CVS Bay Area Inc.

In the event of a natural disaster such as a large-scale earthquake, typhoon, or torrential rain, damage to buildings and equipment, disruption of lifelines, or paralysis of transportation networks could occur, potentially halting service provision functions at business locations. Even in the absence of direct damage, a decline in consumer spending or a decrease in customer numbers could affect revenue generation. As countermeasures, the company manages stockpiled materials based on its BCP and various disaster response manuals, secures evacuation routes, thoroughly conducts employee training and education, and regularly reviews its manuals.

The spread of infectious diseases such as novel influenza and COVID-19 may lead to a contraction in inbound demand and voluntary restraint from outings both domestically and internationally, creating a risk of decreased usage of the Hotel Business, which is centered primarily in central Tokyo where large theme parks, commercial facilities, and large-scale exhibition halls are concentrated. If closures or entry restrictions occur at nearby facilities, this would directly affect the Hotel Business's ability to secure revenue. As countermeasures, in addition to strengthening the provision of high-value-added services, the company is working to correct the overreliance on tourism and leisure demand and diversify its customer base by acquiring accommodation demand from business, education, and sports-related organizations.

The business hotel facility in Ichikawa City and the outdoor resort facility in Narita City are both company-owned properties for which substantial capital investment, including construction costs, has been made. If planned revenues cannot be secured, impairment of these fixed assets may become necessary. There is also a risk of asset value impairment due to earthquakes. Given the large scale of fixed assets, including investment real estate, there are concerns about the potential impact on business performance.

As part of its fund management activities, the Group primarily invests in unlisted companies through investment limited partnerships, which are classified as high-risk financial assets. If the growth of investee companies does not proceed as planned, the value of the investment assets may become impaired, potentially affecting the Group's business results. Although investment decisions are made following thorough deliberation by the Board of Directors, the nature of investments in unlisted companies entails a high degree of uncertainty in asset valuation.

The Group is primarily engaged in customer-facing service businesses. If a worsening nationwide labor shortage delays the securing of necessary personnel, the Group may be forced to scale back service provision, which could affect its ability to secure earnings. In addition, personnel expenses, outsourcing costs, and other selling, general and administrative expenses are expected to increase due to compliance with relevant laws and social insurance requirements and the promotion of improved working environments. As countermeasures, the Group is thoroughly implementing harassment prevention measures, compliance training, and mental health management, and is expanding employment opportunities by establishing new employment forms such as shortened working hours and positions limited by work location or job scope.

The environment surrounding condominium sales nationwide continues to see a declining trend in new unit numbers, and with construction costs remaining elevated and land shortages, large-scale properties are decreasing, leading to a contraction in properties where condominium front services can be introduced. In addition, there is a risk that maintaining the front service system will become difficult due to the growing difficulty of stably securing concierge personnel and ensuring quality, as well as the deterioration of management associations' financial balance caused by rising management costs. As countermeasures, the company is promoting the provision of added value through service differentiation, expanding the introduction of

Demand for general clothing cleaning has been on a declining trend due to the expansion of remote work and the spread of fast fashion. In addition, industry-wide contraction is becoming pronounced, including management difficulties stemming from rising energy costs and raw material prices, closures of intermediary outlets and factories, and business closures due to a lack of successors, resulting in a continued challenging operating environment. If the acquisition of new demand (such as through House Cleaning & Storage Service and online concierge services) slows down or is delayed, this could affect the business performance of the Company Group. As countermeasures, the Company is proceeding with the reorganization and withdrawal of unprofitable segments, cost reductions through the consolidation of partner factories, and the streamlining of back-office operations.

Energy costs related to manufacturing and delivery, as well as prices of raw materials and supplies, continue to rise, putting pressure on the profitability of the Cleaning Business. While the company is working to reduce collection and delivery costs through consolidation of affiliated plants, continued cost increases could lead to a deterioration in business profitability. To build a management structure that prioritizes profitability, the company has also begun addressing the reorganization and withdrawal from unprofitable segments as well as improving the efficiency of back-office operations.

The Company's Hotel Business is concentrated in areas centered around central Tokyo, where large theme parks, commercial facilities, and large-scale exhibition venues are densely located. There is a risk that closures, admission restrictions, or a decline in the drawing power of facilities in these areas could directly lead to a decrease in the number of guests. This concentration of business in a specific region increases vulnerability to changes in the external environment unique to that region, such as natural disasters, infectious disease outbreaks, and regulatory changes. The Company is working to diversify its customer base by securing lodging demand from business, education, and sports-related organizations, thereby reducing the risk of losing a specific customer segment.

In the Condominium Front Service Business, technological advances in various support systems and changes in behavioral patterns and values triggered by the COVID-19 pandemic have made it possible to provide services via systems and to achieve labor savings. However, if the company falls behind in responding to technological innovation, there is a risk of losing competitive advantage relative to competitors. In the Cleaning Business as well, digitalization efforts are required, such as strengthening the deployment of online concierge services utilizing LINE. If the acquisition of new demand slows down or is delayed, this could impact business performance.