MITSUI-SOKO HOLDINGS Co., Ltd.

Economic downturns in North America, Europe, Japan, China, and Southeast Asia may lead to decreased inventories, reduced regional transportation, reduced international transportation, and declines in freight rates received. In the Real Estate Business, deterioration in the supply-demand balance of the Tokyo metropolitan area office leasing market could also affect earnings. In response, the Group is building a diverse customer portfolio, creating value-added services, and promoting multi-tenancy in major buildings.

The Group is subject to legal regulations in each country where it operates, including those related to warehousing, transportation, trade, antitrust, tax, environment, and climate change, and there is a risk of increased compliance costs and business restrictions in the event of violations. The Group seeks to reduce risk through regular information gathering with external experts and the recruitment and development of specialized personnel.

Against the backdrop of a declining labor population due to Japan's low birthrate and aging population, the use of IoT, AI, and robotics is expanding, and progress in digitalization and the shift toward capital-intensive operations is lowering barriers between industries, increasing the risk of entry by companies from other industries. In response, the Group is strengthening on-site capabilities through standardization and visualization of business processes, promoting labor savings using next-generation technologies, and differentiating itself by proposing solutions through full-spec logistics services.

In international transportation, USD-denominated ocean and air freight rates account for a large portion of sales, so in periods of yen appreciation, sales and profits may decrease. There is also a risk that the yen-translated amounts of assets and profit/loss denominated in local currencies at overseas consolidated subsidiaries may fluctuate due to exchange rate movements. The Group addresses this through matching currencies of foreign-currency-denominated sales and purchases, use of forward exchange contracts, and diversification of translation risk through regional diversification.

Funds for capital expenditures and renewals are primarily raised through external borrowings, and future financing costs may rise due to interest rate fluctuations. The Group addresses this through long-term fixed-rate financing, diversification of funding methods, use of derivatives such as interest rate swaps, and minimizing outstanding external borrowings by improving intra-group capital efficiency.

In addition to the sophistication of systems and expanding external network connectivity, the increasing sophistication of cyber attacks raises the risk of prolonged and severe damage each year, potentially disrupting the stable provision of logistics services. The Group has established a Group-wide CSIRT to strengthen its security infrastructure and incident response system, and has set up a dedicated department at the holding company to continuously conduct response training and education.

The Group holds confidential information of business partners and personal information of customers, and unauthorized disclosure could result in claims for damages, fines or penalties imposed by governments in various countries, and a decline in competitiveness due to loss of trust. The Group strives to prevent information leaks through company-wide measures implemented by the Information Security Committee and continuous inspection of Group-wide systems for early detection of vulnerabilities.

As social demands for ESG response increase amid climate change, environmental issues, and supply chain human rights issues, delayed or insufficient response poses a risk of reputational decline, exclusion from investment targets, and reduced competitiveness. The Group has set KPIs for its eight materiality issues and is promoting initiatives such as climate change response, respect for human rights, DX promotion, and enhanced governance.

Impairment may occur, affecting business performance and financial condition, if the fair value of held assets declines significantly with no expected cash flow, or if the fair value of investment securities declines by 30% or more (for unlisted stocks and similar assets with no market price, if the substantial value declines by 50% or more with no possibility of recovery). The Group conducts qualitative and quantitative monitoring for each held asset from the perspectives of holding purpose and cost of capital, among others.

The syndicated loan agreement includes financial covenants, and a breach could result in the loss of the benefit of the term and adversely affect business performance and financial condition. The Group addresses this through verification of the likelihood of breach at the time of contract execution, continuous monitoring of financial indicators, building a close communication system with financial institutions, and diversifying funding methods.