AZ-COM MARUWA Holdings Inc.

The Group is subject to numerous laws and regulations, including the Trucking Business Act, the Warehousing Business Act, and the Waste Management and Public Cleansing Act. In the event of a legal violation, the Group may face administrative sanctions from regulatory authorities (including revocation of licenses and permits), loss of public trust, and claims for damages. The industrial waste collection and transport license must be renewed every five years, and maintaining licenses and permits is a prerequisite for business continuity. As a countermeasure, the Group provides ongoing education and training based on the "AZ-COM MARUWA Group Charter of Conduct and Code of Conduct."

Given the Group's structure centered on 3PL (comprehensive outsourcing of logistics functions) as its core business, sales tend to be relatively dependent on specific clients. Changes in the business environment, revisions to transaction terms, or contract terminations could have a significant direct impact on business performance. While the Group strives to diversify its client base and maintain favorable business relationships, the high degree of dependence remains a structural risk.

In the trucking business, fuel costs, primarily for diesel, are a major cost component, and fuel prices fluctuate based on global supply and demand trends, including geopolitical risks such as the situation in the Middle East. If cost increases cannot be sufficiently passed on to clients through freight rate negotiations, profitability may decline. While the Group implements measures such as price negotiations with fuel suppliers and the promotion of eco-driving, the risk of price fluctuations due to external factors cannot be entirely eliminated.

The Group conducts transport and delivery operations using numerous business vehicles and employs a large workforce at its distribution centers. In the event of a major accident or serious occupational injury involving loss of life, the Group may face loss of public trust, administrative sanctions, and criminal liability. The Group continuously implements measures such as patrol guidance by safety departments, accident prevention study sessions, guidance from Safety Advice Leaders, and occupational accident prevention projects.

The Group utilizes M&A as one of its growth strategies; however, changes in the business environment, delays in PMI (post-merger integration process), or failure to achieve expected synergies may prevent the Group from achieving the originally anticipated results. While the Group has established processes such as due diligence, thorough deliberation by the investment committee, and board deliberations including outside directors, risks remaining after integration cannot be eliminated.

The Group handles a large volume of important information, including client information and personal data. In the event of external leakage, data loss, or loss of personal information, the Group may face loss of public trust and claims for damages. Cyberattacks such as ransomware attacks that cause prolonged system downtime could also have a significant impact on business performance. As a countermeasure, the Group has newly formulated a "Cyberattack BCP" and has established a system to set up a "Cyberattack Emergency Response Office" in the event of an incident to facilitate early recovery.

The Group continuously carries out large-scale capital investments, such as the construction and expansion of distribution centers, resulting in a structure where costs are incurred in advance of full-scale operation. The Group has proactively acquired construction land, including agricultural land, for the expansion of the Higashi-Saitama Technopolis and other projects; however, delays in obtaining licenses and permits, delays in land acquisition negotiations, or loss of order opportunities may prevent investment recovery from proceeding as planned. The Group seeks to ensure appropriate decision-making through deliberation and review by the investment committee and regular reporting to the Board of Directors.

The Group primarily procures funds for capital investments, such as the expansion of distribution centers, through borrowings from financial institutions. In the event of fluctuations in financial market conditions, rising interest rates, or deteriorating business performance, the terms of fund procurement may worsen, or constraints on fund procurement may arise. While the Group currently maintains favorable relationships with financial institutions, there is a risk that financial leverage will increase due to continued large-scale investment. The Group strives to reduce this risk by diversifying its fund procurement methods.

While securing human resources is necessary to accommodate business expansion, a tight labor market and the outflow of existing employees to other companies may make it difficult to secure and develop personnel as planned. In new graduate recruitment, the Group utilizes internships and an all-recruit system, and strives to improve retention and development through regular interviews, personnel transfers, and enhanced education and training programs; however, the labor shortage across the logistics industry as a whole remains a structural challenge.

In the event of natural disasters or infrastructure failures such as earthquakes, storm and flood damage, fires, or power outages, business activities may be disrupted due to the blockage of transport and delivery routes or the shutdown of logistics systems. There is also a risk that mass infections of influenza, measles, emerging infectious diseases, and the like could halt operations at distribution centers or head office functions. While the Group takes measures such as alternative site arrangements based on BCPs at each business location and the prompt establishment of a "Disaster Response Office," there are limits to the Group's ability to respond to disasters that exceed anticipated scale.