NISHIKAWA KEISOKU Co., Ltd.

Of approximately 3,000 customers per year, the top 10 account for approximately 30% of total sales, with lifeline-related customers such as water supply, city gas, and electric power utilities dominating the top rankings. A decline in reliability toward these customers or a reduction in capital expenditure/delay in renewal plans among them could directly and negatively impact order-taking activities. As countermeasures, the Company is working to secure trust through maintaining service quality and to expand its business areas and customer base through proactive marketing and sales activities.

Purchases from Yokogawa Electric Corporation and its group account for approximately 30% of total procurement, and Yokogawa Electric is both a major shareholder and a related party of the Company. If the competitiveness of Yokogawa Electric Group products declines in the domestic market or if changes occur in distributorship agreements, this could have a material impact on the Company's business performance. As countermeasures, the Company maintains good relations with the Yokogawa Electric Group while also actively developing new suppliers to reduce risk.

Because major customers are concentrated among public utility businesses such as water supply, electric power, and gas, as well as heavy electrical equipment and plant projects for government agencies, construction projects tend to be concentrated toward the fiscal year-end in March. As a result, sales and profits are skewed toward the second half of the fiscal year (January to June), creating a risk that first-half performance may become unstable due to this seasonal fluctuation. The Company is working to level out sales and profits by expanding its business fields and customer base and by promoting sales of its proprietary software.

Since orders from public sector entities, which are major customers, are based on a bidding system, there is no guarantee that the Company will continue to win orders. If the Company loses in bidding competition against competitors, there is a risk of a significant decline in sales to public-sector customers. The Company is promoting proactive sales activities to expand its customer base and reduce dependence on specific customers, striving to secure stable sales and profits.

There is a risk of non-payment of accounts receivable owed by customers, and there is no guarantee that all business partners will continue to maintain sound financial conditions. If accounts receivable become uncollectible, this could adversely affect the Company's financial condition and business results. The Company strives to reduce this risk through comprehensive credit management, conducting regular credit investigations and grasping market conditions and business trends through sales activities.

Since sales management and accounting management are all processed through management computer systems, a risk exists that if communication lines or the computer hardware itself go down, this could significantly disrupt business operations. There is also a risk of information leakage due to unauthorized external access. The Company conducts regular maintenance of internal systems, builds backup systems, and implements measures to prevent unauthorized access, working to improve business continuity.

The Company holds shares of Yokogawa Electric Corporation as a major holding, and there is a risk that a sustained significant decline in the share price could impact the Company's business performance. As the Yokogawa Electric Group is also a major supplier, the Company intends to continue holding these shares from the standpoint of maintaining the business relationship, and recognizes that the impact on performance from share price declines is difficult to avoid. The Company strives to mitigate this impact by growing sales and securing profits through proactive marketing and sales activities.

Securing and developing engineers who can respond to cutting-edge technology and increasingly stringent quality standards is essential for business growth; if this is insufficient, the Company may be unable to adequately respond to customer needs, which could affect the Company's credibility and business performance. The Company strives to secure excellent talent through proactive recruitment of new graduates and mid-career hires, while also enhancing employees' technical capabilities through training systems such as on-the-job training and rank-specific training programs.

If a large-scale natural disaster or infectious disease outbreak occurs in areas where the Company operates, this could restrict business activities and lead to the suspension or significant postponement of construction projects, and could impact the Company's business performance through a significant decline in customers' capital expenditure appetite. The Risk Management and Compliance Committee takes the lead in promptly assessing damage conditions and business impact, striving to ensure employee safety and minimize losses. The Company also leverages its extensive experience serving lifeline-related sectors to implement rapid recovery responses in cooperation with business partners.