Tokyo Kisen Co., Ltd.

Fuel oil prices fluctuate depending on crude oil market trends, creating a risk of pressure on earnings in the Tugboat Business and Passenger Ship Business segments. As a countermeasure, the Company conducts deferred hedge transactions for fuel oil prices covering approximately 30% of annual consumption; however, the risk of supply disruption from oil-producing countries due to the materialization of geopolitical risks remains.

Geopolitical risks such as conflicts occurring around the world may render crude oil supply from oil-producing countries impossible, potentially disrupting vessel operations. The Company strives to ensure supply chain stability by procuring from multiple suppliers, but complete elimination of this risk is difficult. In addition, there are risks such as the impact of rising steel prices on newbuilding vessel costs, and procurement risk of ingredients and merchandise in the Passenger Ship Business.

In the Tugboat Business, in addition to the risk of physical damage to the Company's own vessels and human casualties, there is a risk that the Company's own operations could be a cause of marine accidents, resulting in liability. Specifically, this includes collisions, damage to quay walls, marine pollution from fuel oil or crude oil spills, and marine disasters involving vessels handling hazardous materials. As countermeasures, the Company is strengthening its integrated HSEQ system and establishing and improving advanced skills training programs.

A slowdown in the Japanese economy caused by factors such as economic conditions, natural disasters, and the spread of infectious diseases could reduce the number of vessels entering and leaving Japanese ports, thereby reducing the number of tugboat jobs. There is also a risk of decreased tugboat usage due to changes in various regulations related to vessel operations. Since these risks stem from changes in the external environment that are beyond the Company's control, they present a challenging aspect to address.

While maintaining a 365-day, 24-hour tugboat operation system is a social mission, there is a risk that large-scale natural disasters could make it difficult to secure dispatch operation personnel, render offices physically unusable, or cause IT system outages leading to functional failure. As countermeasures, the Company deploys personnel experienced in dispatch operations on a temporary basis, maintains operation systems across multiple locations, and strengthens IT backup systems; going forward, the Company plans to formulate a more detailed BCP.

If a cyberattack causes an IT system failure, there is a risk that it could disrupt the execution of operational tasks in the Tugboat Business. In the Passenger Ship Business, damage to the reservation system could result in the leakage of personal information. Although the Company has implemented countermeasures such as the use of dedicated lines and firewalls, it has not been able to completely eliminate this risk.

The spread of infectious diseases and similar factors could impair human and physical resources, making it difficult to maintain the tugboat operation system. As countermeasures, the Company has implemented restrictions on contact among crew members, divided dispatch operation personnel into multiple teams, and established onshore support systems across multiple locations. In addition, the subsidiary T-KOS Corporation has obtained a seafarer dispatch business license, facilitating mutual sharing of crew members. The Company is also considering expanding the use of flextime systems, remote work, and video conferencing.

In the operation of car ferries and sightseeing boats, the Company faces risks related to accidents involving loss of life and marine pollution. As with the Tugboat Business, strengthening the HSEQ system is required; however, given the nature of a business carrying passengers, the social impact and legal liability in the event of an accident are particularly significant.

There is a risk that changes in various regulations related to vessel operations could reduce the use of tugboats. Regulatory changes are a factor beyond the Company's control, and if relaxation of tugboat obligation requirements at ports occurs, it could have a direct impact on the Tugboat Business's net sales.

Across the multiple vessels operated by the Company Group, there is a risk that securing and reallocating crew members could become a challenge in the event of an infectious disease outbreak or other emergency. The subsidiary T-KOS Corporation has obtained a seafarer dispatch business license and established a system for mutual crew sharing within the Group; however, continued strengthening of human resource management and governance systems across the Group as a whole is necessary.