EJ Holdings Inc.

Reliance on sales to central government ministries and agencies such as the Ministry of Land, Infrastructure, Transport and Tourism, as well as local governments, is high at approximately 85%, and fluctuations in public investment amounts directly affect operating results. Although sales activities aimed at expanding overseas and private-sector orders are being conducted, the high degree of dependence remains a structural risk going forward.

Because delivery deadlines for public-sector projects are concentrated at the fiscal year-end, sales are markedly skewed toward the fourth quarter; in the consolidated fiscal year under review (FY2025 (ending May 2025)), fourth-quarter sales amounted to ¥26,196 million (61.3% of full-year sales of ¥42,705 million). Under this structure, operating losses continue through the first to third quarters, which affects the accuracy of full-year performance forecasts and cash flow management.

The company conducts business by maintaining multiple administrative registrations, including construction consultant registration, compensation consultant registration, surveyor registration, and geological survey company registration. Should any registration be revoked or its renewal denied, or should relevant laws and regulations be amended or abolished, this could have a material impact on business continuity. There is also a risk of administrative sanctions such as suspension from bidding due to violations of the Antimonopoly Act, the Subcontract Act, or other laws, which the company addresses through a compliance program and risk management regulations.

Given the highly public nature of its business, the company handles a large volume of confidential information, including personal information, and any information leakage could have a material impact on operating results and the company's social credibility. Although a company-wide information management system has been established and enforced, complete prevention remains difficult.

If systems are disrupted by increasingly sophisticated cyberattacks such as ransomware, business continuity may be impaired, potentially affecting operating results. Countermeasures include a multi-layered defense system, deployment of an EDR system, 24-hour monitoring, and regular simulated attack-email response drills and information security training.

The construction consulting business is highly dependent on specialized personnel; if recruitment and development of talented staff do not proceed as planned, or if there is significant attrition of personnel, this could have a material impact on the group's growth and operating results. The company addresses this through building a corporate culture and HR system that enables diverse talent to thrive, and by systematizing various education and training programs, although the industry-wide shortage of engineers underlies this risk.

The company continues to pursue M&A and alliances to address weaknesses in regional coverage and business areas and to cope with the shortage of engineers; however, contingent or unrecognized liabilities not identified during due diligence, or failure to achieve planned outcomes, could necessitate impairment of investments or goodwill. While the company conducts thorough investment analysis to address this, the risk cannot be entirely eliminated.

If defects occur in deliverables and result in damages payments or administrative sanctions such as suspension from bidding, this could affect operating results and future order opportunities. The company mitigates this risk by establishing a rigorous review system with dedicated personnel and by taking out liability insurance for damages.

The company has business locations in regions identified as at risk of large-scale earthquakes and flooding, and depending on the scale of a disaster, damage to key facilities or data could affect operating results. The company is strengthening its disaster management framework through the formulation of a BCP (Business Continuity Plan) and by obtaining the Cabinet Office's "National Resilience Contribution Organization" certification (Resilience Certification), among other measures.

Tighter regulations such as carbon taxes associated with the transition to a decarbonized society, as well as physical impacts such as intensifying weather disasters and rising average temperatures, may affect business activities. The company is examining and implementing climate change responses based on the TCFD framework and promoting efforts toward achieving the Paris Agreement's "1.5°C target," although uncertainty remains regarding regulatory trends and physical impacts.