DAIICHI JITSUGYO CO., LTD.

A slowdown in the global economy caused by U.S.-China conflict, expanding protectionism, geopolitical risks, and U.S. tariff measures could worsen the Group's business performance. In particular, the restructuring of supply chains that had become increasingly concentrated in China, and investment restraint due to political and economic conflicts regardless of region, are recognized as risks of high importance. As a countermeasure, the Company seeks to minimize the risk of business deterioration through prompt information gathering via close communication with overseas group companies under the global five-region structure, and through agile shifts in the business portfolio.

In the current consolidated fiscal year, the ratio of overseas sales to consolidated net sales exceeded half at 52.8% (52.6% in the previous fiscal year), and is expected to rise further with the promotion of the medium-term management plan "MT2027." Foreign exchange rate movements, fluctuations in crude oil and raw material prices and transportation costs, trends in capital expenditure by client companies, and changes in political systems, laws, and regulations overseas may affect business performance. The Company strives to minimize the risk of reduced earnings by promptly grasping information leveraging its global network and relationships with a wide range of business partners, and by selecting optimal transaction forms.

Interest-bearing debt at the end of the current consolidated fiscal year stood at ¥7,495 million, and funds are procured through commitment line agreements with five partner banks. If financial markets become unstable or credit ratings are downgraded, timely fund procurement on favorable terms may become difficult, which could constrain business activities. In addition, depending on interest rate trends, financial income and expenses may deteriorate, potentially affecting business performance and financial position. The Company works to maintain good relationships with financial institutions, deepen dialogue with institutional investors, diversify funding sources, and maintain or improve its credit rating by preserving sound financial condition.

Total trade receivables at the end of the current consolidated fiscal year amounted to ¥48,037 million, accounting for 27.4% of total assets, exposing the Company to the risk of losses from deteriorating creditworthiness or bankruptcy of business partners. If a liquidity crisis among business partners, chain bankruptcies, or financial instability of major credit customers occurs due to a worsening economic environment, receivables may become uncollectible, potentially having a material impact on business performance and financial position. The Company implements risk hedging measures such as approval procedures for credit limits and contract limits, obtaining collateral and guarantees, and securitizing receivables, but states that complete elimination of the risk is difficult.

Dependence on systems and networks in business activities is expanding year by year, and if a severe failure occurs due to natural disasters, computer viruses, unauthorized access, large-scale power outages, or equipment failure, it could disrupt business activities including order processing, and result in substantial costs and significant impact on corporate reputation. In response, the Company uses highly secure data centers and cloud services, has introduced monitoring systems for terminal devices, and has established a system for prompt response based on a business continuity response manual.

As the Company expands globally in pursuit of becoming a "next-generation engineering trading company," individual transactions are becoming larger in scale, more complex, and longer in delivery time, giving rise to risks such as increased cross-border transaction risk, accidents in large-scale construction projects, legal liabilities and costs, and decline in market value due to technological obsolescence. The Company is working to avoid risk and enhance competitiveness through the recruitment of engineers, development of personnel evaluation systems, and strengthening of the global strategy promotion division and the legal and management administration divisions.

Under the long-term growth strategy including the medium-term management plan "MT2027," covering April 2025 to March 2028, if business-related investments and other investments fail to produce sufficient effect, this may affect business performance and financial position. Because the plan spans the medium to long term, the period over which risks in existing businesses remain latent is also prolonged, which poses a challenge. The Company addresses this through enhancing the investment evaluation capabilities centered on the corporate planning division, and through regular progress analysis, decision-making on changes, and prompt disclosure after implementation.

If disasters such as earthquakes, typhoons, fires, or the spread of infectious diseases cause damage to the Group's offices, factories, or officers and employees, sales and production activities may be disrupted. In addition, if major business partners suffer significant damage, the resulting stagnation of their sales and production activities could also become a factor in the deterioration of the Group's business performance. The Company has taken measures such as formulating a business continuity plan basic document, preparing a business continuity response manual, introducing a safety confirmation system, and conducting disaster prevention drills, but states that complete avoidance cannot be guaranteed.

Regarding climate change, the Company recognizes that risks based on the recommendations of the TCFD could have a significant impact across the entire supply chain, and that increased tax burdens from carbon taxes and similar measures, technical problems with handled products, decreased market demand, and deterioration of corporate reputation could worsen business performance and financial position. In addition to climate change, delays in responding to standards and market changes related to environmental destruction, human rights, diversity, and other issues may also affect business performance, and the Company is working to establish corporate standards to conform to supply chain due diligence requirements of global companies. A dedicated organization has been established to conduct scenario setting, impact assessment, and ongoing monitoring.

The Group has established an integrated risk management system that monitors and manages risk across multiple layers, and has set up specialized operational departments to handle risks related to business promotion in an integrated manner. However, there are risks that are difficult to foresee, and potential risks not limited to the items described in the Annual Securities Report may affect business performance and financial position. The Company seeks early detection of and response to risks through the continuous strengthening of the integrated risk management system across the entire Group.