SAPPORO HOLDINGS LIMITED

There is a risk that domestic and overseas growth strategies will not proceed as planned due to changes in the market environment, deterioration of management or assets resulting from acquisitions, alliances, or collaborations, a greater-than-expected decline in beer demand driven by the shrinking domestic alcoholic beverage market and growing health consciousness, and delays in the restructuring of the North American business. If realized, this could adversely affect business performance and financial condition, result in impairment losses, and necessitate a review of strategies for core businesses. As countermeasures, the Group formulates strategic scenarios including risk scenarios, implements portfolio management, prioritizes investment in core brands, and continuously monitors KRIs to enable rapid strategic adjustments.

There is a risk of soaring prices for key raw materials and supplies due to deteriorating market conditions or exchange rate fluctuations, as well as procurement shortages or delivery delays caused by climate change, natural disasters, geopolitical risks, or a decrease in the number of suppliers. If realized, this could adversely affect Group performance through increased procurement costs, and could disrupt manufacturing plans or force production to halt. As countermeasures, the Group diversifies procurement sources, utilizes long-term contracts, hedges risk through foreign exchange forward contracts and similar instruments, and passes on appropriate price adjustments to suppliers.

There is a risk that labor productivity will decline due to insufficient progress in building organizational and personnel structures that lead to results, and a risk that corporate competitiveness will decline due to insufficient investment in securing and developing personnel essential to management strategy, such as women, management, global, DX, and IT talent. If realized, this could reduce profitability and adversely affect the execution and realization of management strategy. As countermeasures, the Group is pursuing three personnel strategies: accelerating diversity and mobility, focusing investment on high-priority talent, and establishing systems and environments that allow employees to perform at their full potential.

There is a risk that technologies that have been a strength in products and manufacturing processes will become obsolete due to advances in technological innovation and changes in the competitive environment, reducing competitive advantage, as well as a risk that R&D direction will diverge from market needs due to changes in customer preferences and lifestyles. If realized, this could result in delayed new product development and launches leading to lost sales opportunities, diminished brand value, and deterioration of the mid- to long-term earnings structure. As countermeasures, the Group promotes R&D centered on "deliciousness" and "health," utilizes open innovation, and ensures alignment with priority areas such as Healthier Choice.

There is a risk that global tightening of alcohol regulations and rising health consciousness will shrink consumer demand, leading to lower profitability from declining sales, failure to meet profit targets, and a decline in corporate value due to impaired mid- to long-term growth expectations. As countermeasures, the Group conducts awareness activities to ensure compliance with legal drinking age requirements and to eliminate inappropriate drinking, performs prior advertising review in line with voluntary guidelines, and strengthens development and initiatives for non-alcoholic and low-alcohol products.

There is a risk that progressing climate change will raise the required standards for energy and greenhouse gas reduction, a risk that stable procurement of key raw materials (such as agricultural products) and water resources will become difficult, and a risk of unplanned costs arising from environmental pollution or ecosystem destruction. If realized, this could result in additional costs for regulatory compliance, lost opportunities due to production restrictions or stoppages, and adverse effects on business continuity due to a decline in social reputation. As countermeasures, the Group promotes efforts toward a decarbonized, circular, and nature-positive society based on the "Sapporo Group Environmental Vision 2050," implements TCFD and TNFD disclosures, and develops climate-change-adapted varieties.

There is a risk of leakage, tampering, or destruction of confidential corporate information and personal data due to cyberattacks (such as targeted attacks or malware intrusion), information leaks caused by intentional acts or negligence of data-sharing partners, and a risk of business activities being halted or delayed due to information system outages. If realized, this could result in lost business opportunities due to damage to brand and trust, legal sanctions and fines, additional costs for system restoration and customer response, and adverse effects on performance and financial condition due to substantial compensation payments. As countermeasures, the Group establishes a multi-layered structure for defense, detection, response, and recovery, conducts external assessments such as vulnerability diagnostics, and provides employee education and awareness activities on information protection.

There is a risk of declining competitive advantage due to insufficient use of digital technology in product promotion and business processes, lost opportunities due to inadequate utilization of data within the Group, and a risk of erroneous decision-making or compliance violations due to the absence of established data and AI governance. If realized, this could reduce competitiveness and increase costs due to insufficient improvement in operational efficiency, and adversely affect the promotion of management strategy. As countermeasures, the Group builds a promotion structure for DX and IT strategy, develops a data analytics environment, promotes the use of generative AI, and establishes and operates a data governance framework.

There is a risk of rising raw material prices and deteriorating profitability due to yen depreciation, increased tax burden due to differences in views on transfer pricing taxation or changes in tax laws in various countries, losses from fluctuations in the value of financial assets and liabilities, and impairment losses arising from a deteriorating management environment. If realized, this could result in amended financial statement filings and additional tax burdens, deterioration in yen-translated profit and loss due to exchange rate fluctuations, worsened fundraising conditions due to rising market interest rates, and reduced cash flow due to increased bad debt losses. As countermeasures, the Group utilizes derivative transactions such as foreign exchange forward contracts and swaps, diversifies its fundraising methods, and makes investment decisions based on the Group's "Investment Standards" and "Business Withdrawal Standards."

There is a risk of compliance issues arising from malfunctioning internal controls, acts violating laws and social expectations such as misconduct, bribery, and harassment, and a risk of restricted business activities due to the introduction of new legal regulations such as increases in liquor and consumption taxes or advertising regulations for alcoholic beverages. If realized, this could result in economic sanctions such as penalties and lawsuits, loss of trust among shareholders and customers, outflow of talented personnel and difficulty in recruitment, and adverse effects on Group performance and financial condition due to declining brand and corporate value. As countermeasures, the Group strengthens its monitoring functions based on the Corporate Governance Code, conducts compliance training for all officers and employees, and thoroughly promotes awareness and reinforces operation of its internal whistleblowing system.