Chiyoda Corporation

Changes in global economic conditions and heightened geopolitical risk stemming from wars and regional conflicts may lead customers to cancel, postpone, or modify their investment plans. Supply chain disruptions, fluctuations in energy and resource prices, and the strengthening of regulations and sanctions by various countries could affect earnings forecasts. In response, the Company carefully assesses project feasibility and order probability, incorporates backup projects into order plans, and diversifies business opportunities through Non-EPC operations and other means.

Force majeure events such as natural disasters (earthquakes, floods, typhoons, etc.), the spread of infectious diseases, and terrorism or conflict may pose risks to the lives of construction workers and cause direct and indirect damage, including delays in the delivery of equipment and materials and the suspension of on-site construction work. Risk is particularly elevated given the ongoing large-scale project in Qatar and continued tensions in the Middle East. The Company works to ensure the safety of human life and enhance business continuity capabilities through the establishment of a crisis management department, engagement of security consultants, and the formulation and drilling of BCPs.

In projects undertaken through joint ventures or consortiums, if a partner defaults, experiences a deterioration in financial condition, or faces significant issues with its execution capability, the Company Group may bear joint and several contractual liability and be required to assume additional burdens. In response, the Company thoroughly analyzes the financial condition and execution capability of prospective partners when deciding to collaborate, and conducts ongoing monitoring after the start of business relationships to establish a system for early risk detection and response.

Because a time lag exists between contract estimation and execution ordering in plant construction, there is a risk that prices of equipment and materials such as steel products, copper, nickel, and aluminum may rise beyond expectations due to sudden changes in the social situation caused by war or conflict. Rising ocean freight costs associated with increases in crude oil prices may also affect business performance. The Company seeks to minimize the impact through diversification of suppliers, early ordering of equipment and materials, building cooperative relationships with leading vendors, and consultation and negotiation with customers, vendors, and subcontractors.

In construction work in countries with tight labor markets or regions with harsh climates, shortages of human resources, difficulties securing infrastructure, and supply chain disruptions may cause schedule delays, resulting in additional costs for recovery. There is also a risk of construction interruption due to the effects of infectious diseases and epidemics or strikes. The Company seeks to minimize the impact through innovations in construction methods such as modular construction, building cooperative relationships with leading construction contractors and equipment and material suppliers, and collaboration with customers and local authorities.

Physical risks and transition risks associated with climate change may change customers' investment environments and business portfolios, potentially having a significant impact on the Company's management and business strategy. On the other hand, the Company views the accelerating transition to a hydrogen society, the spread of low-carbon energy, and the expansion of renewable energy as new business opportunities, and is accelerating the transformation of its business portfolio. The Company addresses this by closely monitoring the energy situation, climate change policies, and laws and regulations of each country, and formulating its management plan based on the latest information obtained through its networks with governments, customers, and others.

If a serious accident such as an explosion or fire occurs at a plant under construction or already constructed, and it is determined that the Company Group is responsible for the cause, the Company may be significantly affected in its business performance due to the assumption of liability for damages and other burdens. In addition to safety design at the planning stage and thorough quality control and construction safety management (

initiatives to foster a safety culture), the Company seeks to avoid risk and minimize impact by obtaining appropriate insurance coverage and securing contractual terms that establish a reasonable sharing of damages with customers.

In overseas construction projects, the currency used to settle equipment and material procurement and subcontracting payments may differ from the currency received from the customer, and fluctuations in exchange rates may affect business performance. The Company works to avoid and minimize the impact of exchange rate fluctuation risk by receiving construction payments in multiple currencies and arranging forward exchange contracts.

In conducting business both domestically and internationally, if acts in violation of laws and regulations such as bribery, cartels, bid rigging, harassment, and export control occur, the Company may be significantly affected in its business execution and performance through criminal or administrative sanctions, restrictions on business activities, and damage to credibility. The Company works to prevent violations and achieve early detection and correction through the formulation and dissemination of the "Chiyoda Corporation Group Code of Conduct," the establishment of a Compliance Committee chaired by the CCO, and the development and operation of an internal whistleblowing system.

As the Company manages a large volume of customer and business partner information as well as confidential technical and sales information, cyberattacks may cause system failures, leakage of confidential information, cyber fraud losses, and loss of important business information, potentially affecting operations. The Company recognizes that the risk of general companies becoming caught up in cyberattacks is increasing. The Company works to avoid risk and minimize impact through thorough information security management, including obtaining ISMS certification, building a supply-chain-conscious framework based on the NIST CSF, and conducting regular internal training and audits.