TENPOS HOLDINGS Co.,Ltd.

Although the Administration Division is leading efforts to strengthen the internal audit framework, the possibility of future problems arising in the management system cannot be ruled out. If such issues materialize, they could adversely affect the Group's overall business results through a decline in sales resulting from reduced social trust. The Group's countermeasure is to raise awareness across the entire organization to ensure thorough compliance.

During the Great East Japan Earthquake of 2011, significant damage occurred, including damage to merchandise, primarily at Tenpos Busters Co., Ltd. stores. It is difficult to predict the scale of damage from anticipated large-scale direct-hit earthquakes, such as a Nankai Trough earthquake, and damage to stores and merchandise could have a material impact on business results and financial condition. Although measures such as fixing display shelves and preventing falling items have been implemented, complete protection is difficult to achieve.

In the restaurant industry, the risk of inappropriate conduct by employees or customers spreading rapidly via the internet is increasing, and the corporate image could deteriorate due to the spread of negative rumors, slander, or defamation. The securities report explicitly states that, given the nature of the restaurant industry with high customer and employee turnover, implementing complete countermeasures is difficult. Although employee training and in-store awareness campaigns are implemented as countermeasures, the risk of impact on business results and financial condition remains.

In the restaurant business, the handling of fresh food products—such as meat handled by Steak no Asakuma and fresh fish handled by Yamato Sakana Co., Ltd.—has increased, raising the risk of food hygiene issues and rising ingredient prices. If a food safety problem occurs that exceeds the scope of the Group's own initiatives, declining trust in products, response costs incurred, and rising ingredient prices could affect business results and financial condition. In addition, if a serious incident occurs involving gift products, there is also a risk of product recalls and product liability claims.

The Company positions M&A as an important means of business expansion, but as illustrated by the case of Takewaka Co., Ltd., which went bankrupt after failing to overcome losses partly due to the impact of the COVID-19 pandemic, there is a risk that post-acquisition business development may not proceed as planned. If contingent liabilities or unrecognized liabilities that could not be identified during pre-acquisition due diligence come to light, this could have a material impact on the Group's business activities, financial position, and business results. Although detailed due diligence is conducted through securities firms and specialized M&A service providers, such risks cannot be completely eliminated.

Group companies that hold personal information of customers, employees, and shareholders face the risk of personal information leakage against the backdrop of increasingly sophisticated cyberattacks. Should a leak occur, it could affect business results through loss of social trust and payment of damages. Although appropriate information management and leak-prevention measures are implemented, complete protection against cyberattacks and similar threats is difficult to achieve.