Nomura Real Estate Holdings, Inc.

The risk that discovery of soil contamination, delays in obtaining permits and approvals, occurrence of additional construction work, constraints on order acceptance by general contractors, extended construction periods, and increases in construction and energy costs may result in delayed recognition of revenue or deteriorating profitability, thereby affecting business performance. In particular, the risk that profit growth projected in the management plan may become difficult to achieve due to soaring construction costs and intensifying competition for land acquisition has been identified as a risk requiring particular attention. As a countermeasure, the company incorporates additional costs at the time of business site acquisition and regularly monitors construction cost trends at Board of Directors and management meetings.

The risk that, if expected profit growth or synergy effects cannot be realized in corporate investments (M&A), or if initial plans are not achieved in investments in new business areas or new asset types, the financial position and business performance may be affected. The risk that initially planned profit growth or synergy effects cannot be realized has been identified as a risk requiring particular attention. As a countermeasure, the company carefully investigates the target company's management plan, financial condition, and contractual relationships prior to executing M&A, and regularly monitors the integration process and management issues at Board of Directors and management meetings after execution.

The risk that trends among competitors, the emergence of new market entrants, the manifestation of economic conditions or geopolitical risks, and the occurrence of disasters may lead to changes in the business environment and market conditions, affecting the sale prices of built-for-sale housing and income-generating real estate as well as rental income from held assets, thereby affecting the financial position and business performance. The impact of changes in the domestic real estate market and financial conditions has been identified as a risk requiring particular attention. As a countermeasure, the company regularly updates its understanding of the external environment, makes investment decisions designed to limit the impact of market fluctuations to a certain degree, and formulates investment budgets after conducting risk assessments.

The risk that a decline in housing purchase intentions or a rise in office vacancy rates due to domestic or overseas economic downturns, an increase in funding costs due to rising market interest rates, a rise in mortgage rates, a decline in asset prices due to rising cap rates, and fluctuations in investment and recovery amounts due to exchange rate movements may affect the financial position and business performance. The risk of increased financial costs due to interest rate increases beyond expectations has been identified as a risk requiring particular attention. As a countermeasure, the company primarily relies on long-term, fixed-rate borrowings to address short-term interest rate rise risk, and operates in accordance with a defined foreign exchange hedging policy.

The risk that deterioration in the financial condition of general contractors or joint venture partners in various overseas countries may cause deterioration in the profitability of overseas business or delays in the timing of profit recovery, thereby affecting the financial position and business performance. In addition, deterioration in the economy or real estate market in overseas business operations has also been identified as a risk requiring particular attention. As a countermeasure, the company regularly confirms and deliberates on events affecting the business through overseas business risk meetings and conducts regular monitoring by the first and second lines of defense.

The risk that the materialization of geopolitical risks may cause disruption to foreign exchange, energy markets, and supply chains; country risk in overseas business; the occurrence of new obligations or cost burdens due to changes in domestic and overseas laws, regulations, tax systems, or accounting standards; and damage to brand value due to inadequate response to human rights issues in the value chain, thereby affecting the financial position and business performance. The risk of soaring raw material prices and supply delays due to the materialization of geopolitical risk has been identified as a risk requiring particular attention. As a countermeasure, the company gathers and analyzes information from industry associations and experts, and is also working to build and operate a human rights due diligence process.

The risk that delayed response to industrial structural changes caused by rapid technological innovation or the emergence of innovative new entrants, difficulty securing human resources due to the declining birthrate and aging population, and delayed response to changing customer environmental demands amid tightening greenhouse gas reduction regulations may reduce the competitiveness of products and services, thereby affecting the financial position and business performance. The risk of declining competitive advantage due to the accelerating evolution of digital technology and delayed response to sustainability has been identified as a risk requiring particular attention. As a countermeasure, the company conducts research and development in new business areas through dedicated organizations, collaborates with venture companies through corporate venture capital, and operates an innovation promotion system.

The risk that disasters such as large-scale earthquakes, wind and flood damage, or infectious disease outbreaks may threaten the safety of officers and employees and impede the securing of personnel necessary for business continuity, as well as the risk that built-for-sale, rental, or managed properties may be damaged, threatening customer safety and security. The risk of being unable to continue business due to increasingly severe natural disasters has been identified as a risk requiring particular attention. As a countermeasure, the company has formulated a business continuity plan (BCP), conducts annual training to establish the Group disaster response headquarters, and has also developed an infectious disease BCP and an overseas BCP.

The risk that, in the event information systems become unusable due to cyberattacks, unauthorized access, or system failures, or in the event of an external leak of personal information, delays in sales activities and business processing, loss of credibility, decline in net sales, and the incurrence of damages compensation costs may occur, affecting business performance. The risk of information leakage and impact on business continuity due to cyberattacks or system failures has been identified as a risk requiring particular attention. As a countermeasure, the company blocks unauthorized access, conducts virus scanning, has implemented behavior detection systems and alert monitoring, and maintains cyber insurance coverage.

The risk that health damage to employees due to long working hours, administrative sanctions or loss of personnel due to human resource systems not complying with labor laws and regulations, difficulty securing personnel and decline in corporate competitiveness due to delayed development of a work environment that accommodates diverse human resources, and the risk of violating local labor laws and regulations at overseas locations may affect business performance. The risk of impediments to securing human resources due to delayed dissemination of human resource systems and environmental development needed for diverse personnel to continue to thrive has been identified as a risk requiring particular attention. As a countermeasure, the company has formulated and disclosed a D&I promotion policy and roadmap, introduced an attendance management system, and regularly conducts legal compliance verification of its human resource systems by external experts.