J Trust Co.,Ltd.

The Group is subject to various regulations under Korea's Savings Bank Act, and banking laws in Indonesia and Cambodia, among others. In the event of a violation of laws or regulations, the Group may be subject to administrative dispositions such as suspension of all or part of its operations. As the Group conducts banking business across multiple countries, costs may also arise in responding to regulatory changes in each country. The Group addresses this risk through legal compliance and the development of its compliance systems.

If the financial condition of debtors deteriorates due to significant changes in domestic and overseas economic and financial conditions, or due to impairment of real estate collateral value or an increase in bankruptcies among member stores in the installment sales business, the allowance for doubtful accounts (allowance for loss evaluation) may increase, which could affect business performance. Changes in accounting standards may also be a factor in increasing the allowance. The Group addresses this through enhanced monitoring of borrowers and guarantee counterparties and periodic verification of collateral value.

Since the revenues, expenses, and assets of overseas subsidiaries in Korea, Indonesia, Cambodia, and other countries are translated into yen when preparing consolidated financial statements, significant exchange rate fluctuations beyond expectations could affect business performance. This is a structural risk for the J Trust Group, which conducts business globally. The Group monitors exchange rate trends and works to mitigate fluctuation risk.

Because the Group applies IFRS, regular amortization of goodwill is not required; however, if indications of impairment arise due to deterioration in the operating results of an acquired company, an impairment test is conducted, and if the recoverable amount falls below the carrying amount, an impairment charge is required. Since IFRS does not provide for the regular amortization of goodwill, impairment risk remains outstanding over the long term, and the impact on profit or loss at the time of impairment recognition could be significant. The Group addresses this through careful examination of the appropriateness of acquisition prices and follow-up on earnings plans after investment.

In business reorganization and expansion domestically and overseas, if the anticipated business strategy does not function effectively, or if the Group encounters risks and challenges with which it has little experience, business performance may be affected. Securing the personnel necessary to oversee new businesses and responding to legal risks are also challenges. The Group addresses this through detailed due diligence at the time of M&A and the establishment of a group-wide risk management system.

In overseas markets such as Korea, Indonesia, and Cambodia, changes in laws and regulations, political and economic instability, terrorism, war, social unrest, large-scale natural disasters, epidemics, and other events may occur, which could prevent business activities from developing as expected or make it difficult to continue operations. The Group addresses this through local information gathering via its overseas subsidiaries and a mutually complementary system among group companies.

The real estate business, which centers on condominium and detached housing sales, is susceptible to land price trends, rising construction costs, competitors' supply trends, rising interest rates, and changes in real estate-related tax systems, which could lead to a decline in housing purchase demand and result in inventory buildup or the recognition of valuation losses. Rising construction material prices due to elevated crude oil prices and rising labor costs due to chronic worker shortages also put pressure on profitability. The Group addresses this by increasing the proportion of bulk building sales and reducing costs through consolidated ordering across multiple sites.

In fundraising activities, including variable-rate borrowings, changes in financial conditions that raise funding costs or make fundraising difficult could affect business performance. The prolongation of real estate business project periods may necessitate extensions of loan repayment dates, and if such extensions prove difficult, this could affect cash flow or force changes to business plans. The Group addresses this through diversification of funding sources, including borrowings, corporate bonds, commercial paper issuance, and securitization of loan receivables.

If a failure occurs in the information network system due to unauthorized access, cyberattacks, computer viruses, or other causes, this could result in the leakage of customers' personal information, loss of business opportunities, claims for damages, and administrative dispositions from regulatory authorities. In the securities business, there is a high degree of dependence on core systems, and the impact of a service outage would be significant. The Group addresses this through regular system audits, the establishment of backup systems, and the development of security measure programs.

In addition to compliance with various laws and regulations such as the Financial Instruments and Exchange Act and the Money Lending Business Act, the Group is required to observe social norms and ethical standards. In the event of a scandal or violation of social norms, penalties, loss of public trust, and damage to corporate image could affect business performance. Similar risks arise in the event of administrative guidance or recommendations. The Group works to instill a compliance mindset among all officers and employees across the group through the establishment of group compliance regulations and the establishment of a Compliance and Risk Management Committee.