GIKEN LTD.

While social demand for national resilience initiatives and aging infrastructure renewal is expected to continue, conditions in domestic and overseas construction markets, particularly public investment trends, may affect the Group's business performance. Although the Group is confident in the continuity of social infrastructure investment, a contraction in public investment due to policy changes or economic fluctuations poses a risk directly linked to sales and earnings.

Under the Medium-Term Management Plan 2027, the Group is actively promoting overseas business expansion centered on Asia, Europe, and the United States; however, differences in culture and business practices, exchange rate fluctuations, changes in each country's legal systems and regulations including tariffs, and fluctuations in energy and raw material prices arising from geopolitical risks may affect business performance. The Group is addressing this by establishing a total package provision system that is less susceptible to the individual circumstances of each country's market.

In the event of a major natural disaster or infectious disease outbreak, business performance may be affected not only through disruption to the Group's own business activities but also through disruptions to the supply chain and society as a whole. As a countermeasure, the Group has formulated and conducts training for its Business Continuity Plan (BCP), and has established a system to set up a crisis management headquarters to minimize damage when a material risk materializes.

As the Company designs its machinery in-house while outsourcing manufacturing to partner companies, fluctuations in material and energy costs, changes in transaction terms such as delivery times, costs, and quality with outsourcing partners, and deterioration in the financial condition of outsourcing partners or termination of cooperative relationships may affect business performance. The Group works to maintain its production system through thorough enforcement of delivery and quality control standards, expansion of outsourcing partners, and supply chain visualization through digital technology.

The Group holds Specified Construction Business licenses under the Construction Business Act (GIKEN LTD.: valid until July 3, 2026; Giken Seko Co., Ltd.: valid until January 9, 2027) and a First-Class Architect Office registration (valid until July 17, 2029). If a license were revoked due to misconduct or falling under disqualification provisions, it would cause a serious impediment to business continuity. It is disclosed that, at present, there are no facts corresponding to grounds for license revocation or failure to renew.

The Group's products comply with exhaust emission and noise regulations, and the Group has implemented pioneering environmental measures such as obtaining designation as low-noise construction machinery and using biodegradable hydraulic fluid. However, if regulatory tightening driven by heightened social interest progresses faster than expected, additional compliance costs may arise, potentially affecting business performance. The Group has indicated its policy to continue actively developing environmentally conscious products going forward.

As a development-oriented company, the Group holds important technical information related to machinery and construction methods as well as specialized business information (intellectual property, know-how, etc.). If information is leaked or lost due to external cyberattacks or employee negligence, it could damage the Group's reputation and incur recovery costs, potentially affecting business performance. The Group works to reduce this risk through the establishment of internal rules and manuals, strengthening of IT infrastructure security, and awareness-raising and education for officers and employees.

The Group has accumulated intellectual property such as inventions and know-how through continuous development of machinery and construction methods; however, unauthorized use or tampering by third parties could impair its competitive advantage and result in legal response costs. The Group exercises great care in managing confidential information and takes appropriate measures to prevent tampering, leakage, loss, and unauthorized use of related information.

With the active expansion of overseas business, fluctuations in exchange rates may affect the Group's business performance. In particular, since Asia, Europe, and the United States are the Group's primary regions of overseas expansion, a stronger yen poses the risk of reducing the yen-denominated value of overseas sales and profits. While the annual securities report does not specify concrete hedging measures, diversified expansion across multiple country markets serves to some extent as a risk diversification function.

If a customer's financial condition deteriorates and a large additional allowance for doubtful accounts must be recorded, this may affect the Group's business performance. The Group has established a system to limit major impacts on business performance through thorough credit management and the recording of allowances for doubtful accounts based on defined rules; however, a residual risk remains that the system cannot fully address sudden deterioration in a business partner's financial condition.