Ichiyoshi Securities Co., Ltd.

A decline or stagnation in domestic and overseas stock and bond markets could reduce trading volume in the secondary market, leading to a decrease in brokerage commission income. Since the primary market is similarly affected, deterioration in market conditions could directly impact the Group's principal revenue source. Given the securities business's high dependence on market conditions, an economic downturn could have a significant effect on business performance.

In addition to holding investment securities, the Company engages in proprietary trading, and fluctuations in stock prices, interest rates, foreign exchange rates, and other factors could cause the value of held securities to fluctuate, resulting in losses. During periods of sharp market fluctuation, unrealized losses on held positions could deteriorate the Company's financial condition. Depending on the scale of proprietary trading, such losses could have a material impact on operating results.

A counterparty's default or deterioration in creditworthiness could cause losses to the Group. Since the creditworthiness of customers and counterparties is directly linked to the soundness of revenue in the securities business, deterioration in a counterparty's financial condition could lead to uncollectible losses. The effectiveness of credit risk management affects financial soundness.

Deterioration in financial market conditions or in the Group's financial condition could impose constraints on fund-raising, resulting in liquidity impairment. There is also a risk of losses arising from being forced to raise funds at interest rates significantly higher than usual. During periods of market turmoil, a sharp rise in funding costs could put pressure on the business.

Computer system downtime or malfunctions, or disruptions caused by disasters or power outages, could result in business suspension or losses. There is also a risk of losses from unauthorized computer use (such as cyberattacks). The securities business is extremely dependent on systems, and in the event of a failure, this could lead to suspension of customer transactions and loss of trust.

Violations of laws and regulations could result in losses, litigation, or administrative sanctions from regulatory authorities. The financial instruments business is subject to strict legal regulation, and if a violation is discovered, it could lead to serious administrative sanctions such as a business suspension order. Maintaining and strengthening the compliance framework remains an ongoing challenge.

Insider trading, leakage of internal information, or inappropriate information disclosure could result in losses or a decline in social credibility. Since securities companies handle large amounts of customers' non-public and material information, failures in information management could lead to both legal sanctions and loss of trust. Establishing an information security framework is a prerequisite for business continuity.

The financial and securities industry has entered an era of full-scale competition, and further intensification of competition is expected going forward. As competition with online brokerages and major integrated securities firms intensifies, the Group's market share and profitability could decline. Responding to changes in the competitive environment could affect operating results and financial condition.

Revisions to various laws and regulations surrounding the financial and securities industry could affect the Group's operating results and financial condition. Stricter regulation could increase operating costs, and changes in systems may require a review of existing business models. Continuous monitoring of regulatory trends and prompt responses are required.

Changes in policy and regulation accompanying the transition to a low-carbon economy, as well as changes in investor behavior, present a risk that existing products and services could become obsolete (transition risk), while climate change also poses risks of damage to held assets and disruption to business activities (physical risk). Delays in responding to the transition could also lead to reputational decline. Addressing climate change is recognized as a medium- to long-term management issue.