DAISUI CO.,LTD.

As a marine products wholesale company, compliance with the Wholesale Market Act and related laws and regulations is important, and violations could result in business suspension or other sanctions from the market administrator. The impact on financial position and business performance is recognized as significant, but it is explicitly stated that the probability of materialization is not high. As countermeasures, the Company is working to ensure compliance with and thorough awareness of relevant laws and regulations, respond to inspections by market administrators, and conduct various monitoring activities.

In the Marine Products Sales Business, the Company's core business, the volume of incoming goods and market conditions fluctuate daily due to weather, natural disasters, marine pollution, catch restrictions, import/export restrictions, and other factors, and a significant decline in supply-demand balance or a market crash could affect procurement and sales. Since marine products sales is the main source of revenue, the impact of market fluctuations directly affects overall business performance. As countermeasures, the Company strives to secure timely and appropriate inventory and build a stable procurement system by strengthening relationships with shippers from production areas nationwide.

As a food handling business operator, risks such as deficiencies in quality control and hygiene management, and inadequate communication of food information, are inherently always present. If such risks materialize, they could result in food recalls, disposal, and damages costs, as well as a decline in social trust that could affect procurement and sales conditions. As countermeasures, the Company has established a Quality Control Committee and assigned dedicated quality control personnel, and implements plan preparation, procedure manual development, and record retention based on hygiene management standards in line with HACCP.

While the proportion of middle-aged and older employees in the workforce composition is high, recruitment of new graduates among the younger generation is becoming increasingly difficult due to population decline. If the securing and development of young talent stagnates, hollowing-out of core operational know-how could occur, potentially affecting business activities such as procurement and sales. As countermeasures, the Company has assigned dedicated recruitment personnel in the administrative department to promote year-round recruitment and diversify recruitment methods, while enhancing stepwise education and training based on qualification grades and improving personnel systems to prevent early attrition and promote early development of young employees.

If the company-wide integrated system stops or malfunctions, it could disrupt services to business partners and affect procurement and sales conditions; in addition to natural disasters, there are also risks such as cyberattacks, unauthorized access, and virus infections. As countermeasures, the Company has installed servers at data centers, made the system redundant, and built an operational structure capable of functioning for several days, while also implementing UTM based on an information security policy and operating a security management system for information terminal devices.

Since the Company has business partners nationwide, it handles personal information including customers' credit information as well as transaction terms, and if information leakage, loss, or unauthorized use occurs from the group or outsourced contractors, it could affect business performance through loss of credibility, liability for damages, administrative sanctions, and other consequences. As countermeasures, the Compliance Committee and Information Security Committee take the lead in formulating policies for the appropriate handling of personal information and specific personal information, and work to maintain and promote safety management.

In addition to increases in sales, price fluctuations, and changes in supply and demand, bad debt risk may increase due to funding shortages among business partners as repayments under financial support programs for small and medium-sized enterprises become due in full. In particular, during the year-end busy season when trade receivable balances are high, the impact on business performance is relatively larger if large receivables become uncollectible. As countermeasures, the Company conducts receivables management through credit management and the collection of qualitative information on sales destinations, while also implementing risk avoidance measures such as reviewing contract terms and utilizing accounts receivable guarantee services.

Although the Company secures inventory while taking market conditions into account, depending on market trends, excess inventory or valuation losses could occur. Since forecasting market conditions is difficult, it is hard to predict when such risks will materialize, and this poses a risk that could affect business performance. As countermeasures, the Company shares current and future market information at regular meetings and checks for stagnant inventory, working to maintain appropriate inventory levels.

If natural disasters such as earthquakes, tsunamis, and typhoons, or fires, epidemics, and other events occur, they could worsen the financial condition through asset damage, and could also affect procurement and sales through decreased demand for marine products, disruption of distribution, and numerous employee absences; however, it is extremely difficult to predict the timing of occurrence, and advance countermeasures are also limited. As countermeasures, the Company has established a Risk Management Committee, formulated a BCP plan, and has established a system to set up an emergency response headquarters under the direction of the Representative Director in the event of an emergency.

Due to stricter working-hour regulations for truck drivers and the worsening labor shortage in the logistics industry, there are concerns about difficulty in securing transportation means and rising logistics costs. If this materializes, it could lead to chronic delays from shipping locations, suspension of interruption of outsourced contractor services, increased cargo handling work, and other issues, and if the Company cannot appropriately respond to a significant increase in logistics costs, it could affect business performance. As countermeasures, the Logistics Planning Department takes the lead in coordinating with producers and transportation operators to work on ensuring the stability of logistics.