Seven Bank, Ltd.

If the spread of cashless payments progresses further, the number of ATM transactions may decline, directly affecting revenue in the Domestic Business segment. The Company's revenue is heavily dependent on the ATM Platform Business, exposing it to the risk of a structural decline in demand. As countermeasures, the Company is developing cash charging for various cashless payment methods and new ATM services such as "+Connect", aiming to expand the social value of ATMs.

Although ATM acceptance fees received from partner financial institutions are set at mutually reasonable levels, if fee levels are reduced or partnership relationships are terminated, the Company's main revenue source would be directly impaired. In addition, if competition intensifies due to more aggressive ATM deployment by competing convenience store ATM operators or financial institutions, this could lead to a decline in the number of users and fee income. The Company is seeking to differentiate itself through the expansion of proprietary services, but it is difficult to fully control changes in the competitive environment.

Cyberattack methods are becoming increasingly sophisticated and elaborate, creating risks of leakage of customer information or disruption of ATM and payment services due to unauthorized access, malware infection, ransomware attacks, attacks via third parties, and other means. The Company has established a CSIRT and is working to maintain training and response capabilities across the group, but complete defense against evolving attack methods cannot be guaranteed. In the event such an incident occurs, in addition to the impact on profit and loss, damage to the Company's social reputation is also a concern.

Approximately 80% of the Company's ATMs are installed inside Seven-Eleven stores, and if it becomes difficult to continue installing ATMs at these stores or if the number of store visitors decreases significantly, it would have a material impact on the Group's profit and loss. In addition, if the terms of ATM installation fees change significantly, this could also put pressure on revenue. The parent company, Seven & I Holdings Co., Ltd., holds 33.40% of the Company's voting rights, and it cannot be denied that changes in that company's management policy could affect the Company's decision-making.

There is a risk that the system may become inoperable due to natural disasters such as major earthquakes and typhoons, power outages, network failures, malicious use of new technologies including AI, human error, and other causes. The Company has implemented measures such as a two-center operating system, equipment redundancy, and 24-hour, 365-day operational monitoring, but these risks cannot be completely eliminated. If a system failure occurs, it could impact profit and loss due to the suspension of ATM and payment services, and could also lead to a loss of customer trust.

Due to the unique nature of the Company as an ATM-centered bank primarily engaged in non-face-to-face transactions, there is an inherent risk of financial crimes such as money laundering and terrorist financing. If countermeasures temporarily fail to keep pace with the rapid sophistication and elaboration of criminal methods, this could affect profit and loss and social reputation through reputational damage or administrative sanctions from regulatory authorities. The Company is working to strengthen risk-based management by continuously monitoring ATM usage and account usage status.

The Company's banking license carries conditions imposed under Article 4, Paragraph 4 of the Banking Act, and separate approval from the Commissioner of the Financial Services Agency is required to conduct new businesses such as foreign currency deposits. Depending on the progress of the approval application, there is a risk that the Company may not be able to develop new businesses as planned. In addition, if the Company falls under the requirements for business suspension or license revocation under Articles 26 and 27 of the Banking Act, this could seriously impede its business activities.

The Company has consolidated subsidiaries that operate ATMs overseas, and if major changes in the political or economic environment or unforeseen events such as natural disasters occur, this would affect the Group's profit and loss. In addition, funding costs for the overseas ATM business are affected by rising market interest rates, and Group profit may decrease due to fluctuations in exchange rates. In cases where ATM installation locations include areas with unstable security conditions, there is also a risk of losses due to physical attacks such as cash theft.

In the course of conducting banking operations, the Company holds a large amount of personal information, and if a large-scale information leak occurs, this could affect profit and loss and financial condition through orders and penalties from regulatory authorities, claims for damages, and reputational damage. The Company thoroughly enforces strict management through the establishment of "Personal Information Management Regulations" and the conclusion of memorandums with outside contractors, but complete prevention cannot be guaranteed. This risk is also linked to information security risk, and leakage due to cyberattacks is also a possible scenario.

If ATM operating costs and materials procurement costs rise due to increases in resource prices amid geopolitical tensions and rising labor costs stemming from a structural labor shortage, this could impede business operations and affect the Group's profit and loss. In addition, competition with other financial institutions and IT companies for talent is intense, creating a risk that it may become difficult to recruit, develop, and retain the necessary personnel. These cost increase pressures may continue over the medium to long term.