The San-in Godo Bank,Ltd.

There is a risk that the sales strategy aimed at strengthening earnings capacity may fail to succeed due to deterioration of the domestic and overseas economic environment, intensifying competition from other industries, or a divergence from customer needs. If the strategy underperforms, it may adversely affect operating results and other financial results. The Bank has established a system to flexibly convene the Board of Directors, Management Executive Committee, and Executive Officers' Committee to evaluate and revise strategy progress.

As the Bank's main business base is the two San'in prefectures, its deposit and loan balances, fee income, and credit costs are significantly affected by the economic conditions of that region. As this is an advanced-issue region facing declining birthrate and aging population, a downturn in the regional economy would directly and adversely affect operating results and other financial results. The Bank seeks to diversify regional risk through wide-area expansion; at the end of the fiscal year under review, the breakdown of the loan balance by region was 33.8% for the two San'in prefectures, 19.4% for Hiroshima and Okayama, 25.0% for Hyogo and Osaka, and 21.6% for Tokyo.

This is the risk of incurring losses due to difficulty in collecting interest and principal on loans, etc., as a result of deterioration in the financial condition of business partners, and credit risk tends to increase under the strategy of expanding the loan balance. An increase in non-performing loans or credit costs may adversely affect operating results and other financial results. The Bank conducts individual case screening, portfolio management, and self-assessment based on its internal rating system, and manages the risk amount within the scope of its capital through regular discussions at the Credit Risk Management Committee and the ALM Committee.

This is the risk of incurring losses due to fluctuations in the value of held financial assets and liabilities resulting from changes in market conditions such as interest rates, stock prices, and exchange rates; risk-taking has become more diversified as investment in foreign securities and various investment trusts has expanded. Depending on trends in domestic and overseas economies and financial markets, a decline in the price of securities may result in impairment or valuation losses, which may adversely affect operating results and other financial results. The Bank monitors and manages VaR levels, valuation gains/losses, and sensitivity on a daily basis, and the ALM Committee discusses and determines appropriate risk control measures based on its grasp of the risk amount.

If the Bank's fundraising capacity is significantly diminished due to a serious financial system crisis or a substantial deterioration in the Bank's financial condition, funding costs may increase significantly, adversely affecting operating results and other financial results. In addition to daily management of fund gap limits and monthly verification of fund flow forecasts against actuals, the Bank has formulated a contingency plan. The Bank holds liquid bonds such as government bonds and other highly liquid assets, and has established a system to respond to emergencies.

Against the backdrop of progressing digitalization accompanying the promotion of DX, if the Bank is subjected to increasingly sophisticated and serious cyber attacks, service interruptions, data tampering, information leakage, unauthorized money transfers, etc. may occur, potentially resulting in liability for damages to customers and adverse effects on operating results and other financial results. The Bank has established the Gogin CSIRT to respond to cybersecurity incidents both inside and outside the Bank, and has established a reporting system to the Operational Risk Management Committee.

If a failure occurs in ATMs, branch terminals, the website, etc., it may cause the suspension of deposit withdrawals and money transfer services, loss of social credibility, and other inconveniences to customers, as well as adverse effects on operating results and other financial results. System risk, including computer system outages, malfunctions, and unauthorized use, is managed as part of operational risk in accordance with management regulations.

If officers or employees violate laws and regulations, social norms, the code of ethics, internal regulations, etc., it may adversely affect operating results and other financial results. Based on the Operational Risk Management Regulations, the Bank works to develop and strengthen its compliance systems through discussions and deliberations at the Operational Risk Management Committee.

The Bank conducts its business in accordance with current laws, regulations, policies, business practices, and interpretations, but future regulatory changes and the circumstances arising therefrom may adversely affect operating results and other financial results. The Bank continuously monitors regulatory trends and maintains a system to respond to changes.

If business partners' operations are disrupted, collateral properties are damaged, or branch stores and other facilities are damaged due to the intensification and increased frequency of natural disasters caused by abnormal weather, this may adversely affect operating results and other financial results. In addition, tightening regulations and technological innovation accompanying the transition to a decarbonized society may affect the business and performance of business partners, which may in turn adversely affect the Bank's operating results and other financial results. Related initiatives are disclosed in the Bank's sustainability philosophy and initiatives.