Fuyo General Lease Co., Ltd.

Since the average term of lease transactions is medium- to long-term at approximately 5 years, there is a risk that a counterparty's bankruptcy or other event during the credit period could make it difficult to collect lease payments and other receivables. If new non-performing loans arise due to a deterioration in economic conditions, this could have a material impact on business results. As countermeasures, the company has established a system of individual credit screening, portfolio monitoring, self-assessment, and periodic reporting on large credit exposures through the "Business Risk Review Committee."

Funds for purchasing property are mainly procured from financial institutions and the market, and the company also holds foreign-currency-denominated assets such as aircraft, as well as corporate bonds and fund investments; fluctuations in interest rates, exchange rates, and stock prices may affect business results. In addition, if the company's credit rating is downgraded, favorable fundraising through commercial paper and other means may be restricted, creating a risk of being forced to raise funds at higher interest rates. The company manages market risk and discusses new funding policies through the "ALM Committee," and maintains ratings of AA- from Japan Credit Rating Agency and A+ from Rating and Investment Information, Inc.

Since the company conducts business based on current laws, tax regulations, accounting systems, and standards, significant changes to these could affect business results. In particular, Accounting Standard No. 34, "Accounting Standard for Leases," published by the Accounting Standards Board of Japan in September 2024, represents a significant risk of institutional change for the Company Group, which operates a leasing business. The company is preparing for such changes by establishing an information-gathering and review framework, but the full extent of the impact has not yet been determined at this time.

The company is expanding its business domains through investments in venture companies and new businesses both in Japan and overseas, as well as through strategic alliances and corporate acquisitions; however, there is a risk that expected synergies or contributions to business results may not be realized due to issues not identified during due diligence coming to light later, or due to changes in the external environment. If the investment amount cannot be sufficiently recovered, this could affect business results through impairment of goodwill and other factors, and the balance of goodwill stood at ¥46,304 million as of the end of the current consolidated fiscal year. The company strives to avoid such risks through thorough advance due diligence and careful examination of profitability and the feasibility of investment recovery.

The materialization of physical risks due to the intensification of natural disasters, as well as the introduction of carbon taxes and tightening of regulations associated with the transition to a decarbonized society, may affect business or financial results. The company has established a "CSV Promotion Committee" to identify climate-related risks and opportunities based on the TCFD recommendations, analyze their financial impact, and disclose information, and has set a "carbon neutrality" target to achieve net-zero greenhouse gas emissions from business activities by FY2030 (ending March 2031).

As the company holds a large amount of customer information and management information, if a cyberattack were to cause its IT systems to malfunction for an extended period, business operations could be significantly disrupted, adversely affecting business results. Leakage of personal information or confidential corporate information due to unauthorized access or other causes carries the risk of damaging social trust and incurring liability for damages. Under the "System Strategy Committee," the company implements multi-layered defenses including entry and exit countermeasures as well as endpoint monitoring, along with education and training for officers and employees.

If the company's response to digital transformation (DX) is delayed due to a shortage of digital talent or other factors, or if the application of digital technology is significantly delayed, the competitiveness of the Company Group could relatively decline, potentially adversely affecting business or financial results. As the digital shift in society accelerates, there is a growing need to respond through business transformation and the creation of new solutions utilizing digital technology. The company has established a "DX Strategy Promotion Committee" and is proceeding with the development of the organization and systems necessary to promote its DX strategy.

In the aircraft leasing business conducted both in Japan and overseas, if aircraft asset values decline significantly due to deteriorating airline performance or changes in the economic environment, losses on the sale of aircraft or impairment losses could occur, affecting business results. In real estate leasing and investment/financing as well, there is a risk of declining asset values due to deteriorating counterparty performance, lower occupancy rates, or worsening real estate market conditions. The company carefully assesses creditworthiness, future value, and future cash flows on a case-by-case basis and has established a system for regular monitoring.

In the renewable energy business conducted both in Japan and overseas, there is a risk of reduced power generation due to unfavorable weather conditions, while in the grid-connected battery storage business, there is a risk that profitability may fall short of plan due to fluctuations in trading prices on the Japan Electric Power Exchange. If annual power generation declines significantly due to abnormal weather, or if difficulties in power supply or fluctuations in the supply-demand balance arise due to unforeseen circumstances, this may necessitate recording valuation losses or additional capital contributions, potentially affecting business results. The company has established a system for careful examination of business plans and continuous monitoring of operational status and market trends after business commencement.

The company conducts leasing and finance operations, aircraft operating lease business, renewable energy power generation business, and other operations mainly in North America and Asia, and there is a risk of unforeseen events arising from changes in laws and regulations, or changes in political, economic, and social conditions in the countries where it operates. In addition to exchange rate risk, if country risk, including geopolitical factors, materializes, this could affect business activities. The company has established a system to carefully assess asset value and business viability, taking country risk into consideration when undertaking individual projects.