Chuo Warehouse Co.,Ltd.

Cargo handling volumes may decline due to the effects of domestic and overseas economic trends, and customer companies' management decisions, logistics rationalization, and business restructuring, resulting in a contraction of the market for major cargo handled. As countermeasures, the Company seeks to diversify risk by handling cargo across a wide range of industries and items in a broad area, and strives to reduce risk by changing the cargo composition in light of environmental issues.

When launching new businesses, there is a risk that profit margins may decline due to upfront investment in facilities and equipment, or that expected sales may not materialize, or that substantial costs may be incurred due to abrupt changes in the business environment or unforeseen circumstances. If progress does not proceed as planned, there is a possibility that recovery of the investment will be delayed or become impossible, affecting business results. As a countermeasure, the Company conducts multifaceted risk verification through investigations by outside experts and deliberation at the Nomination, Remuneration and Governance Committee and the Board of Directors, while being mindful of the cost of capital.

Amendments to relevant laws and regulations or changes in systems may result in increased compliance costs or changes in business strategy. In addition, if the Company fails to comply with regulations, there is a risk of receiving dispositions, fines, or surcharges from regulatory authorities, resulting in loss of credibility and adverse effects on business results. As a countermeasure, the Company has established various regulations for monitoring amendments to laws and systems, and has developed a system to identify information at an early stage and respond with a sufficient preparation period.

In M&A and business alliances aimed at expanding business scale and strengthening competitiveness, if significant changes occur in the business environment after acquisition or if risks of the target company that could not initially be anticipated materialize, there is a possibility that progress will not proceed as planned in the business plan, resulting in impairment of goodwill and affecting business results. As a countermeasure, the Company conducts thorough prior deliberation, including with outside experts, and due diligence on financial details and contractual terms.

If facilities and other assets are damaged or social infrastructure is disrupted due to natural disasters such as earthquakes and typhoons, or fires and accidents, it may become difficult to carry out normal business operations. In addition, as climate change progresses, an increase and intensification of disasters caused by abnormal weather is anticipated, and the cost of responding to environmental management may also increase. As countermeasures, the Company is formulating business continuity plans, conducting evacuation drills, concluding mutual cooperation agreements in the event of a disaster with Yasuda Warehouse and others, disclosing information based on TCFD recommendations, and setting CO2 emission reduction targets and installing solar power generation equipment, among other measures.

In addition to the chronic labor shortage in the logistics industry, the declining population and progressing low birthrate and aging society are expected to further intensify the labor shortage, potentially making it difficult to stably secure and develop personnel with advanced skills and experience, as well as information systems personnel to support DX initiatives. As countermeasures, the Company is promoting recruitment activities not bound by timing, work-style reform through digitalization and labor-saving in operations, improvement of the working environment, and the development of an environment in which diverse personnel can thrive through revisions to the personnel system.

External cyber attacks such as ransomware are becoming increasingly sophisticated and elaborate day by day, and if personal information or business-related information held by the Company is leaked externally or data is lost, this may result in loss of credibility and damages, affecting business results. As countermeasures, the Company has formulated an information security policy, established a dual defense system through the installation of UTM equipment and introduction of antivirus software, developed a monitoring and detection system in anticipation of cyber attacks, and continuously conducts information security training and targeted attack email drills for group officers and employees.

Amid the need to renew the platform (OS, hardware, etc.) supporting the core system, if migration to the next-generation core system platform is not carried out properly and causes disruption to the use of the core system, or if progress does not proceed according to schedule, it may become difficult to carry out business operations, affecting business results. As a countermeasure, the Company has launched a project team headed by the Representative Director, President and Executive Officer, and is working to assign leaders who can oversee the entire project and to secure highly specialized personnel.

With respect to tangible fixed assets used in business operations, such as warehouses and land, if the recovery of the invested amount becomes unlikely due to a decline in the market value of assets or a decline in profitability, an impairment loss may be recorded, affecting business results. As a countermeasure, the Company strictly verifies the appropriateness of prices and future income and expenditure for significant capital investments at the Board of Directors, and works to optimize cargo composition, rates, and staffing through monthly management performance management at each business office.

If internal controls cannot be sufficiently established and maintained due to an increase in subsidiaries through M&A or business expansion, there is a risk that the Company may be unable to obtain an audit report from the audit firm due to the occurrence of fraudulent accounting practices, among other issues. This may result in loss of social credibility, response costs, and claims for damages from shareholders, affecting business results. As a countermeasure, the Company has established regulations for the management of subsidiaries, whereby the parent company is involved in establishing regulations, accounting policies, and information security, and works to properly establish and apply internal controls by having parent company officers and employees seconded to or concurrently serving as officers of subsidiaries.