OHKI HEALTHCARE HOLDINGS CO.,LTD.

Under the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices, etc. and related laws and regulations, each business site is required to obtain necessary permits and registrations from the governor of the relevant prefecture or other competent authority. Changes in the status of permits and licenses granted by regulatory authorities could hinder the opening of sales offices or the sale of pharmaceuticals and other products, potentially affecting operating results. The Company manages this risk through its executive meetings, management meetings, compliance committee, and other bodies.

In the pharmaceutical wholesale industry, it is customary practice for pharmaceutical manufacturers to pay sales incentives based on the achievement of sales volumes or number of deliveries. If pharmaceutical manufacturers change their sales strategies and revise their sales incentive systems in the future, this could affect business performance. In addition, center fees collected by major mass retailers and drugstore chains may also affect performance if the fee rates are changed due to intensifying competition in the retail market.

The Group's business operations are highly dependent on computer systems. If system functions are suspended due to natural disasters, accidents, computer virus intrusions, or other causes, recovery may take time and significantly disrupt sales and logistics operations. Because system outages directly lead to delays in order receipt and delivery operations and to lost business opportunities, this represents a material risk to business continuity.

The Group holds large amounts of trade receivables from customers, mainly drugstores and pharmacies. If the recovery of these receivables is delayed due to deterioration in a customer's financial condition, this could affect business performance. While the Group strives to thoroughly manage credit risk to minimize this exposure, a deterioration in a customer's business environment could lead to the occurrence of bad debt losses.

Most of the product inventory and returned goods inventory held by the Group can be returned to suppliers, which normally allows inventory risk to be avoided. However, if a supplier becomes bankrupt or undergoes civil rehabilitation proceedings, a decline in the value of product inventory and the inability to return goods could occur simultaneously. Should such a situation arise, this could affect business performance through the recording of inventory valuation losses and other factors.

The Group holds information assets such as customer information and confidential information, and has established and operates a management system to prevent leakage to outside parties. However, should such information be leaked due to unforeseen circumstances, this could lead to a loss of customer trust. If an information leak were to occur, it could have a material impact on operating results through claims for damages, termination of business relationships, and other consequences.

The Group exercises the utmost care in its business activities to avoid violating laws and regulations or infringing on the rights of others. However, if a lawsuit seeking damages is filed against the Group and the Group loses the case, this could affect business performance depending on the amount of damages awarded. Litigation can result not only in financial losses but also in damage to the Company's credibility and reputation.

Logistics functions play an important role in the pharmaceutical wholesale business. If a large-scale natural disaster such as an earthquake or typhoon occurs, it could significantly disrupt logistics operations, leading to lost sales opportunities and increased recovery costs. Although the Group has established a crisis management framework and system backup arrangements, it may be difficult to respond adequately to disasters that exceed expectations.

Although the COVID-19 pandemic has settled down, a large-scale pandemic caused by a new virus or other pathogen could disrupt logistics and the Group's overall operations. Should such a situation occur, it could have a material impact on business performance and financial condition, and would also constitute a significant risk from the standpoint of the Group's social mission of ensuring a stable supply of pharmaceuticals.