OKASAN SECURITIES GROUP INC.

The Financial Instruments Business, the Group's core business, is characterized by the tendency for brokerage commissions received and trading gains/losses to fluctuate significantly due to changes in investment demand driven by domestic and overseas market and economic conditions. Trends in financial instrument markets in Japan and around the world, as well as fluctuations in trading volume on exchanges, may directly affect operating results and financial position. No specific measures for revenue stabilization are disclosed, but quantitative risk management is implemented through the Risk Appetite Framework.

As a dedicated securities company built around face-to-face sales, the Group has established a regionally rooted competitive advantage, but the competitive environment is intensifying further due to entry by other securities firms, financial institutions such as banks, companies from other industries, fintech startups, and industry consolidation. If the Group fails to maintain its competitive advantage, its customer base and earnings may shrink, affecting operating results and financial position. Under the medium-term management plan (with FY2028 (ending March 2028) as the final year), the Group is addressing this through strengthening One to One marketing and promoting digitalization.

Domestic securities subsidiaries, including Okasan Securities Co., Ltd., are subject to the Financial Instruments and Exchange Act and the various rules of self-regulatory organizations such as financial instruments exchanges and the Japan Securities Dealers Association, while overseas subsidiaries are subject to local laws and regulations. Future tightening of legal regulations or the introduction of new regulations that cannot currently be anticipated could restrict business activities through business improvement orders, business suspension orders, or similar measures. The Group implements comprehensive risk identification and monitoring through a framework established under the Integrated Risk Management Regulations and other rules.

The Group holds stocks, bonds, foreign exchange, and derivatives thereof for its own account, and bears the risk that the value of these financial assets will fluctuate due to sudden market or interest rate movements. If counterparty default, deterioration in the creditworthiness of securities issuers, or reduced liquidity due to market disruption forces transactions at significantly disadvantageous prices, this may result in principal impairment or losses. The Group manages this risk by setting limits on the amount at risk and monitoring it daily, but it may not be able to fully respond to sudden fluctuations exceeding expectations.

Due to the nature of the Financial Instruments Business, the Group must flexibly and stably raise large amounts of funds necessary for business execution, but there is a risk that fundraising from the short-term money market and capital markets may become difficult, or funding costs may rise, due to deterioration in financial position, reduced liquidity of assets, or a decline in credit ratings. If unexpected outflows of funds or a sharp decline in credit ratings occur, this could have a material impact on operating results and financial position. The Group monitors the impact of sudden market changes by conducting stress tests, and has established a system to respond promptly should liquidity risk materialize.

There is a risk of system failures arising from various factors, including quality defects in internet trading systems and other systems and networks, unauthorized access from inside or outside the Group including cyberattacks, and disasters or power outages. Should a system failure occur, it could halt customer transactions or interrupt operations, leading to a decline in creditworthiness or claims for damages. The Group implements comprehensive risk identification and monitoring through a framework established under the Integrated Risk Management Regulations and other rules, but it may not be able to fully respond to unforeseen events exceeding expectations.

There is a risk that confidential information, such as personal information of customers and employees/officers or management information, may be leaked due to unauthorized use of information systems. If customer information is leaked or personal information is compromised, the Group may face claims for damages or administrative dispositions from regulatory authorities, and damage to its social credibility could lead to customer attrition, affecting operating results and financial position. The Group implements comprehensive risk identification and monitoring through a framework established under the Integrated Risk Management Regulations and other rules.

Under the medium-term management plan with FY2028 (ending March 2028) as its final year, the Group has adopted "strengthening One to One marketing," "advancing the platform," and "evolving corporate branding" as its basic policies, and is promoting digitalization across all areas; however, if these initiatives do not proceed as planned, this may affect operating results and financial position. Technical challenges and difficulties in securing human resources could become obstacles to promoting digitalization. Specific details of the progress management framework for enhancing the feasibility of the plan are not disclosed.

The environment surrounding ESG, including climate change and human rights, is changing rapidly, and its impact is broad and accompanied by uncertainty. If the Group's ESG initiatives in its business activities do not succeed or are insufficient, this may affect the Group's reputation, operating results, and financial position. Specific countermeasures and details of the management framework for ESG risk are not explicitly disclosed in the securities report, but are believed to be managed within the framework of the Risk Appetite Framework.

The Group has established a risk management framework through the formulation of a Business Continuity Plan (BCP) and the establishment of a crisis response headquarters in preparation for natural disasters and the spread of pathogenic infectious diseases, but if unforeseen events exceeding expectations occur, this may affect operating results and financial position. In addition, there is a risk of claims for damages or a decline in creditworthiness due to deficiencies in administrative processes or inappropriate conduct by employees or officers. The Group implements comprehensive risk identification and monitoring through a framework established under the Integrated Risk Management Regulations and other rules, but states that it is not possible to respond to every conceivable event.