Subaru Enterprise Co., Ltd.

Public works projects account for a very high proportion of net sales. If national and local government fiscal conditions lead to reductions in public works spending, or if bidding competition intensifies due to an increase in competitors, opportunities to secure large-scale contracts such as Road Maintenance and Management Services may decline, potentially leading to decreased sales and surplus personnel. As countermeasures, the Company is working to actively expand sales activities leveraging its track record and experience in maintenance and management operations, improve its comprehensive evaluation scores through thorough safety and quality management, and secure bidding opportunities by strengthening its internal management systems.

The decline in the working population accompanying the progression of an aging society has resulted in a shortage of workers, including engineers, which may hinder the securing of orders and the smooth execution of operations. The Company is addressing this by strengthening the recruitment of engineers, including foreign workers, and by developing personnel with superior technical and management capabilities through encouraging existing employees to obtain qualifications.

In addition to the continued rise in labor unit costs stemming from the labor shortage, expenses such as raw material costs including fuel and various materials and equipment, driven by geopolitical risks, are also on an upward trend, which may put pressure on the profits of the Company Group. The Company is addressing rising prices by appropriately assigning engineers to suitable positions, building an efficient system through cooperation with partner companies, and securing well-developed procurement channels.

In the event of a large-scale natural disaster such as an earthquake, tsunami, or flood, an accident such as a fire, or other social disruption, business activities of the Company Group or its major business partners may be suspended or hindered from continuing, potentially affecting business performance. When such events occur, the Company conducts initial response and safety confirmation based on an internally formulated safety and health management plan, and has established a system in which a local response headquarters is set up while branch offices and headquarters provide rear-line support.

The spread of various infectious diseases may cause a decrease in the number of visitors to food and beverage outlets and the marina in the Leisure Business, temporary rent reductions or exemptions due to poor business performance among tenants in the Real Estate Business, and construction suspensions in the Road-Related Business, potentially leading to decreased sales and bad debt losses from business partners. The Company addresses this through thorough employee health management based on established infection prevention rules and the continuation of infection prevention measures.

The Road-Related Business, the Company's core business, is subject to regulation under the Construction Business Act and related laws, and amendments to laws or the introduction of new legal regulations may affect business performance. The Company has established a system for sharing notices and guidance from various ministries, agencies, and local governments across the entire Group, and strives to ensure thorough legal compliance.

When undertaking various construction projects contracted by private business operators, if the ordering business partner falls into credit distress due to sudden changes in the business environment or other factors, bad debt losses may occur, potentially affecting business performance. The Company strives to avoid this risk by thoroughly managing the creditworthiness of ordering parties and flexibly changing payment terms according to the circumstances.