Japan Transcity Corporation

During downturns in domestic and overseas economic conditions, inventory adjustments and reduced consumption among client companies may lead to a decrease in stored cargo and handling volume in the Warehousing Business, a decrease in container and raw material cargo handling volume in the Port Transportation Business, and a decrease in cargo transport volume in the Land Transportation Business and International Multimodal Transport Business. In addition, demand from shippers for logistics rationalization and intensified competition with other companies in the same industry are expected to worsen earnings. Although there have been cases where the impact of an economic downturn in a specific industry or region was limited due to the wide variety of cargo handled, this risk has the potential to significantly affect the Group's business performance and financial condition.

The Integrated Logistics Business is subject to a wide range of laws and regulations, including the Warehousing Business Act, the Port Transportation Business Act, and other industry-specific laws. If a violation of laws or regulations results in a disposition such as suspension of business, this could lead to a loss of social credibility, damage to the corporate image, and the occurrence of damages liability. Since compliance risks cannot necessarily be fully identified, this could have a significant impact on business performance and financial condition. As countermeasures, the Company has established a Compliance Committee, operates a consultation desk, and has concluded advisory contracts with five law firms nationwide.

If a serious industrial accident occurs in the course of conducting logistics operations, in addition to the occurrence of compensation obligations to employees, the resulting loss of social credibility could have a significant impact on business performance and financial condition. In addition, if employees become infected due to the spread of an infectious disease and are unable to work, this is also expected to affect business performance, financial condition, and cash flows. As countermeasures, a Safety and Quality Group has been established within the Operations Management Department, and thorough safety education, regular patrols, cause investigation, recurrence prevention measures, and regular meetings of the Health and Safety Committee are being implemented.

If logistics facilities such as warehouses are damaged by a large-scale disaster such as an earthquake, fire, or infectious disease outbreak and become unable to operate, this will affect business performance, financial condition, and cash flows. In particular, since management resources are concentrated in the Chubu, Kanto, and Kansai regions, the occurrence of the Tokai earthquake, Tonankai earthquake, a Tokyo metropolitan earthquake, or an earthquake directly beneath the Chubu or Kinki regions is expected to have a significant impact on the Company's management. As countermeasures, the Company has formulated initial response manuals for disasters, implemented seismic reinforcement of facilities, introduced emergency power supply equipment, conducted disaster prevention drills, and carried out planned scrap-and-build of logistics facilities.

Since collateral or credit guarantees are not generally established for trade receivables in ordinary transactions, if it becomes difficult to collect large amounts of trade receivables from customers, this could have a significant impact on business performance, financial condition, and cash flows. In addition, if a fixed-term contract for a logistics center dedicated to a specific major customer is not renewed, there is a risk of deteriorating profitability as well as impairment losses on fixed assets. As countermeasures, the Company has established a Credit Management Committee, manages credit ranks and credit limits based on credit management regulations, and focuses on shortening the collection period for trade receivables and early collection of advances.

The Group has overseas locations in China, Southeast Asia, North and Central America, and Europe, and potential risks exist due to differences in language, legal and tax systems, various regulations, economic and political instability, infrastructure, and business customs. In addition, there are risks of unpredictable events such as the outbreak of infectious diseases, acts of terrorism, and the occurrence of war or conflict, and if these risks materialize, they could have a significant impact on business performance and financial condition. As countermeasures, the International Headquarters serves as the central hub for gathering information within the Group, and the Company works to prevent and avoid risks through the engagement of advisory attorneys and external consultants.

If a serious accident such as a cargo accident, traffic accident, or industrial accident occurs in the course of conducting logistics operations, or if such accidents occur repeatedly, this could have a significant impact on business performance and financial condition due to the occurrence of damages liability to customers and the resulting loss of social credibility. The Group plays a socially important role as part of its customers' supply chains, and the impact of an accident could be far-reaching. As countermeasures, a Quality Control Committee has been established as a standing body to identify and analyze operational risks across logistics operations as a whole and to maintain an appropriate quality control system and processes.

If various systems become unusable for an extended period of time due to natural disasters, computer viruses, unauthorized external intrusion, or other causes, this could significantly hinder the continuity of business activities and have a significant impact on business performance and financial condition. Data linkage with affiliated companies and the operation of management systems are also indispensable, and the stable operation of information systems forms the foundation of business activities. As countermeasures, the Company has placed important information assets in an external data center, implemented multi-stage virus and intrusion countermeasures, duplicated internal networks, backed up important data, established an Information Security Committee, and conducted employee training.