THE ROYAL HOTEL, LIMITED

The Group, which operates primarily in accommodation, banquets, weddings, and restaurants, is susceptible to fluctuations in consumer trends and corporate earnings, as well as deteriorating international relations, terrorism, natural disasters, and epidemics. In the past, this risk has actually materialized, including the Great East Japan Earthquake of 2011, the deterioration of Japan-Korea relations in 2019, and the outbreak of COVID-19 in 2020. In response, the Group has established a Risk Management Committee and put in place countermeasure manuals, BCPs (business continuity plans), and a system for setting up a disaster response headquarters in the event of an emergency.

For the Group, which provides meals and sells food products, food poisoning incidents or mislabeling of origin or ingredients could damage its reputation and affect business performance. In recent years, several incidents have occurred that required disclosure and notification to authorities, demonstrating an actual track record of this risk materializing. The Group has established a Safety and Sanitation Management Office, which has prepared sanitation management manuals and conducts regular sanitation inspections and menu labeling checks to thoroughly ensure compliance with the Food Sanitation Act, the JAS Act, the Act against Unjustifiable Premiums and Misleading Representations, and other relevant laws.

The Group holds personal information of customers and others, and any leakage of such information could damage its reputation and affect business performance. In line with the intent of the Act on the Protection of Personal Information, the Group is strengthening its management system through the development of internal regulations, enhancement of information system security, and thorough employee training. The Group has also taken out insurance to prepare for any impact on business performance.

As the Group employs many part-time employees, increases in social insurance premium rates or changes in laws related to labor conditions could increase personnel expenses and affect business performance. In recent years, various insurance premium rates have been on an upward trend, and this has already had a certain impact. In response, the Group has designated "reform of personnel management" as one of its key strategies, promoting improved employee motivation and better working environments.

The Group owns a considerable amount of fixed assets for business use, and damage or deterioration of facilities due to disasters such as fires, typhoons, and earthquakes could affect business performance. In 2018, Typhoon No. 21 actually caused building damage requiring repairs. The Group promotes planned inspection and repair of buildings and equipment, as well as disaster prevention construction work such as seismic reinforcement, while also taking out insurance to prepare for any impact on business performance.

The Group owns a considerable amount of fixed assets for business use, and future trends in land prices or deteriorating profitability could result in impairment losses that affect business performance. In the fiscal year under review, the Group recorded an impairment loss on the asset group of a hotel in Shinjuku-ku, Tokyo, by writing down the book value to its recoverable amount. The Group carefully assesses asset value at the time of capital investment planning and strives to record only fixed assets for which sufficient future cash flows are expected.

The Group operates hotels across Japan, and the performance trends of individual hotels that have received investments or loans could affect the Group's business performance. As signs of recovery from the impact of COVID-19 have been observed, this risk is currently recognized as not high. The Group thoroughly provides operational guidance to individual hotels that have received investments or loans and strives to improve their performance.