GA technologies Co.,Ltd.

If the real estate transaction market cools due to changes in economic conditions, interest rate levels, land price levels, and other factors, customer investment appetite may decline, potentially affecting the Group's business results and financial position. The real estate industry as a whole has a structural vulnerability of being influenced by the external macro environment. The Group strives to build a system that can respond flexibly while closely monitoring market trends.

The real estate industry has many competitors, and since the M&A advisory business requires no license and has low barriers to entry, intensifying competition may result in price competition, customer attrition, decreased sales volume, and rising procurement costs. The Group seeks to differentiate itself through improving the functionality of the AI real estate investment platform "RENOSY" and applying technology to the M&A advisory business; however, if sufficient differentiation cannot be maintained, this may affect business results and financial position. The likelihood of this risk materializing due to intensifying competition is recognized as reasonably significant.

A portion of the Group's operating and investment funds are raised through financial institution borrowings and bond issuances, and it may become difficult to raise funds on desired terms in a timely manner due to economic downturn, deterioration of financial markets, rising interest rates, decline in creditworthiness, and other factors. Additionally, some borrowings are subject to covenants (financial restriction clauses), and a breach thereof could result in the loss of the benefit of time and have a material impact on the financial position. The Group strives for stable fundraising by building close relationships with financial institutions and diversifying its fundraising methods.

The IT technology field in which "RENOSY" operates is subject to rapid technological progress, and there is a possibility that the Group's own technology and services could lose competitiveness due to technological innovation exceeding the Group's expectations. The direction and speed of IT technology progress are difficult to predict, and the likelihood of this risk materializing is recognized as reasonably significant. The Group aims to reduce this risk through the continuous hiring of engineers with cutting-edge technology skills and the implementation of internal training.

The Group conducts business in North America, China, Thailand, Taiwan, and Malaysia, and is exposed to various risks including each country's legal system, business customs, labor relations, economic trends, exchange rate fluctuations, and political and social factors. In particular, in the United States there is a high likelihood of litigation being filed, and if litigation costs or damages become substantial, business results may be affected. The Group aims to reduce this risk through thorough research prior to overseas expansion, building governance structures, and establishing a system for timely understanding of legal systems and political and economic conditions.

For the Group, which has both online and physical operations, securing and developing excellent talent and ensuring the necessary headcount are important challenges for business expansion, and if the Group is unable to secure necessary personnel or if developed personnel fail to sufficiently contribute to the business, this may affect business results and financial position. This risk is recognized as having a certain likelihood of occurring at all times, and is recognized as having a particularly significant impact on growth. The Group is working on personnel development through active recruitment via a wide range of hiring channels and the implementation of training programs.

If the period from the acquisition to the sale of investment real estate becomes longer than expected, this may result in increased fundraising through borrowings, a rise in the balance of interest-bearing debt, increased interest expense burden, and inventory valuation losses. There is also a risk that discounts offered to promote sales could worsen profit margins. The Group aims to shorten the inventory holding period through thorough inventory quality and quantity management utilizing AI technology and the establishment of procurement standards, and recognizes that the likelihood of this risk materializing within the normal scope of business operations is low.

The Group is subject to numerous legal regulations, including the Building Lots and Buildings Transaction Business Act, the Construction Business Act, and the Act on Advancement of Proper Management of Condominiums, and business activities may be constrained by legal violations or the enactment or revision of new laws. The M&A advisory business is also susceptible to the influence of the Financial Instruments and Exchange Act, the Companies Act, and various tax laws, and changes in laws and regulations may affect the expansion and promotion of M&A transactions. The Legal Department and the Risk Management and Compliance Committee take the lead in responding to this risk, and while the likelihood of materialization is recognized as low, it is positioned as a key risk that could develop into an extremely significant problem should a violation occur.

The Group holds personal information of members and owners and is subject to the Act on the Protection of Personal Information, while group company RENOSY X Co., Ltd. is required to comply with FISC security standards. If an information leak occurs, it could lead to loss of credibility, suspension of transactions, claims for damages, and other consequences that may affect business results and financial position. While the likelihood of materialization is recognized as low, given that an occurrence could develop into an extremely significant problem, the Group has implemented measures such as obtaining Privacy Mark and ISMS certification and conducting ongoing internal training.

If, after an M&A transaction, the acquired business fails to develop as planned due to insufficient prior due diligence or significant changes in the market or competitive environment, this may result in the inability to recover invested funds, goodwill impairment, and additional costs, significantly affecting business results and growth prospects. In particular, because goodwill is not amortized under IFRS, the impact tends to be greater when impairment occurs compared to Japanese GAAP. The Group aims to reduce this risk through review by the Investment Committee based on the Investment Management Regulations and regular monitoring.