RYOHIN KEIKAKU CO., LTD.

Economic downturns in Japan and overseas, changes in climate conditions, and contraction in consumption due to deteriorating security overseas may adversely affect business performance and financial condition. For the Company, which operates a lifestyle proposal business through original products such as apparel, sundries, household goods, and food, changes in consumer sentiment translate directly into an impact on sales. In response, the Company is promoting the strengthening of a sustainable growth foundation, customer creation, and the development of a framework capable of flexibly responding to changes in the external environment, along with productivity improvements.

The Company operates stores and conducts merchandise procurement in more than 30 countries across Asia, Oceania, the Middle East, Europe, and North America, and unexpected changes or tightening of laws and regulations, adverse political and economic factors, and social disruption caused by terrorism or war may adversely affect business performance and financial condition. Changes in tax systems and tax rates, as well as international tax issues such as transfer pricing taxation, are also cited as inherent risks. The Compliance & Risk Management Committee monitors these matters as part of daily operations and, when risks materialize, has established a system to respond in coordination with relevant departments.

Because the Company conducts overseas business operations and local merchandise procurement across more than 30 countries, fluctuations in foreign exchange rates may adversely affect business performance and financial condition. In particular, in the Asian, European, and North American regions where transactions in multiple currencies occur, fluctuations in either the direction of yen appreciation or depreciation can affect profitability. Risk management is conducted through a monitoring system by the Compliance & Risk Management Committee.

The Company operates businesses other than retail, such as the housing business and distribution processing, which require the resolution of numerous technical issues and the establishment of sales expansion methods. However, given the many uncertain factors involved, if business plans are not achieved, the investment burden may adversely affect business performance and financial condition. The Company has established an investment review and business plan approval process involving management and specialized departments, and conducts regular progress reporting and confirmation of new risks. Identified risks are comprehensively managed, and periodic reviews of risk assessments are also conducted.

The Company owns numerous stores and distribution centers both in Japan and overseas, and if natural disasters such as earthquakes, storms, or floods, or man-made disasters such as terrorism or war occur, business performance and financial condition may be adversely affected. The Company has implemented preventive measures such as formulating response manuals and taking out non-life insurance, and when disasters are predicted or warnings are issued, a disaster response meeting is convened under the direction of the chairperson of the Compliance & Risk Management Committee. When a disaster occurs, a disaster response headquarters headed by the Representative Director and President is established, and a system is in place to implement relief measures.

If cyberattacks, unauthorized access, computer viruses, or similar incidents occur, business interruption due to system outages, loss of trust and legal liability from leakage of confidential information such as customer data, and financial losses such as recovery costs and litigation costs may result. The Company seeks to mitigate these risks through the introduction of the latest security technologies, regular security education for all employees, and the establishment of a rapid incident response system.

The Company outsources product manufacturing to production partners in countries and regions around the world, and if serious human rights violations such as forced labor or child labor become apparent, business performance and financial condition may be adversely affected due to a decline in trust from customers and business partners. Based on the "Ryohin Keikaku Code of Conduct for Production Partners," the Company shares and requests compliance with policies on respect for human rights, working environment, and environmental consideration throughout the supply chain, and conducts social audits by third-party organizations as part of its monitoring activities. At present, no human rights violations that would have a material impact on operating results have been detected.

The effects of climate change have already become apparent, and costs associated with responding to increased greenhouse gas emissions across overall business activities, as well as the impact of extreme weather on stores and logistics, may adversely affect business performance and financial condition. The Company is proceeding with risk and opportunity analysis and countermeasures in line with the TCFD framework, and is working to understand and reduce greenhouse gas emissions across overall business activities. Details are described in the Company's approach to and initiatives on sustainability (response to climate change).