OTANI KOGYO CO.,LTD.

The Company, whose main business bases are the Electric Power & Communications Division and building materials-related operations, faces the risk that failure to appropriately respond to economic trends and changing needs in each market could affect its medium- to long-term business performance and financial condition. A deterioration in the international situation or an economic slowdown that suppresses capital investment and construction demand would also directly affect business performance. As countermeasures, the Company is promoting market trend surveys by the sales departments, proposals including VA (value analysis) and market development by the sales promotion and development departments, and efforts to acquire new customers and develop new business fields.

If prices of raw materials, auxiliary materials, and outsourced processed goods rise beyond the assumptions used in cost management, manufacturing costs will increase, worsening profitability and potentially affecting business performance and financial condition. The Company continuously monitors market prices and strives to build a smooth supply chain by maintaining good relationships with suppliers and outsourcing partners.

If an accident or disaster of a scale exceeding expectations occurs, damage to facilities or disruption of logistics could impede product supply to customers, affecting business performance and financial condition. In addition to promoting occupational health and safety activities at each business site, the Company works to reduce risk by formulating business continuity plans, building an employee safety confirmation system, implementing seismic countermeasures, and conducting disaster prevention drills.

If unexpected product defects are discovered, costs arising from large-scale product recalls, refunds, and free replacements, as well as a decline in the Company's credibility, could have a material impact on business performance and financial condition. The production and sales departments utilize a quality management system certified under ISO standards, and continuously monitor the quality control framework, including the supply chain, and customer satisfaction.

If an event in violation of laws and regulations occurs and social trust in the Company declines, this could affect business performance and financial condition. The Company has established a compliance declaration along with a compliance manual and code of conduct, and strives to ensure legal compliance through compliance education for all employees and thorough dissemination of the code of conduct.

If information assets are leaked externally, the Company's social credibility could decline, affecting business performance and financial condition. The Company has established information security guidelines, disseminated them to all employees, and strives for thorough compliance; however, the risk of information leakage due to cyberattacks or internal misconduct cannot be completely eliminated.

If a significant decline in the value of the Company's tangible fixed assets and investment securities occurs, impairment or valuation losses may arise, affecting business performance and financial condition. The securities report does not describe specific countermeasures, and fluctuations in market conditions and asset values are structured to be directly reflected in financial figures.

In the sale of Construction Studs with installation work in the Building Materials Division, some construction projects may exceed the order amount before completion of the work, and there is a risk that price negotiations over the excess portion may become prolonged, making collection of receivables difficult over an extended period. The Company monitors the status of receivables collection through monthly confirmation of accounts receivable balances; however, depending on the state of negotiations, this could affect business performance and financial condition.