DN HOLDINGS CO., LTD.

The Company depends on national and local government agencies for most of its orders, and if public works budgets are reduced due to a change in government, policy shift, or national emergency, this may affect business performance through a decrease in orders received and lower net sales. In addition, if intensifying price competition continues to cause order unit prices to decline, this could also lead to a decrease in profit. As countermeasures, the Company is working to expand its share by leveraging the technical capabilities and track record of its existing businesses, and to diversify its client base by expanding private-sector orders and overseas business.

In energy-related operations with electric power-related companies and other clients that are the main source of orders outside government agencies, if there is a policy shift particularly regarding nuclear power, orders for such related operations may decrease, affecting business performance. Since energy-related business is the primary revenue source after government agencies, dependence on policy trends is high. As a countermeasure, the Company is strengthening sales activities aimed at expanding other energy-related operations and private-sector orders outside the energy field.

Large-scale earthquakes, typhoons, heavy rain, river flooding and other natural disasters, fires, or the prolonged nature of a pandemic such as COVID-19, may cause damage to major facilities and data, business interruption, deferral of orders by local governments, or a decrease in the volume of public works, potentially having a significant impact on business performance. As countermeasures, the Company is formulating BCPs and conducting regular inspections, introducing a safety confirmation system, developing a telework environment, and improving productivity through the promotion of DX.

If a mistake occurs in deliverables from the Construction Consultant Business and Geological Survey Business resulting in a serious defect, the Company may face large claims for damages or administrative dispositions such as suspension of designation, potentially having a significant impact on business performance. Since construction consulting operations are directly linked to public infrastructure, defects in deliverable quality could also lead to a loss of social credibility. As countermeasures, in addition to obtaining ISO 9001 certification, establishing a company-wide quality policy, and strengthening the quality control system, the Company has taken out construction consultant liability insurance.

If a violation occurs of laws and regulations such as the Companies Act, the Financial Instruments and Exchange Act, the Antimonopoly Act, the Subcontract Act, or the Labor Standards Act, the Company may lose social trust due to punishment, litigation, or social sanctions, potentially having a significant impact on business performance. In addition, if licenses such as construction consultant registration, surveying business registration, or geological survey business registration are revoked or not renewed, continuing the business may become difficult. As a countermeasure, the Company conducts compliance training and awareness activities for all officers and employees, with the CSR Headquarters taking the lead in promoting overall compliance activities.

If a serious accident occurs due to insufficient safety management in operations, the Company may face suspension of designation or claims for damages, potentially affecting business performance. Since construction consulting and geological survey operations involve on-site work, safety risks at worksites are ever-present. As a countermeasure, the Company thoroughly implements safety management activities such as safety management education and safety patrols, with the CSR Headquarters promoting overall CSR activities including safety management.

The Company Group is supported by engineers with a high degree of specialized expertise, but due to the progression of the declining birthrate and aging population and intensifying competition to acquire talent, if the Company is unable to secure personnel and develop successors as planned, this may lead to a decline in productivity, potentially having a significant impact on business performance. As countermeasures, in addition to promoting referral hiring, use of internships, and career hiring, the Company is enhancing education and training such as hierarchical training, DX promotion training, and reskilling training, and is taking measures to prevent talent attrition through the promotion of women's advancement and diverse working styles.

If confidential customer information or confidential management and technical information is leaked due to targeted cyberattacks, ransomware, unauthorized access, computer viruses, or the like, or if important data is destroyed or falsified or systems are shut down, this may result in suspension of business activities, loss of social credibility, and large expenses such as damages, potentially having a significant impact on business performance. As countermeasures, the Company is strengthening system security, establishing a CSIRT, developing information security regulations and a code of conduct for responding to ransomware, and conducting information security training and targeted attack email drills for all officers and employees.