COSMOS INITIA Co.,Ltd.

There is a risk that if real estate demand declines due to trends in the economy, interest rates, land prices, or new supply, purchasing intent may weaken in the housing sales business, and sales prices of income-producing real estate may decline due to a rise in expected yields. Profitability could deteriorate significantly due to impairment or valuation losses on held assets and real estate for sale. As countermeasures, the company conducts regular market trend monitoring, verification of financial resilience, and risk diversification through a portfolio of multiple assets and businesses.

There is a risk that rising market interest rates or turmoil in financial markets may increase funding costs, leading to reduced business opportunities and deteriorating profitability. There are also concerns about a decline in home purchasers' purchasing intent and a decline in sales prices or losses due to rising expected yields sought by investors in income-producing real estate. As countermeasures, the company conducts regular economic trend surveys, prior consultations with financial institutions, and secures funding through financial monitoring.

There is a risk that rising costs such as construction costs, energy costs, and labor costs may worsen the profitability of the real estate development business, leading to the suspension of business plans or a decrease in business opportunities. There is also a risk of development delays or uncollectible receivables due to a decrease in available general contractors or contractor bankruptcies. As countermeasures, the company analyzes cost fluctuation factors, controls costs, incorporates contingency reserves, and develops new general contractors while conducting credit checks.

There is a risk of additional costs arising from the discovery of underground obstructions or soil contamination, business delays or cancellations due to neighborhood opposition or difficulty in rights adjustments, and delays or cancellations in obtaining permits and licenses. These risks could lead to significant changes in business plans or deteriorating profitability. As countermeasures, the company conducts prior surveys by external experts, allocates contingency reserves, and maintains a prior confirmation system through collaboration among the planning and development, construction, and legal departments.

There is a risk that information systems may be shut down due to external cyberattacks or unauthorized access, causing suspension or delays in business activities such as real estate transactions and hotel reservations, as well as payment processing. If personal or confidential information is leaked externally due to system failures caused by internal factors, unexpected costs and reputational damage may occur. As countermeasures, the company has introduced security systems, established a dedicated department, taken out cyber insurance, and conducts educational activities such as targeted phishing email training.

There is a risk of administrative sanctions or business suspension due to violations of major laws and regulations such as the Building Lots and Buildings Transaction Business Act and the Building Standards Act, as well as risks of damages and reputational damage from violations of advertising regulations, the Act on Promotion of Subcontracting Small and Medium-sized Enterprises, and the Personal Information Protection Act. Business suspension is a serious risk that would directly reduce sales. As countermeasures, the company has established business flows, manuals, and regulations within business divisions, and the compliance department conducts company-wide training and surveys.

There is a risk that population decline and workforce diversification may make it difficult to secure highly specialized personnel in real estate development, construction, and other fields, weakening corporate competitiveness. There are also risks of health problems caused by employees' long working hours, and unpaid wages, administrative sanctions, or reputational damage due to violations of the Labor Standards Act. As countermeasures, the company encourages the use of paid leave, has established remote work arrangements, improved working conditions, introduced an attendance management system, and monitors employees who work long hours.

There is a risk that large-scale earthquakes, storm and flood damage, or the spread of infectious diseases may restrict officers' and employees' ability to work or cause them to leave the company, leading to business suspension, damage to or decline in the value of held real estate, suspension or delay of development projects, and breach of contract due to the inability to deliver real estate for sale. There are also concerns about a decline in sales at hotel operating facilities due to a decrease in the number of foreign visitors to Japan. As countermeasures, the company conducts regular disaster prevention drills, formulates BCPs and establishes organizational systems, and takes seismic countermeasures at construction sites.

There is a risk of repair costs arising from design or construction defects in real estate development and condominium renovation work, or from inadequate management of leased management facilities, as well as risks of response costs and reputational damage from the use of prohibited building materials. A decline in construction quality could lead to a loss of trust among general consumers and business partners. As countermeasures, the company has established its own "Standard Specifications" and "Quality Control Standards" and maintains a system of prior inspection and confirmation by dedicated staff with backgrounds in construction companies.

If officers or employees commit financial statement fraud, bribery, harassment, leakage of personal information, insider trading, or other misconduct, there is a risk of criminal penalties, investigations and sanctions by public authorities, loss of credibility, decreased sales, and the incurrence of damages costs. As countermeasures, the company has established the "Cosmos Initia Group Code of Conduct" and provides ongoing training and educational activities, builds internal controls through accounting systems, information security, and internal regulations, and maintains an internal whistleblowing system.