ENSHU TRUCK CO.,LTD.

Due to the increase in transactions related to internet mail-order sales, transactions with a specific business partner account for 20% or more of operating revenue. If there is a change or termination of the contract terms with this business partner, or a drastic change in the business environment occurs, this could have a material impact on business performance. The Company is working to avoid this risk by expanding the scope of handled operations through the enhancement of logistics services.

A rise in diesel fuel prices due to soaring crude oil prices directly increases transportation costs, including fuel and lubricant expenses. Although the Company addresses this through the collection of fuel surcharges and the promotion of centralized purchasing and eco-driving, business performance may deteriorate if the increase in costs cannot be passed on through freight rates.

The Company continuously makes capital investments for vehicle replacement and the construction or renewal of warehouse facilities, and funds required for these are procured mainly through external borrowings. While borrowings are mainly at fixed interest rates, the portion procured at variable interest rates is affected by interest rate increases, which may raise future fund procurement costs.

Given the nature of the Logistics Business and the real estate business, etc., the Company holds a large amount of fixed assets. If there is a decline in the market value of held assets or a decrease in profitability, impairment losses may occur, affecting the financial position and business results.

The Company operates businesses based on permits and registrations from the Minister of Land, Infrastructure, Transport and Tourism, etc., such as the general freight motor transport business and warehousing business, and is affected by environmental and safety regulations such as exhaust gas regulations. Increased regulatory tightening accompanying the transition to a low-carbon society may increase human and financial burdens, and in the event that the Company violates regulations and is subject to business suspension or revocation of permits, there is a risk that it will become difficult to continue business operations.

The Company's main operational base is located in a region where the possibility of the Tokai earthquake has been mentioned, and there is a risk that warehouses, vehicles, roads, and communication networks could suffer significant damage due to large-scale earthquakes, tsunamis, storm and flood damage, or fires. This could result in the temporary suspension of business, reduction or termination of transactions, decreased employee safety, and an increased burden of disaster countermeasures. Although the Company has taken measures such as formulating a BCP and conducting disaster prevention drills, if damage exceeds expectations, it could have a material impact on business performance.

Although business offices are dispersed from the Kanto to Kansai regions to diversify risk, if an unknown infectious disease such as a novel influenza or COVID-19 spreads on a scale exceeding expectations, there is a possibility that business activities of the Company and its business partners could be suspended or face difficulty in continuing. There are concerns regarding the impact on business results and financial condition.

In the course of receiving logistics business outsourcing, the Company handles various information of its business partners, and if an information leak occurs, there is a risk of being subject to substantial claims for damages. The Company addresses this through the establishment of a privacy policy, thorough information management education, continuous security measures through outsourcing to external experts, and the acquisition of liability insurance, but the risk of loss of social trust remains.

The majority of operations rely on systems, and if a system failure caused by a natural disaster, virus intrusion, unauthorized access, etc. becomes prolonged, it may cause significant disruption to operations. The Company is working to reduce this risk through the use of data centers, and is proceeding with the reconstruction of its core system in anticipation of diversified business development and an increase in the volume of information.

As the Company operates a large number of vehicles daily, if a serious traffic accident occurs, business performance may be affected by loss of social trust, substantial claims for damages, and administrative dispositions such as business suspension. In addition, if compliance violations by officers or employees occur, this could have a material impact on business activities and may require restatement of financial statements. The Company addresses this through the establishment of corporate conduct guidelines and a monitoring system by the Internal Audit Office and the Internal Control Committee.