ASTMAX Co., Ltd.

In a group engaged in diverse businesses, if the governance framework or administrative execution system fails to function adequately, it may adversely affect business development, operating results, and financial condition. In response, the Group has established a deliberation framework involving the Executive Officers' Meeting, the Full-time Officers' Meeting, the Management Committee, and the Board of Directors, and maintains effective governance through monthly regular meetings with outside directors and the convening of extraordinary board meetings.

Various legal regulations apply to each business, including the Dealing Business, electricity trading, renewable energy, and retail electricity business, and if a legal violation occurs, it may lead to administrative sanctions, restrictions on business activities, and damage to the company's image. The Group has established a self-inspection system through pledges submitted by all officers and employees, continuous training, internal audits, and compliance checklists, and works to ensure thorough compliance.

In investments in operating companies and funds related to core businesses, if expected profits cannot be achieved, or if the financial condition of an investee deteriorates or fund investment performance significantly declines, it may negatively affect consolidated earnings. When selecting investees, the Group conducts careful examination based on internal regulations, and after investment, strives to enhance investee value through collaboration and management guidance.

If a system failure occurs in computer systems due to hardware or software defects, human error, natural disasters, cyberattacks, unauthorized access, or similar causes, it may have a significant impact on business activities and results. The Group has established a backup system utilizing an external data center, and regularly holds Information Security Committee meetings to maintain and improve its information security framework, including prevention of leakage of important data.

In renewable energy businesses such as solar power, geothermal power, and grid-connected battery storage, business profitability may deteriorate due to delays in project progress, occurrence of unexpected costs, increased output curtailment, changes in government energy policy, real estate-related risks, and other factors. In cases utilizing leverage such as bank borrowings, even a slight deterioration in profitability may have a relatively large impact on earnings. The Group limits its risk to the amount of capital contributions, etc. by using non-recourse loans through SPCs (special purpose companies), and diversifies risk through cooperation with specialized companies and the invitation of co-business partners.

The electricity market carries the risk of significant price fluctuations when liquidity contracts, and losses may occur if an imbalance arises between the volume of electricity procured and the volume sold. In addition, as the number of counterparties to which credit is extended increases, there is also a risk of counterparty default due to electricity price spikes and other factors. The Group works to control price fluctuation risk by leveraging risk management know-how developed through the Dealing Business, and controls the amount of credit risk through risk limit management for each counterparty and credit risk transfer.

Due to the low barriers to entry under the Electricity Business Act, more than 800 operators are registered, and a rapid increase in new entrants could lead to rising electricity procurement prices and falling sales prices. If a surge in electricity procurement prices cannot be adequately passed through to sales prices, or if customer attrition occurs, it may affect financial condition, operating results, and cash flow. The Group seeks to maintain medium- to long-term business relationships by appealing to the superiority of its proprietary services for high-voltage and extra-high-voltage customers, while securing necessary funds through commitment line agreements with banks.

The Electricity Trading Business and the Dealing Business utilize domestic and overseas commodity futures markets, and if unexpected events such as global political, economic, or social changes, wars, terrorism, epidemics, or natural disasters cause market closures, trading suspensions, or major rule changes, business activities and results may be significantly affected. The Group reduces the direct impact of market trends through arbitrage trading strategies, and manages excessive risk exposure through margin ratio management, profit management, securing on-hand liquidity, and securing credit lines from financial institutions.

If excellent personnel leave the company, or if recruitment and training do not proceed as planned, it may hinder business activities across all businesses and adversely affect results. The Group is working to secure, retain, and develop personnel by enhancing work-life balance through the introduction of telework, flextime, and staggered working hour systems, and by introducing a personnel system that appropriately evaluates specialized expertise.

There remains a possibility of litigation being filed by customers of the former Mitsui Bussan Futures Co., Ltd., and litigation risk also exists in relation to compliance violations and the Renewable Energy Business. The Group works to reduce litigation risk through prior and ongoing consultation with its retained attorneys, compliance with external contracts, and appropriate communication with business partners.