Nagoya Railroad Co., Ltd.

A massive earthquake along the Nankai Trough or similar event could cause significant damage to facilities and equipment across a wide range of businesses, including the Railway Business and Real Estate Business. While the Group is taking preventive measures such as implementing seismic reinforcement work and formulating BCPs for large-scale disasters, if damage occurs, it could materially affect operating results and financial position. Given the business characteristics centered on the Chubu region, the risk of regional concentration is high.

If an infectious disease such as a new strain of influenza or COVID-19 spreads on a large scale, revenues could be affected across a wide range of segments, particularly the Transportation Business, Leisure & Service Business, and Distribution Business. During the past COVID-19 pandemic, passenger demand declined significantly, and there is a risk of broad-based impact despite the Group's diversified business operations.

In the transportation and freight businesses, including the Railway Business, Bus Business, and Trucking Business, if a serious accident occurs due to human error, unforeseen accident, unlawful act such as terrorism, or fire, it could cause damage to facilities and equipment and a decline in social trust, thereby affecting operating results and financial position. Additionally, a loss of trust related to product quality or food safety in the Distribution Business or Leisure & Service Business could also lead to a decline in revenue.

The Transportation Business and Freight & Transport Business consume large amounts of electricity and use diesel fuel and other fuels for operating vehicles and vessels. If energy prices or other raw material costs rise significantly, the resulting cost increases could affect operating results. Since energy prices are influenced by geopolitical risks and international market conditions, they are external factors that are difficult to control.

The Group operates its businesses in accordance with relevant laws and regulations such as the Railway Business Act, the Road Transportation Act, and the Building Standards Act. If legal regulations, including those related to safety and barrier-free access, are strengthened, compliance costs could increase. Conversely, if deregulation occurs, competition with other companies could intensify, potentially affecting the profitability of each business.

The Group continuously makes capital investments across various businesses, including the Railway Business, and raises funds through borrowings and corporate bonds. If market interest rates rise or credit rating agencies downgrade the Group's ratings, funding costs could increase, affecting operating results and financial position. Given the nature of infrastructure businesses, the balance of interest-bearing debt is large, and attention should be paid to the high sensitivity to interest rates.

The Group holds substantial fixed assets and inventory assets, including real estate and securities. If the market value of these assets declines significantly, the recognition of impairment losses or valuation losses could affect operating results and financial position. As the Real Estate Business is one of the Group's main segments, dependence on land price trends is high, and the impact of a market downturn would be substantial.

The Group operates various service businesses centered on the Transportation Business, based in the Chubu region. If the region's economic conditions, consumption trends, and demographic changes, or competition with other operators, worsen at a pace exceeding expectations, this could result in declining profitability. Population decline due to the falling birthrate and aging population, as well as intensifying competition with automobiles and MaaS, pose medium- to long-term risks of demand contraction.

If the Group is unable to secure and develop the human resources necessary to operate its various service businesses, centered on the Transportation Business, and maintain a healthy working environment, this could affect the operations of each business within the Group. Amid a declining working population due to the falling birthrate and worsening labor shortages in the transportation industry, securing crew members and others responsible for safe operations has become a particularly important challenge.

The Group holds personal information in connection with IC card issuance, the Department Store Business, Hotel Business, information processing business, and other operations. In the event of a leak, this could damage social trust and brand image and result in compensation costs, affecting operating results. In addition, if information systems fail or stop due to natural disasters, human error, computer viruses, cyberterrorism, or similar causes, this could disrupt business operations and result in system recovery costs and reduced operating revenue. The Group has established information security policies and personal information protection rules to address these risks, but continued response is required as threats become more sophisticated.