Seibu Giken Co., Ltd.

If a raw material or parts supplier used in product manufacturing becomes unable to continue operations, faces raw material shortages, or is affected by drastic changes in the economic environment, it may become difficult to procure at appropriate prices or in appropriate quantities. In particular, most of the Company's products use raw materials procured from specific suppliers, and if contract changes or reductions in transactions occur with such suppliers, business performance could be affected. As countermeasures, the Company secures multiple procurement routes, has suppliers operate a BCP maintaining three months' worth of inventory, and sets contractual grace periods before supply suspension takes effect.

Sales of core products such as the Desiccant Dehumidifier, VOC Concentrator, and Total Heat Exchanger are highly susceptible to trends in customers' capital investment, and if changes in economic conditions cause customers to cancel or postpone investment plans, demand could decline more than expected. Through subsidiaries in Sweden, Poland, the United States, China, South Korea, Thailand, and other countries, the Company has developed a sales network spanning approximately 50 countries to reduce dependence on any specific region, while also leveraging domestic maintenance service revenue as a stabilizing base for the business.

The performance of the Group, which conducts business globally, is affected by overseas economic and social conditions such as U.S.-China trade friction, slowing growth in emerging economies, and heightened geopolitical risks in the Middle East and North Korea. If these risks materialize, demand in major sales regions could be adversely affected, potentially impacting the Group's financial position and operating results. While the Company monitors the macroeconomic environment as it proceeds with business development, specific hedging measures remain limited.

If confidential information of business partners, customer personal information, trade secrets, or employee personal information obtained in the course of business is leaked externally due to intentional acts or negligence, this could give rise to liability for damages, substantial expenditure on countermeasures, and damage to the Company's corporate image. The Company has established the "Information Security Management Regulations" and works to ensure thorough awareness among all employees, but disclosure of specific countermeasures against external threats such as cyberattacks remains limited.

If a serious defect occurs in product quality or safety, this could give rise to liability for damages and a decline in confidence in product quality, potentially affecting the Group's financial position and operating results. The Company has established a quality control system based on the ISO quality management system and works to suppress the occurrence of defects by conducting risk assessments through design reviews in new product development.

If the Company is unable to obtain intellectual property rights such as patents and trademarks, resulting in insufficient technology protection, or if the Company's products infringe on third-party intellectual property rights and become subject to claims for damages, this could affect the Group's financial position and operating results. In addition, since disclosure of technical information at the time of patent application poses a risk of leaking key technology, the Company has adopted a strategic policy of not filing patent applications for its core honeycomb rotor manufacturing technology, while actively acquiring rights and managing the prevention of infringement of other companies' rights in accordance with the "Intellectual Property Management Regulations."

The Group, which conducts business domestically and overseas, is subject to legal regulations in each country, and unexpected regulatory changes or changes in the application of laws could affect the Group's business, operating results, and financial condition. In particular, with respect to environmental regulations, there is a risk of substantial expenditure arising from compliance costs related to environmental laws concerning wastewater, exhaust, noise, and waste disposal, as well as from facility renovation and expansion associated with future tightening of regulations. The Company addresses this through thorough compliance awareness among all officers and employees and the operation of the "Group Guidelines."

Fusaburo Kuma, Representative Director, President and Executive Officer, is a major shareholder who beneficially owns 36.29% of the total issued shares (excluding treasury shares) and plays an important role in determining management policy and business strategy. If, for any reason, he becomes unable to continue his duties, this could affect the Group's financial position and operating results. While the Company seeks to reduce this dependence by strengthening information sharing among directors on the Board of Directors and reinforcing its management organization, specific disclosure of succession planning remains limited.

Amid intensifying competition to secure excellent personnel in technology, sales, and management, as well as personnel capable of working globally, if the Company is unable to smoothly secure and develop personnel in a society facing a full-scale population decline, or if excellent personnel leave the Company, this could affect the Group's financial position and operating results. The Company is working to create a comfortable work environment and to secure and retain personnel through initiatives such as promoting diversity, health management, and regularly conducting employee engagement surveys.

The Group, which conducts business both domestically and overseas, is constantly affected by exchange rate fluctuations, which could impact the results of business activities, the value of overseas assets, production costs, import purchase prices, and price competitiveness against overseas competitors. The Company works to mitigate this impact mainly through the use of short-term forward exchange contracts, but its response to long-term exchange rate fluctuation risk remains limited.