ECHO TRADING CO.,LTD.

As the Group operates numerous business offices and distribution centers nationwide, the occurrence of a large-scale earthquake or other natural disaster may disrupt logistics and service provision due to the severance of lifelines and transportation networks. If recovery is prolonged, there is concern about the impact on business performance. As countermeasures, the Group has established and operates risk management regulations, manages risk through the Risk Management Committee, and has implemented computer system housing and relocation of the head office as BCP measures.

If the computer system suffers catastrophic damage due to intrusion by computer viruses or natural disasters, business delays may occur and affect business performance. In particular, in scenarios where recovery is prolonged, serious disruption to business continuity may result. As a BCP measure, the Group implements computer system housing to reduce this risk.

As pet food sales account for more than half of total sales, the occurrence of food safety issues such as BSE (bovine spongiform encephalopathy) or avian influenza could disrupt the production and distribution of pet food and have a significant impact on business performance. Consumer demand for "safety and security" is increasing, and the risk of a sharp decline in demand when such issues occur is particularly large. As a countermeasure, the Group thoroughly manages inventory related to safety, including expiration date management.

As the pet food and pet supplies wholesale business accounts for the majority of total sales, changes in the business environment of business partners or changes in their sales policies could lead to reductions in selling prices, increases in purchase prices, or changes in trading accounts beyond expectations, which may affect business performance. This is due to the structural nature of the wholesale business, in which pricing power tends to be influenced by business partners. As countermeasures, the Group focuses on business activities that contribute to improving customer satisfaction among business partners, and works to develop and provide high-value-added products.

The retail industry, which is the Group's main sales channel, is expected to continue facing a difficult business environment due to intensifying competition from new store openings and M&A. If business partners experience credit concerns, collection of receivables may become difficult, which may affect business performance. This structure means that deterioration in the retail industry's business environment directly translates into credit risk. As countermeasures, the Group thoroughly manages credit by setting credit limits according to the creditworthiness of business partners and by subscribing to trade credit insurance.

As the pet food and pet supplies wholesale business is the Group's main business, increases or decreases in the number of pets owned may directly affect business performance. A decline in the number of pet owners due to the declining birthrate, aging population, and changes in lifestyle poses a risk of shrinking the demand base for the core business. As a countermeasure, the Event Business provides "a place for interaction between people and pets," aiming to reduce this risk by increasing the number of new pet owners.