TANSEISHA CO.,LTD.

Economic deterioration may lead client companies to curb investment, resulting in decreased demand for store openings and renovations as well as exhibition- and event-related demand, with direct impacts including postponement, scaling-down, or cancellation of projects. A decline in demand for public facility development due to worsening local government finances, as well as increased receivables collection risk associated with deteriorating client performance, are also anticipated. As countermeasures, the Company is building a cross-organizational system to consolidate and analyze market trends by sector, and is working to diversify demand fluctuation risk through the creation of new businesses.

If the Company fails to appropriately respond to changes in consumer preferences and values, as well as shifts in consumption behavior and economic activity driven by the penetration of digital technology, the value provided to clients may decline, leading to lost order opportunities and damage to credibility. In particular, the digital shift has a wide-ranging and significant impact, and the Company positions its response to changing needs regarding "space" as a critical issue that must not be mishandled. As countermeasures, the Company is promoting the establishment of dedicated teams and R&D facilities, as well as co-creation with external companies, to create new spatial experiences that combine real-space know-how with digital technology.

In a competitive environment involving diverse competitors of varying business types and scale, intensified competition amid shrinking demand, the emergence of unexpected new competitors, and stronger cost-reduction demands from clients could lead to price competition and deteriorating profitability. If declines in selling prices exceed cost reductions, profitability may deteriorate and the Company's sales base may be eroded. As countermeasures, the Company is working to establish competitive advantage by improving its ability to accurately capture changes in customer and societal needs, and by continuously strengthening added value.

If procurement prices for external resources such as raw materials, supplies, labor, and services rise sharply, or if procurement becomes difficult due to economic conditions, resource shortages, changes in various regulations, or large-scale disasters, and such increases cannot be passed on to selling prices, profit margins may decline. If alternative products or alternative procurement sources cannot be secured during procurement difficulties, delays in production or construction for contracted projects and delivery delays may occur, potentially resulting in failure to fulfill contractual obligations and losses such as compensation payments. As a countermeasure, the Company is strengthening its procurement base by closely collaborating with partner companies through its partnership program.

The occurrence of a major earthquake, intensified wind and flood damage, or widespread spread of infectious disease could cause a combination of disruptions such as lifeline outages, interruption of the flow of people and goods, economic stagnation, and soaring resource prices, potentially significantly hindering smooth business continuity. Human asset losses such as employee health damage or loss of life are also anticipated. As countermeasures, the Company operates its Business Continuity Plan (BCP), maintains a group-wide safety confirmation system in constant operation, conducts evacuation and initial response drills, transfers risk through insurance, and carries forward infectious disease countermeasure guidelines based on experience from the COVID-19 pandemic.

If deficiencies or defects in design or production content cause injury or health impairment to facility users or operating personnel, economic losses such as damages, litigation costs, and corrective action costs may arise, along with damage to social credibility and lost business opportunities due to legal liability. As countermeasures, the Company implements defect prevention at the design stage based on its "Sustainable Design Guidelines," maintains an advisory and corrective guidance system through a dedicated quality and safety management department, and holds regular safety and health committee meetings.

Fires, explosions, or accidents at production factories or construction sites, as well as traffic accidents during transportation, could threaten the safety and health of workers, construction personnel, and facility users, and may cause interruptions to production or construction, resulting in delivery delays, failure to fulfill contractual obligations, and economic losses such as compensation, penalties, and remanufacturing costs. As countermeasures, the Company conducts various safety and quality management activities based on its "Safety and Health Policy" and "Quality Policy," holds joint "Safety Conventions" with partner companies, and works to raise safety awareness across the entire supply chain.

The Company's core "space-creation" business requires a construction business license under the Construction Business Act as a key requirement for its establishment, and is also subject to the Building Standards Act, the Architects Act, the Fire Service Act, and other regulations, requiring management effort to meet standards such as fulfilling required numbers of qualified personnel. If the Company unintentionally violates such regulations, legal sanctions could damage credibility and restrict or limit business operations, potentially resulting in reduced earnings. As countermeasures, the Company promotes employee qualification acquisition through its qualification support program, continuously conducts compliance education and training, and operates an internal whistleblowing system.

Given the nature of the "space-creation" business, which relies on creative added value, situations may arise in which third-party copyrights, design rights, trademark rights, portrait rights, or publicity rights are alleged to have been infringed due to negligence or differences in perception. If infringement is established, economic losses such as litigation costs and damages may result, along with additional costs from changes to design or construction content and lost order opportunities due to damaged credibility. As countermeasures, the Company explicitly states respect for intellectual property rights in its "Tanseisha Group Code of Conduct" and "Procurement Policy," conducts regular training, and maintains close collaboration with specialists such as lawyers and patent attorneys.

Given the nature of the business, which holds confidential information such as unannounced products and store opening plans as well as large volumes of personal information, data leakage or loss due to negligence or accidents, as well as information theft or damage from cyberattacks or unauthorized access, could result in economic losses such as litigation, damages, and response costs, as well as reduced earnings due to damaged credibility. The Company recognizes that the risk of information incidents has increased with the rise of telework and online meetings. As countermeasures, the Company operates a personal information protection management system certified with the Privacy Mark, implements organizational, human, and physical measures based on its "Information Security Policy," conducts vulnerability testing, and transfers risk through insurance.