CENTRAL SECURITY PATROLS CO.,LTD.

In conducting its Security Business, the Company is subject to regulations under the Security Services Act, the Construction Business Act, the Motor Truck Transportation Business Act, and other laws, and multiple subsidiaries and affiliates, including Kansai CSP Co., Ltd., are subject to similar regulations. If the Company or any of these entities violates these laws and receives administrative dispositions such as business suspension, it could have a material impact on the performance of the Group as a whole. As a countermeasure, the Company strives to maintain and improve compliance awareness through thorough operational management and employee education.

Due to the nature of security operations, the Company is in a position to be privy to confidential information and personal information of client companies, and if an information leak were to occur, it could damage the Company's reputation and affect its business performance. As a countermeasure, the Company obtained ISMS (ISO/IEC 27001) certification in May 2003, established the "Personal Information Protection Regulations" (revised April 1, 2022) in response to the Personal Information Protection Act enacted in 2005, and further enacted the "CSP Group Information Security Basic Policy" in January 2020 to strengthen the information management system across the Group.

There are 10,674 security companies nationwide (according to the National Police Agency's "Overview of the Security Services Industry in Reiwa 5"), and given the large number of competitors relative to the market size, price competition among industry peers has intensified year by year. Depending on future trends in price competition, the profitability and business performance of the Group may be affected. The Group is in a competitive relationship with these industry peers and is required to continually respond to the competitive environment.

Securing excellent personnel and providing continuous education and training are essential to the continued provision of high-quality security services. However, if the Company is unable to secure the necessary personnel in terms of both quality and quantity due to the declining birth rate, this could affect business continuity. As countermeasures, the Company conducts year-round recruitment activities and employee education using dedicated facilities and dedicated staff, while also promoting diversity, equity & inclusion to expand opportunities for women and aiming to build a workplace environment that is easy to work in.

Advances in IT technology have given rise to new services such as Mechanical Security utilizing image analysis, requiring responses to the obsolescence of existing equipment and devices as well as to the increasing sophistication and severity of crime. In addition, as information networks expand, demand in the cybersecurity field is also growing, and if the Group is slow to respond to these rapid environmental changes, it could affect business performance. The Group addresses these changes through research and development in this technological field.

In the event of a widespread large-scale earthquake, fire, or other disaster, the provision of security services could be impeded by the failure of public communication infrastructure or the disruption of transportation infrastructure. In addition, if alarm equipment (Company assets) installed at client sites is damaged, the Company would be forced to undertake repairs or replacements, which could affect its business performance and financial condition. As a countermeasure, the Company has built a nationwide network with mutual backup functions in Tokyo and Nagano (the Integrated Mechanical Security System S21), and implements response manuals as well as regular education and training.

If an infectious disease such as COVID-19 spreads widely and a large number of security personnel become infected, the Company may be forced to scale back or suspend security services in order to prevent infection among clients. A pandemic of a highly dangerous infectious disease could affect business performance and financial condition. As countermeasures, the Company strives to establish an infection prevention and crisis management system, including the stockpiling of infection prevention supplies, employee education, and the establishment of a system for gathering information from relevant organizations.

The Company integrates and manages signal processing for Mechanical Security services, contract management, billing, and receivables management through its security and core systems, and if a system failure occurs due to a disaster or a program malfunction occurs in connection with a system upgrade, it could affect business performance. The Company undertakes system upgrades from time to time to respond to operational efficiency improvements, diversifying transaction forms, and regulatory changes, and strives to ensure thorough quality control from the development stage through to delivery.

If an employee engages in inappropriate conduct, it could lead to the cancellation or reduction of various services, as well as claims for substantial damages, and could have a significant impact on business performance and financial condition. As countermeasures, the Company regularly conducts compliance education to raise employee awareness, and dispatches directors or auditors from the Company to Group subsidiaries to provide strict guidance and oversight.

Sales to East Japan Railway Company, a major shareholder (holding a 25.5% voting rights ratio), and its group companies totaled ¥20,319 million in the current consolidated fiscal year, accounting for a high dependency of 28.5% of total net sales. If the performance of East Japan Railway Company were to deteriorate significantly, or if there were changes to the partnership relationship based on the "Basic Business Alliance Agreement" concluded in December 1997, it could affect the business performance and financial condition of the Group. The Company intends to continue strengthening this partnership going forward, and the sales ratio is expected to gradually increase.