Wesco Holdings Inc.

National and local governments account for approximately 90% of the total order value in the Comprehensive Construction Consulting Business, and there is a risk that orders could decline significantly due to sudden changes in public investment policy. Following the Cabinet's decision on the "1st National Resilience Implementation Medium-Term Plan" (FY2026-FY2030), the near-term order environment remains solid, but deteriorating local government finances due to the COVID-19 pandemic could pressure public works budgets. As countermeasures, the company is strengthening efforts to secure private-sector orders, such as expressway survey and inspection work, and is promoting expansion into PPP, PFI, concession projects, and other areas.

The Comprehensive Construction Consulting Business, which accounts for over 80% of net sales, derives approximately 90% of its orders from public works, and intensifying competitive bidding could cause a significant decline in bid prices, or unexpected changes to the bidding system could affect business performance. There is also a risk that securing personnel who meet stable appointment requirements could become difficult due to retirement of qualification holders. In response, the company has established a specialized department to improve bidding competitiveness and provide practical support, building a system for centralized management of bidding information and support for refining and improving comprehensive evaluation proposals.

Securing excellent talent has become difficult due to the declining working-age population from the falling birthrate and aging population, combined with intensifying competition among companies for talent. With the average age of employees at 46, the succession of technology and expertise for sustainable development is a challenge, and labor-related risks such as optimizing working hours and preventing harassment are also becoming apparent. In response, the company is working to improve the workplace environment through expanding internship programs, measures to raise corporate awareness, technical succession training, and promoting work-style reforms.

The company manages customers' personal information and technical information through information systems, and if a system outage or information leak occurs due to cyberattacks, computer viruses, or similar causes, it could have a significant impact on business performance and social credibility. In response, the company has established internal regulations such as the "Information Security Rules," conducts targeted attack email training for all employees, and has implemented AI-driven predictive defense, multi-layered endpoint defense, and strengthened access management through adoption of a zero-trust model.

The Aquarium Operations Business (ATOA (Urban Aquarium)) leases its facilities and ancillary equipment from an asset owner, with a guaranteed rent of ¥300 million per year. Under this long-term contract, which is difficult to cancel midway, if revenue falls below the guaranteed rent due to disasters, resurgence of infectious diseases, or other factors, or if a partial payment obligation for unexpired rent arises upon mid-term cancellation, business performance and financial condition could be affected. In response, the company has established a risk control system through variable rent contracts and continues to strengthen infection prevention measures, customer-attracting events, and advertising and promotional activities.

If misconduct such as violations of the Antimonopoly Act or government-orchestrated bid-rigging occurs in public works bidding, exclusion recommendations from the Japan Fair Trade Commission, business suspension orders, or disqualification from bidding imposed by national and local governments could significantly affect business performance and the company's social credibility. In response, the company has established a Compliance Committee, appointed compliance leaders at each group company, and thoroughly implements employee training on compliance with laws such as the Antimonopoly Act.

While the reclassification of COVID-19 to Category 5 has reduced its impact on economic activity, the emergence of severe variant strains or the spread of new serious infectious diseases could lead to a decline in new orders and delivery delays in the Comprehensive Construction Consulting Business, as well as facility closures and business suspensions in the Sports Facility Operations and Aquarium Operations businesses. In response, the company continues to maintain remote work environments such as work-from-home and online meetings, and maintains hygiene measures and business continuity systems in its facility operations businesses.

The Group has entered into a debt guarantee agreement with a financial institution for ¥882 million regarding monetary obligations of Shikoku Aquarium Development Co., Ltd., a related business partner that is not a consolidated company. While the company currently judges the likelihood of being required to fulfill this guarantee obligation to be minimal, if a situation arises in the future requiring performance of the debt guarantee, it could affect business performance and financial condition.

In the Comprehensive Construction Consulting Business, revenue recognition for contracted work uses the input method (ratio of actual costs to the execution budget), and each project is highly individual, making changes to work content during progress likely to occur. If unexpected changes in circumstances require revision of the execution budget, business performance and financial condition could be affected. In response, the company has established a system in which information is communicated promptly to the appropriate departments and authorized personnel when work content changes occur, allowing timely revision of the execution budget.

The company's (holding company's) main sources of income are management guidance fees, real estate rental income, and dividends from each consolidated subsidiary, creating a structural risk in which deterioration in the business performance or financial condition of individual operating companies could make these payments difficult, directly affecting the company's performance. Additionally, in the Sports Facility Operations and Aquarium Operations businesses, intensifying competition with other companies could lead to a decline in membership numbers and sales, affecting the group's overall revenue base.