ZENHOREN CO.,LTD.

If economic conditions or the employment environment deteriorate significantly, a decline in tenants' ability to pay could increase the amount of subrogation repayments and result in an inability to collect indemnity claims. This would require additional provisions for the guarantee performance loss allowance and allowance for doubtful accounts, significantly impacting the financial position and business results. The Company has established an AI-based screening system to optimize credit assessment and a dedicated department for debt collection.

Many operations, including rent guarantee contract management, depend on systems. If software malfunctions, human error, disasters, unauthorized access, or other events make stable system operation difficult, this could cause serious disruption to business activities. The Company has established emergency response systems including backup plans and implemented security measures, but these measures cannot completely eliminate the risk.

The Company holds a large amount of confidential information, including contractors' personal information. If an information leak occurs, it would result in liability for damages to the affected parties and significantly damage the Company's credibility, greatly impacting the financial position and business results. The Company is strengthening information security through obtaining the Privacy Mark, developing internal regulations and manuals, training officers and employees, and building information management systems.

Large-scale natural disasters such as earthquakes and typhoons, or the spread of infectious diseases, could significantly impact the financial position and business results through a contraction in demand for rent guarantees in affected areas and effects on the sales operations of partner companies. There is also a risk that business execution could be disrupted if infection spreads among employees. The Company has established preventive measures and infection control protocols and implements appropriate countermeasures, but given its nationwide operations, the scope of impact of this risk is broad.

Hidehiko Ibaraki, Representative Director, President and Executive Officer, plays a critical role in determining management policy and business strategy. If he becomes unable to be involved in business operations, this could significantly impact the financial position and business results. The Company is working to strengthen its organization by expanding and developing executive officers and employees and delegating authority, but this is recognized as a risk that exists before a sufficient system is fully established.

Events that could develop into litigation or other disputes related to business operations may occur, and depending on court rulings and other factors, this could result in the burden of substantial damages liability or a decline in credibility. The Company strives for legal compliance and the prevention and early resolution of disputes, including receiving advice from multiple outside legal experts, but this risk is explicitly rated as

If the rental real estate market stagnates due to population decline or worsening economic conditions, demand for rent guarantees could shrink, affecting the financial position and business results. On the other hand, the increase in single-person and elderly households due to later marriage and the declining birthrate and aging population, as well as the shift from personal guarantees to rent guarantees following the revision of the Civil Code, are tailwinds for the business, and both likelihood and severity are currently assessed as low.

The rent guarantee business does not require statutory licensing, resulting in low formal barriers to entry, and there is a risk of losing market share to highly compatible entrants from other industries such as insurance companies, as well as competitors and credit card companies. On the other hand, building networks with landlords and partner companies and establishing debt collection operational workflows requires considerable time, so the substantive barriers to entry are recognized as high, and both likelihood and severity are assessed as low.

Although no business law currently directly regulates the rent guarantee business, the introduction of a new legal system in the future could affect business operations, financial position, and business results. In addition, violation of the rules established under the Ministry of Land, Infrastructure, Transport and Tourism's rent guarantee business operator registration system carries the risk of receiving guidance or having the registration revoked. The Company has registered under this system and strives for appropriate business operations.

The Company provides services through partner companies, and maintaining relationships with partner companies is an important prerequisite for business continuity. If relationships with partner companies cannot be maintained, or if applications decline due to bankruptcy or other issues among partner companies, this could affect the financial position and business results. The Company is working to strengthen these relationships through establishing electronic application processes, accident response cost insurance, and an estimated payment system, as well as continuous new business development and follow-up through its 19 offices nationwide.