Sotetsu Holdings,Inc.

Large-scale natural disasters such as earthquakes, typhoons, and heavy rains, as well as global geopolitical risks, infectious disease outbreaks, and terrorism, may cause damage to infrastructure and facilities, business suspension, and increased recovery costs. As these external environmental changes are difficult for the Group to control, the Group seeks to minimize their impact by diversifying business sites and area risk, reviewing its Business Continuity Plan (BCP), and building a system for prompt decision-making and action in emergencies.

If accidents, fires, or explosions occur in railway or bus operations, or if food poisoning, foreign object contamination, or labeling violations occur in the Retail Business, this could have a serious impact on human life and safety, and could adversely affect business continuity due to loss of social credibility. The Group works to prevent recurrence and minimize damage through regular inspections of facilities and equipment, training and audits related to quality and food hygiene management, and strengthening of communication and crisis response systems.

Cyberattacks, information leaks, or large-scale system failures could compromise business continuity and customer data or confidential information, potentially leading to loss of social credibility as well as legal and financial losses. The Group seeks to reduce this risk by strengthening initiatives based on its "Cybersecurity Basic Policy," conducting targeted email attack drills, and fostering employee awareness.

Businesses such as railway, bus, and retail are strongly affected by various laws and public regulations, and if legal regulations are strengthened or significantly changed, flexible business development and fare revisions, among others, could be constrained, impacting business performance and financial condition. The Group addresses this by researching and disseminating the latest developments in relevant laws and regulations internally, and by strengthening compliance training and education.

Deficiencies in corporate governance, delays in risk recognition and response, and the occurrence of fraudulent transactions, bribery, harassment, etc. at Group companies could lead to a decline in corporate credibility, legal liability, and damage to brand value. The Group addresses this through strengthening its management and internal control systems, improving the effectiveness of its internal reporting system (helpline), promoting operations based on its "Human Rights Policy" and "Supply Chain Policy," and conducting compliance training.

A decline in the working-age population leading to labor shortages and recruitment difficulties, loss of personnel and mass resignations, and the discontinuation of skill transfer could make it difficult to stably secure the human resources necessary for business operations, potentially lowering service levels and weakening the momentum of growth strategies. The Group promotes becoming a "workplace of choice" through treatment and work-style reforms, develops human resource development and skill transfer systems, and pursues diverse recruitment measures, including securing external personnel and foreign labor.

Due to the declining birthrate and aging population, technological advancement, and changes in values and lifestyles, existing revenue models and customer segments could change significantly, and if this coincides with failures in new business investments, it could have a major impact on the Group's business performance and growth potential. The Group addresses this by continuously monitoring changes in customer and social needs, promoting timely service and new business creation and initiatives to enhance value along its rail lines, and regularly reviewing its business portfolio.

Due to substantial capital expenditures and redevelopment plans, the Group has a financial structure with a high level of interest-bearing debt, and rising market interest rates or funding costs could affect interest payments and investment returns, potentially leading to a decline in corporate earnings and deterioration of the fundraising environment. The Group seeks to maintain financial soundness by promoting fixed-rate financing for its interest-bearing debt balance to curb variable rate risk, monitoring and hedging interest rate risk, diversifying funding sources and methods, and continuously scrutinizing construction project details.