ONWARD HOLDINGS CO., LTD.

There is a risk that planned revenue may not be secured due to sluggish personal consumption caused by economic fluctuations, competition with other companies, and rapid changes in fashion trends. Given the nature of fashion products, the accuracy of demand forecasting is directly linked to business performance, and changes in the market environment affect both sales and profit. As a countermeasure, the Group has established a system to collect information on customer needs in a timely manner and promptly reflect it in product planning.

Sales of the Group's core fashion products are highly susceptible to weather, and there is a risk of missing peak-season sales opportunities due to prolonged unusual weather such as cool summers or warm winters, or repeated typhoons. Given the characteristics of seasonal merchandise, the loss of sales opportunities is also linked to inventory risk, resulting in a significant impact on business performance. As countermeasures, the Group is strengthening its short-cycle planning and production system, diversifying procurement sources, building a backup system for production sites, and securing appropriate inventory levels.

Although quality control standards have been established and are being observed, if a product accident caused by the Group or a business partner occurs, it may lead to a decline in corporate and brand image and significant costs. For an apparel company whose competitiveness is rooted in brand value, quality issues can also have a serious impact as a reputational risk. As a countermeasure, the Group has taken out product liability insurance.

There is a risk of losses arising from bad debts due to credit concerns of business partners or unexpected bankruptcies of large commercial facilities. The apparel industry is highly dependent on transactions with department stores and commercial facilities, and deterioration in the business condition of major business partners affects performance in terms of both sales and receivables collection. As countermeasures, the Group regularly checks the business conditions and creditworthiness of business partners and conducts credit checks and investigations on new business partners.

Although the Group holds trademark rights and other intellectual property rights domestically and overseas, if infringement by a third party occurs, it may lead to a decline in corporate and brand image and hinder product development. For brand companies operating globally, counterfeit goods and trademark infringement can directly lead to the loss of revenue opportunities. As countermeasures, the Group appropriately manages intellectual property rights and executes related contracts, and conducts prior investigations by experts when there are concerns about infringement of third-party rights.

Amid the need to comply with the Antimonopoly Act, the Subcontract Act, the Act against Unjustifiable Premiums and Misleading Representations, the Consumer Product Safety Act, and environmental and recycling-related laws and regulations, if problems arise due to misconduct or illegal acts by employees or business partners, it may lead to a decline in the company's social trust and significant costs such as damages. As a countermeasure, the Onward Group Compliance Committee leads efforts to promote awareness of legal compliance and thorough implementation of internal control procedures.

If information leakage occurs due to unauthorized access to computer systems or criminal activity, it may lead to a decline in the company's social trust and significant costs. As an EC and retail operator holding customers' personal information, an information security incident could also affect business continuity. As countermeasures, the Group is strengthening the security of its information systems, formulating personal information protection guidelines, and thoroughly disseminating them to all officers, employees, and related business partners.

Overseas business inherently involves various risks such as local natural disasters, political upheaval, changes in socioeconomic conditions, terrorism and war, exchange rate fluctuations, intellectual property litigation, and infectious diseases, and if these risks materialize, it may become difficult to continue business activities. For the Group, which operates production and sales sites globally, geopolitical risk and exchange rate fluctuations directly affect the stability of earnings. As countermeasures, the Group has diversified its production sites across multiple countries and regions and established a system of close communication with each regional site.

As part of its growth strategy, the Group invests domestically and overseas through M&A and other means, but if the business or financial condition of an investee deteriorates due to changes in the business environment beyond expectations, the Group may be required to recognize an impairment loss on goodwill. Recognition of an impairment loss could significantly worsen performance and financial position on a temporary basis. As a countermeasure, the Group thoroughly examines the investment effects and risks before investing and implements investments based on formulated capital expenditure plans.

The impact of the COVID-19 pandemic may adversely affect business performance and financial condition through disruptions to domestic and overseas supply chains, reduced consumption due to requests to refrain from going out, and temporary store closures or reduced operating hours. For an apparel company highly dependent on physical store sales, restrictions on store operations have a direct negative impact on sales. As countermeasures, the Group is thoroughly implementing infection prevention measures at stores and offices, introducing a telework system, and promoting responses to new lifestyles and work-style reforms.