COPRO-HOLDINGS. Co., Ltd.

There is a risk that a downturn in the construction industry, to which the Company's clients belong, could lead to deteriorating contract terms, increased standby labor costs, and early termination of dispatch contracts. As of the end of March 2026, the Company employed 7,629 engineers, of whom 64.7% (4,938 people) were on indefinite-term employment contracts, meaning that the burden of personnel costs for engineers on standby becomes particularly large during economic downturns. Significant fluctuations in construction investment due to substantial cuts in public works spending or a decline in private-sector construction could affect order intake.

There is a risk that securing the technical personnel necessary for business operations could become difficult due to market contraction resulting from Japan's declining total population and intensifying competition for new graduates and mid-career hires. The construction industry continues to face structural issues such as the aging of engineers and a shortage of young workers, and labor shortages have become more severe since the application of overtime work limit regulations from April 2024. On the other hand, the persistently high demand for domestic technical personnel could also present a growth opportunity, making continuous strengthening of the recruitment system an important challenge.

Founder and President & Representative Director Kosuke Kiyokawa plays an extremely important role in determining and executing management policy and business strategy, and if he were to become unable to continue his duties, this could affect the Company's business results and financial condition. The Company is working to strengthen information sharing and management organization through the Board of Directors and the Medium-Term Management Plan Promotion Meeting, and plans to deliberate on successor selection at the Nomination and Compensation Committee. The Company recognizes that the likelihood of this risk materializing is low.

As a result of acquiring all shares of Trite and Trite Engineering in March 2026 for an acquisition price of ¥29,243 million, goodwill of ¥27,809 million accounted for 58.6% of consolidated total assets of ¥47,471 million as of the end of March 2026. If expected results are impaired due to changes in the business environment or competitive landscape, or if significant fluctuations occur in the discount rate or long-term growth rate due to rising interest rates, market contraction, or other factors, impairment losses may occur, potentially having a material impact on business results and financial condition. There is also a risk of divergence from the initial revenue plan if the expected synergy effects cannot be realized.

Since the Company procures investment funds for M&A and other purposes through borrowings from financial institutions, there is a risk that a sharp rise in interest rates or a prolonged period of rising rates could increase the cost burden of interest expenses. Against the backdrop of the outstanding borrowing balance associated in particular with the large-scale acquisition (Trite acquisition price of ¥29,243 million), the impact of interest rate fluctuations could adversely affect business results and financial condition.

The Company employs 7,629 dispatched engineering staff, and if disputes related to occupational health and safety or employment relations arise, or if injury, illness, disability, or death occurs during work or commuting, the Company as an employer is subject to compensation obligations for such accidents, which could affect business results and financial condition. The Company works to prevent workplace environment risks through regular interviews and to strengthen labor management and training systems with an emphasis on compliance. The Company recognizes that the likelihood of this risk materializing is low.

The dispatching and placement business is subject to regulation under the Worker Dispatching Act, the Employment Security Act, and the Labor Standards Act, and there is a risk that strengthened supervisory guidance or inadequate responses in business processes could result in license revocation or business suspension orders. If future amendments to relevant laws and regulations or strengthened supervisory guidance cause client companies to reconsider their use of dispatching or contracting arrangements, demand could decline, potentially affecting business results and financial condition. The Company works to prevent this through checks and controls in business processes and regular monitoring.

Since dispatched engineering staff are in a position to learn clients' confidential information in the course of their work, and since the Company handles a large amount of personal information in the course of conducting its dispatching business, if an information leak were to occur, this could result in claims for damages or disruption to business operations. The Company has implemented measures such as obtaining Privacy Mark certification, establishing information security regulations, strengthening network security, and providing training and education to officers and employees. The Company recognizes that the likelihood of this risk materializing is low.

Since the Company has business locations nationwide, business operations could become difficult in the event of a large-scale natural disaster, and given its large base of engineers and clients, the workload involved in confirming safety and adjusting contracts would be substantial. If an unknown infectious disease were to spread globally, as with COVID-19, there is a risk that prolonged suspension of operations at construction sites or a decrease in construction work could result in significant losses to business activities. The Company recognizes that this risk cannot be mitigated or avoided solely through its own management measures, and considers it difficult to make a definitive estimate of the impact.

In a business that employs a large number of people and carries significant social responsibility, if officers or employees engage in acts that disregard compliance or violate social ethics, this could affect business operations and results through compensation claims or reputational damage. In addition, since the engineer dispatching market is highly fragmented with a large number of operators, scandals at other companies could also damage the image of the industry as a whole, with risk of spillover effects on the Group's business operations.