TOYO TEC CO., LTD.

The Company is subject to various laws and regulations including the Security Services Act, the Construction Business Act, and the Motor Truck Transportation Business Act, and may be subject to administrative sanctions such as business suspension in the event of violations. The building maintenance business and real estate business are also subject to regulations such as labor laws. The Company manages this risk through the "Table of Laws and Rules to be Observed" in its compliance manual and cooperation with its retained legal counsel.

The proportion of sales to financial institutions is high, and cancellations or reductions in store mechanical security, valuables transport security, and ATM management services due to the advance of cashless payments or mergers and consolidations among financial institutions could materially and adversely affect business performance. The Company strives to maintain and expand transactions through the expansion of outsourcing services (such as cash collection operations) received from financial institutions.

The Company depends on Fujitsu Limited for the development and equipment of monitoring center devices for its mechanical security systems, and equipment failures or supply disruptions due to natural disasters or other causes could adversely affect monitoring center operations. The Company addresses this risk through a 24-hours-a-day, 365-days-a-year message notification service agreement with the Fujitsu LCM Center and by duplicating equipment and securing backup units.

In its ATM management business and sales proceeds collection service business, the Company manages cash and deposits as entrusted funds, and there is a risk that advanced funds may become uncollectible due to deterioration in the financial condition of contracted financial institutions or other parties. The Company seeks to mitigate this management risk by conducting credit checks and by flexibly responding to prolonged advance funding periods caused by consecutive holidays and similar factors.

The security business and building maintenance business may be affected by rapid changes in services resulting from the introduction of new technologies such as AI and robotics. The Company has established an Innovation Promotion Department to research and study cutting-edge technologies such as AI and robotics and to plan and promote sales of new products and services, thereby building a service provision framework responsive to technological change.

The Company holds securities such as stocks that are subject to price fluctuation risk, and declines in value could result in valuation losses that adversely affect business performance and financial condition. In addition, the Company holds rental real estate and other properties in its real estate business, which entails risk of fluctuations in real estate value due to economic conditions and other factors. The Company decides whether to hold such assets based on a comprehensive assessment of the economic environment, market conditions, the business performance trends of the holding counterparties, and business relationships.

If personal information such as the names, addresses, and details of secured properties of clients obtained through security service contracts and other means is leaked or disclosed outside the Company, this could adversely affect business performance through damage claims and loss of trust. The Company addresses this risk through the establishment of personal information protection regulations, acquisition of the Privacy Mark, provision of personal information protection training, and enrollment in personal information leakage liability insurance.

There is a risk of system downtime and information leakage resulting from cyber-attacks on various systems, including monitoring systems. The Company has implemented measures such as physically disconnecting monitoring systems from the internet, introducing whitelist-based (OS-protected) terminal protection, promoting migration to cloud environments, and conducting targeted phishing email training.

The security business, building maintenance business, and other operations require the continuous acquisition of personnel, and an inability to secure human resources due to Japan's declining population could affect the Company's ability to sustainably maintain its operations. The Company addresses this risk through active recruitment including alumni hiring and referral hiring, retention measures such as a mentoring system and networking events for younger employees, improvements in working conditions, work-style reforms, and certification as an Excellent Enterprise of Health and Productivity Management (maintained continuously since 2019).

An earthquake, major tsunami, or large-scale power outage of a scale comparable to the Great East Japan Earthquake could disrupt the centralized monitoring system used in mechanical security operations, which relies on communication lines, potentially affecting business performance and business development. The Company seeks to mitigate this risk through the duplication of communication lines and by locating center devices in the cloud or robust data centers, while also formulating a Business Continuity Plan (large-scale earthquake and flood disaster response edition) and conducting regular disaster preparedness drills.