Nippon Air Conditioning Services Co., Ltd.

Global economic trends, financial crises, wars, natural disasters, climate change, and infectious disease outbreaks may lead to a decrease in orders received or a stagnation/suspension of business activities. While the Company seeks to minimize the impact through service expansion to diverse industries such as large hospitals and manufacturing plants and through BCP formulation, there remains a risk that unforeseen events could have a material impact on business performance. The Corporate Planning Department is taking the lead in responding to climate change initiatives and promoting analysis of the current situation, risks, and opportunities.

Changes in the external business environment may accelerate customers' awareness of reviewing maintenance costs and intensify competition among companies for new orders, which could affect business performance. The Company is strengthening its competitiveness through rapid in-house response enabled by approximately 2,500 technical employees and a network of locations across Japan and Asia, as well as through flexible service provision as an independent corporate group. By focusing on specialized facilities requiring advanced technical capabilities, the Company has built a business model with high barriers to entry.

Intensifying competition in the recruitment environment due to the decline in Japan's working-age population may lead to a shortage of technical employees and reduced diversity, potentially resulting in a decline in technical and service capabilities and a loss of credibility. There are also concerns that deteriorating working conditions could increase employee turnover. The Company has established a Technical and Training Center to improve the quality and efficiency of personnel training and enable new employees to become productive more quickly, while also actively working to secure human resources both domestically and internationally and to improve engagement through better treatment.

There is a risk that overseas business operations may stagnate due to language and geographical factors, various regulations including legal and tax systems, political and economic turmoil, unexpected exchange rate fluctuations, differences in business customs, and strikes by local employees in the countries where the Company operates. There is also a risk of impairment due to intensifying competition with rival companies or failure to achieve business plans. The Company continuously supports its overseas operations through information gathering via relevant institutions and local sources, sales development by the Overseas Management Department, and employee training for local staff by various domestic departments.

There are risks of losses to customers due to human error by employees, the occurrence of repair work arising from warranty liability for defects after completion of building equipment construction, and lawsuits filed by customers. There are also concerns about losses not covered by liability insurance and a decline in brand strength due to loss of credibility. The Company addresses these risks through comprehensive training and on-the-job training, including a 10-year curriculum for new employees, to improve technical capabilities, appropriate review of insurance coverage, and strengthening of quality control and quality assurance systems at pharmaceutical manufacturing facilities and similar sites.

There is a risk of losing order opportunities due to changes in eligibility requirements for participation in bidding systems for projects related to government agencies. In addition, intensifying competition resulting from the introduction of systems such as the designated administrator system may lead to lost orders for government-related projects. While continuing to treat government-related clients as important customers, the Company is diversifying risk by focusing on developing new private-sector clients, leveraging its network of locations across Japan and Asia.

In the event of unforeseen circumstances causing the loss, leakage, or falsification of important confidential information such as technical and sales information, or personal information of stakeholders, this may result in a loss of social credibility, liability for damages to affected stakeholders, and disruption to business activities. The Company houses important servers in highly reliable data centers to preserve information even in the event of large-scale disasters, while continuously strengthening information security measures and providing information security training to all employees.

The internal control system may fail to function properly due to various factors such as carelessness, errors in judgment, or collusion by personnel in charge, changes in the internal or external environment, non-routine transactions, or misconduct by management. The occurrence of fraudulent acts poses a risk of damaging corporate value and undermining social credibility. The Company addresses this through the Governance Division's leadership in building and operating the internal control system, providing compliance training to all employees, and fostering a culture of integrity and enhanced dialogue.