Credit Saison Co.,Ltd.

The Company conducts the Lending Business (India), Lending Business (Vietnam/Latin America) and Investment Business in India, Southeast Asia and Latin America. If economic deterioration, interest rate and foreign exchange fluctuations, deterioration of the fund-raising environment, or deterioration in the performance of partner companies occur, this could affect business performance and financial condition through increased credit-related expenses, recognition of investment losses, and incurrence of business restructuring costs. The Company continuously monitors the performance, asset quality, and regulatory trends of each overseas operating company, and addresses this risk by strengthening local governance through IHQ (International Headquarters).

The Company holds credit card receivables, lease receivables, real estate finance receivables, overseas lending receivables and other assets, and also bears guarantee obligations associated with its credit guarantee business. Deterioration in the domestic and overseas economic environment, changes in the employment and income environment, deterioration in the real estate market, rising delinquency rates, and increases in fraudulent use could result in increased credit-related expenses and increased fulfillment of guarantee obligations. The Company addresses this through credit limit management, in-progress credit management, improved screening accuracy using machine learning models, and monthly monitoring through the Global Receivables Management Committee.

The Company holds and operates information assets including card member information, as well as core systems. If information leaks or system outages occur due to external cyberattacks, ransomware, unauthorized access, breaches via outsourcing partners, or improper external transmission of confidential information associated with the use of generative AI, this could have a material impact on business performance and financial condition through damages compensation, recovery costs, and loss of public trust. The Company addresses this through access rights management compliant with international standards, vulnerability management, incident response training, and development of AI guidelines.

The Company's principal sources of funding are borrowings from financial institutions, corporate bonds, and CP, with a substantial amount raised through short-term borrowings and CP maturing within one year. If liquidity risk increases due to deteriorating business performance, downgrades of credit ratings, economic or financial crises, or natural disasters, this could have a material impact on business performance and financial condition. The Company addresses this by maintaining longer-term and fixed fund-raising, establishing liquidity supplementation facilities such as commitment lines, and diversifying fund-raising and dispersing redemption timing through corporate bonds and receivables securitization.

If new enactments, amendments, changes in interpretation, or stricter enforcement occur with respect to domestic and overseas laws and regulations such as the Installment Sales Act, the Money Lending Business Act, the Banking Act, the Act on the Protection of Personal Information, and the Act on Prevention of Transfer of Criminal Proceeds, this could affect business performance and financial condition through increased system investment and operating costs, changes to products and services, and constraints on the provision of certain services. In particular, regulatory changes have a relatively larger impact on the business environment in emerging market countries, and the Company maintains a system to track trends through regulatory authorities and industry associations and to review internal rules, business processes, and systems accordingly.

In the Payment Business, there are concerns of slowing growth in shopping transaction volume, declining merchant fee rates, and rising member acquisition costs due to the diversification of code payment services and the entry of technology companies. In the Finance Business, competition with various financial institutions could lead to declining lending yields and guarantee fee rates. In the Global Business as well, intensifying competition with local banks and fintech companies could lead to competition for acquiring quality customers, declining lending yields, and lengthening investment recovery periods. The Company aims to maintain competitiveness through a shift toward the affluent, corporate, and small/medium-sized business segments, digitalization and efficiency improvements in operations, and strengthened governance through IHQ.

The Company holds investment assets such as listed and unlisted equities, investment funds, bonds, and real estate, uses floating interest rates for part of its fund-raising, and bears foreign exchange fluctuation risk associated with overseas operations. If market prices decline or unfavorable movements occur in interest rates or foreign exchange rates, this could affect business performance and financial condition through valuation losses on securities, valuation losses related to real estate, increased interest expenses on fund-raising, and foreign exchange losses. The Board of Directors and the ALM Committee manage this through investment policies and limit-setting based on RCM and ALM, continuous monitoring, and hedging or reviewing fund-raising terms as necessary.

Because the Company applies IFRS, goodwill is not amortized on a regular basis, and its balance increases each time new goodwill arises through M&A and other transactions, leaving impairment risk that persists into the future. If the business environment deteriorates or income and expenditure plans are not achieved, this could affect business performance and financial condition through impairment losses. The Company addresses this through investment limit-setting under RCM, prior deliberation on the appropriateness of acquisition prices, and follow-up on post-investment income and expenditure plans and regular monitoring of the management environment.

Core operations such as payment processing, credit screening, and billing/collection are highly dependent on computer systems and communication networks, and system configurations are becoming increasingly complex due to progress in business digitalization, expansion of in-house development, and increased use of generative AI. If system malfunctions, large-scale disasters, or external service failures occur, this could have a material impact on business performance and financial condition through suspension of critical operations, processing errors, and recovery costs. The Company has implemented measures such as securing backups for critical systems, developing contingency plans, formulating BCPs, geographically dispersing processing centers between eastern and western Japan, seismic isolation functionality, and emergency power sources.

Securing, developing, and retaining highly specialized talent in areas such as DX, AI, data analysis, global business operations, and risk management is essential for sustainable growth. If it becomes difficult to acquire talent or if outflow of personnel to outside the Company occurs, this could stall the sophistication of products and services, expansion of global business, and strengthening of management systems, thereby affecting business operations, growth potential, and profitability. The Company addresses this through the development of diverse working styles, fair treatment, partner-type support through the HRBP system, and enhancement of succession planning.