OPTIMUS GROUP COMPANY LIMITED

Geopolitical issues such as Russia's invasion of Ukraine, conflicts in the Middle East, and the US-China confrontation may lead to soaring energy prices and transportation costs, as well as global logistics disruptions. New sanctions and legal regulations arising from each country's economic security policies, along with social changes, could affect the business over the medium to long term. The Group continuously monitors global political and economic conditions as well as regulatory trends, striving to build a system capable of early detection and rapid response.

The Group positions Australia and New Zealand as the two pillars of its business, with overseas operations accounting for over 80% of consolidated net sales. Should the economic conditions in either country change drastically, this could significantly impact business performance. In particular, as new vehicle sales and vehicle transport are rapidly expanding in Australia, the risk associated with fluctuations in that country's economy is increasing. The Group is working to reduce its dependence on these two countries and diversify its revenue sources by developing new markets such as Europe.

Since overseas sales account for over 80% of net sales, exchange rate fluctuations upon conversion into yen constantly affect the financial results. In addition, since much of the Group's borrowings are at variable interest rates, and the auto loan business sets lending rates at fixed rates, fluctuations in market interest rates directly affect the interest margin income from fundraising and lending. The Group strives to mitigate this impact through foreign exchange hedging tailored to sales scale and currency, utilization of local procurement, and improved capital efficiency through CMS (Cash Management System).

Demand may decline due to a decrease in the number of vehicles owned resulting from lifestyle changes and diversification of transportation means, as well as a shrinking customer base caused by reduced immigrant inflows in Australia and New Zealand. On the supply side, since most used vehicles for New Zealand are sourced from domestic auto auctions in Japan, there is a risk that securing the necessary vehicles will become difficult due to a decrease in the number of vehicles listed or intensified procurement competition. The Group addresses this by diversifying procurement routes beyond auto auctions and diversifying into peripheral businesses (logistics, inspection, data services, finance, etc.).

There is a risk that traditional dealer-based commerce could shrink due to the spread of new sales channels such as electronic transactions. In addition, rapid advances in energy technologies such as autonomous driving and EVs may reduce the commercial value of used vehicles with conventional internal combustion engines. The Group is promoting business diversification, viewing these changes as business opportunities, by strengthening its data services and media businesses and introducing new technologies in the Inspection segment.

Materialization of geopolitical risks or global logistics disruptions could make it difficult to secure the necessary vessel space, hindering vehicle transport as scheduled. Rising freight costs due to higher fuel prices or tight vessel supply-demand, as well as port facilities becoming unusable due to natural disasters, strikes, or congestion, could also affect business continuity. The Group addresses this by maintaining good relationships with major shipping companies, strengthening ties with multiple shipping companies, diversifying transport methods, formulating BCPs, and considering hub logistics methods utilizing nearby ports.

There is a risk that inspection technology may fail to keep pace with the increasing electronic sophistication of automotive equipment, and unpredictable events such as unexpected pest outbreaks and spread may make it difficult to maintain high-level inspection quality due to technical and cost constraints. The Group has obtained ISO/IEC 17020 accreditation from IANZ and also operates as a registered inspection body under Japan's Ministry of Agriculture, Forestry and Fisheries; any loss of this reliability would directly affect the business foundation. The Group strives to maintain quality through inspection technology innovation, equipment upgrades, patent acquisition for heat treatment facilities (in 7 countries including Japan, Australia, and New Zealand), and adaptation to OBD inspections.

Used vehicle exports are subject to regulations under the Foreign Exchange and Foreign Trade Act and the Export Trade Control Order, among others, and there is a risk of tightened regulations due to amendments, new enactments, or changes in interpretation of laws, or of criminal penalties, administrative dispositions, or revocation of permits/licenses due to violations. In transactions with numerous stakeholders both domestically and internationally, the occurrence of significant litigation or legal proceedings resulting in an unfavorable ruling could lead to loss of social credibility and substantial compensation burdens. The Group positions compliance as a fundamental management policy, thoroughly monitoring legal and regulatory trends through domestic and overseas legal advisors and conducting officer and employee training.

There is a risk that cyberattacks by malicious third parties or system failures could cause business systems to malfunction. In addition, if confidential information or personal information belonging to business partners, among other information assets, is leaked or destroyed, the business could be constrained by enormous compensation burdens, loss of social credibility, criminal penalties, or revocation of permits/licenses. The Group has established various regulations such as information system operation management rules and an information security policy, and implements multi-layered measures including unauthorized intrusion detection, automatic backups, and officer and employee training.

It may become difficult to secure personnel with advanced expertise and experience, such as skilled buyers (Import & Export segment) and certified inspectors (Inspection segment), due to competition not only with competitors but also across various other fields. If the necessary personnel cannot be sufficiently secured, this could disrupt business operations in each domestic and overseas business area. The Group is working to secure and develop human resources by expanding recruitment channels, promoting retention through improved working environments, introducing personnel systems that emphasize motivation, and enhancing training programs.