slow to respond to new technologies, it could lose order opportunities and lose market competitiveness, adversely affecting the Group's business results and financial condition. As countermeasures, the Group is enhancing its responsiveness by gathering information on technology trends and market needs, verifying cooling technologies for data centers and other facilities, and forming alliances with other companies.

If risks materialize related to insufficient experience and consideration in developing new business fields, or difficulty in securing appropriate resources for large-scale data center and redevelopment projects, this could adversely affect the Group's business results and financial condition. As countermeasures, the Group is controlling risk through partnerships with companies possessing relevant know-how, company-wide coordination of construction resources, and planned ordering of materials.

Increased costs to the Group and its customers due to mandatory emissions trading and the introduction of new systems such as carbon taxes (transition risk), and reduced productivity from rising temperatures and equipment damage from abnormal weather (physical risk) could adversely affect the Group's business results and financial condition over the medium to long term. As countermeasures, the Group is promoting the accumulation of track record and know-how in decarbonization and CO2-reduction projects, reducing greenhouse gas emissions, and contributing to the decarbonization transition of society and customers.

If personal injury, property damage, or equipment accidents occur during construction work, this could result in loss of customer trust, adversely affecting the Group's business results and financial condition. As countermeasures, the Group strives to ensure safety through sharing past accident cases, conducting safety education and training (including use of the Haneda Safety Training Center), safety patrols, and thorough measures against heat stroke.