AISAN TECHNOLOGY CO.,LTD.

Improper transactions and misconduct were discovered at Akisoku Co., Ltd., a consolidated subsidiary, and a special investigation committee has been established to determine the cause and consider measures to prevent recurrence. In addition to the risk that expected synergies may not materialize due to insufficient coordination and governance amid the rapid increase in group companies, misconduct has become apparent despite the establishment of a system since July 2024 to assign directors and executive officers to all group companies.

With the progression of the declining birthrate and aging population, there is concern that securing young talent, particularly in development and Mobility-related positions, will become increasingly difficult. If the labor force necessary for business execution cannot be secured, this may have a long-term impact on financial condition and business results. As countermeasures, the Company is diversifying recruitment methods, expanding business locations to Akita and Nagasaki, and substituting operations through the use of AI.

The Company depends on strong relationships with specific suppliers, business alliance partners, and distributors. If a partner withdraws from business or the relationship weakens due to changes in the partner's business environment or policy shift, this could have a long-term material impact on the financial condition and business results of the Group as a whole. Since some partners hold exclusive rights or technologies that would be difficult to replace, the Company strives to build a wide range of relationships.

Amid the rapid advancement of technological innovation, including generative AI, while appropriate utilization is expected to create innovation, improper use could lead to information leaks or the spread of misinformation, potentially having a long-term material impact on management. The Company has established internal guidelines and, following trial operation by the DX Promotion Committee, has begun company-wide utilization, and has also introduced legal tech in its legal operations.

The Company holds shares in venture companies for cross-shareholding purposes, and if impairment accounting is required due to deterioration in the business performance or financial condition of the investee, this could have a long-term material impact on the Group's business results and financial condition. The Company works to reduce this risk by regularly obtaining and monitoring the investee companies' management plans and financial statements, as well as periodically discussing the appropriateness of valuations with its accounting auditor.

Delays in revising systems in response to legal amendments and the occurrence of various harassment incidents could result in damage claims, loss of social credibility, and the departure of talented personnel, hindering business operations and potentially having a long-term material impact on financial condition and business results; this is recognized as a risk that has already materialized. The Company is addressing this through collaboration with its retained certified social insurance and labor consultant to respond to legal amendments, and by conducting harassment prevention seminars for all employees.

In the social implementation business utilizing autonomous driving technology, a wide range of risks exist, including sensor misdetection, cyberattacks, operational errors, and violations of laws and regulations. If a serious accident occurs, it could have a long-term material impact on the achievement of the medium-term management plan. With the spread of End-to-End (E2E) autonomous driving technology, the risk of AI misjudgment has also newly emerged, and the Company is addressing this through the provision of digital risk assessment in cooperation with Sompo Japan Insurance and Tier IV, as well as thorough safety confirmation.

If the Company fails to adequately respond to rapid technological evolution and changes in laws and regulations, there is a risk that the competitiveness of its products and services will decline, resulting in a long-term adverse impact on growth potential and business results. Amid the need to identify priority technology enhancement areas and allocate resources appropriately, the Company has adopted a policy of accelerating research and development and promoting innovation through active collaboration with universities, research institutions, and companies.

Uncertainty in the international situation is increasing, including US-China relations, the situation in Russia and Ukraine, and the risk of military conflict in the Taiwan Strait, and there is a possibility that strengthened regulations and sanctions aimed at preventing the outflow of advanced technology could affect business activities. Since the Company's main business region is primarily domestic, the direct impact is judged to be small; however, indirect effects such as foreign exchange fluctuations and rising crude oil prices could affect earnings, and the Company is responding through diversified business development and appropriate inventory management.

There is a risk of unauthorized access, data leakage, and tampering with various systems operated at outsourced data centers and cloud services, as well as a risk of communication interception in telework environments. An incident actually occurred in which the Company's website was hacked and redirected to an inappropriate site, and the Company has implemented measures such as data center redundancy, strengthening security software on client PCs, and utilizing internet VPNs.