AKATSUKI EAZIMA CO., LTD.

The Company is subject to a wide range of laws and regulations, including the Construction Business Act, the Subcontract Act, the Antimonopoly Act, and the Industrial Safety and Health Act. Changes in the abolition, enactment, or application standards of these laws and regulations may affect the Company's business performance and financial position. As a countermeasure, the Company has established a system to develop, maintain, and enhance compliance through its Compliance Committee.

The Company conducts its business activities mainly centered on Ibaraki Prefecture, resulting in a structure that is directly susceptible to the investment conditions, economic conditions, and natural disasters of that region. If the regional economy deteriorates or a large-scale disaster occurs, a decline in orders received may affect the Company's business performance and financial position. As a countermeasure, the Company strives to minimize concentration risk through focused investment in strategic areas and strengthening of sales capabilities.

If construction periods are extended due to circumstances not attributable to the Company, delivery to customers may be delayed beyond the scheduled period, resulting in a discrepancy in the timing of revenue recognition. This may cause performance in a specific period to fall short of plan, potentially affecting the Company's business performance and financial position. As a countermeasure, the Company strives for early detection of issues during construction and thorough construction management.

If prices of materials and equipment rise sharply due to market fluctuations, it may become difficult to pass on such increases to contract amounts, and the resulting rise in construction costs may affect the Company's business performance and financial position. This risk is particularly likely to materialize in an environment of continued increases in construction materials and labor costs. As a countermeasure, the Company strives to minimize this risk by closely monitoring market fluctuations, procuring materials early, and securing stable business partners.

Unprofitable construction projects may arise due to unexpected cost increases resulting from construction delays caused by the progress status of work outside the Company's scope, design changes, and increases in construction materials and labor costs. Although the Company implements appropriate cost management through individual cost accounting, sudden cost increases directly affect business performance and financial position. As a countermeasure, the Company strives for early detection of issues during construction and thorough construction management.

The Company bears liability for non-conformity with contracts for a certain period after completion under construction contracts, and if repair costs exceed the provision for warranty for completed construction, this may affect the Company's business performance and financial position. Although provisions are recorded based on past performance, there is a risk that the provision may be insufficient in the event of large-scale defects. As a countermeasure, the Company strives to avoid risk through thorough quality control via construction review meetings, internal interim inspections, and completion inspections, as well as by taking out construction work insurance and liability insurance.

The Company may face claims for damages due to personal or physical accidents, disasters, or complaints after completion, and if a large-scale earthquake or other disaster or infectious disease that impedes business continuity occurs, the resulting damages that cannot be fully covered may affect the Company's business performance and financial position. Although the Company hedges certain risks by taking out various types of insurance, the possibility of damages not covered by insurance cannot be ruled out. As a countermeasure, the Company has established a business continuity plan, conducts safety patrols, and implements measures to prevent the spread of infection (such as staggered commuting hours and installation of disinfectant).

If a business partner goes bankrupt before payment for construction work is received, this may impede the collection of trade receivables, and if a subcontractor's bankruptcy disrupts construction progress, this may affect the Company's business performance and financial position. Given the nature of the construction industry, collaboration with multiple subcontractors is essential, and the effectiveness of credit management directly impacts business performance. As a countermeasure, the Company strives to minimize risk through thorough credit management at the start of transactions, progress-based billing and cash flow balance management, and information sharing on business partners between the sales and construction departments.

Securing and developing excellent personnel in the sales and construction departments is an important issue, and if the Company is unable to secure and develop the human resources necessary to realize its vision of being a "total engineering group with technical capabilities and human resources," this may impede the securing of orders received and affect the Company's business performance and financial position. As the labor shortage across the construction industry as a whole becomes more severe, maintaining competitiveness in recruitment has become a challenge. As a countermeasure, the Company strives to secure and develop personnel by promoting recruitment through the use of recruitment support services, university visits, company information sessions, and the introduction of internship programs, by creating a diverse workplace, and by actively investing in personnel training.