NOHMI BOSAI LTD.

The businesses of the Group are heavily dependent on trends in the construction industry and public works. If an economic downturn leads to a decline in private capital investment and public investment, the order environment may deteriorate, potentially affecting the Group's financial position and operating results. The Group seeks to mitigate this risk by actively pursuing proposal-based sales activities and cost reduction efforts.

A major portion of the Group's sales arises in connection with regulations under the Fire Service Act, and sudden changes in regulations may alter the competitive environment. If regulatory changes undermine the competitive advantage of existing products and services, this could affect the Group's financial position and operating results. Given the high degree of dependence on business related to the Fire Service Act, continuous monitoring of regulatory trends is important.

Because the Group provides products and services directly linked to public safety, such as Automatic Fire Alarm Systems and Fire Extinguishing Equipment, the social impact of any defects could be severe. If an unforeseen defect causes harm to public safety, this could result in a decline in social credibility and adversely affect the Group's financial position and operating results. While the Group makes every effort to ensure thorough quality control, it recognizes that completely eliminating such risk is difficult.

While the Group strives to secure a stable supply of raw materials for its product offerings, a significant rise in raw material prices or a supply shortage of certain materials could lead to increased manufacturing costs and production delays. This could adversely affect the Group's financial position and operating results. Ensuring supply chain stability remains an ongoing challenge.

If production and sales facilities are damaged by a large-scale natural disaster such as an earthquake, this could significantly disrupt business continuity. The Group addresses this risk by formulating a Business Continuity Plan (BCP), but if a disaster exceeding expectations occurs, it could affect the Group's financial position and operating results. The degree of geographic concentration of production and sales facilities affects the magnitude of this risk.

If a serious compliance issue occurs, it could affect the Group's financial position and operating results due to a decline in social credibility and legal sanctions. The Group strives to raise awareness among officers and employees through ongoing compliance training, but it is difficult to completely eliminate risks arising from human factors. A loss of credibility could have a particularly severe impact given the highly public nature of the fire protection equipment business.

Influenced by business practices in the construction industry, sales tend to be concentrated in the fourth quarter, resulting in seasonal fluctuations in business performance. The significant variation in quarterly results may affect cash flow management and personnel allocation during the fiscal year. This seasonal fluctuation is recognized as a structural characteristic that is difficult to resolve in the short term.

If a pandemic occurs, delays in construction progress and a slowdown in private capital investment could worsen the order environment. Given the nature of fire protection equipment construction work, which involves on-site labor, restrictions on construction activities due to the spread of infection would directly lead to delays in recognizing sales. This is explicitly recognized as a risk of concern that could affect the Group's financial position and operating results.