BIKEN TECHNO CORPORATION

The Group conducts business under a wide range of legal regulations, including the Building Maintenance Management Act (in the building maintenance business), the Building Lots and Buildings Transaction Business Act (in the real estate business), the Long-Term Care Insurance Act (in the nursing care business), the Food Sanitation Act (in the franchise business), and the Hotel Business Act (in the hotel business). Should these regulations be amended or abolished, or should new legal regulations be introduced in the future, the Group's business results and financial condition could be affected. A distinctive feature of this risk is that, due to the Group's diversified business operations, regulatory risk extends across a broad range of areas.

The Group promotes business diversification through affiliated companies, including overseas local subsidiaries, and therefore is also exposed to country risk and foreign exchange risk. Although the Group thoroughly manages the progress of each affiliated company's business plan and formulates and implements improvement measures when deviations occur, if business performance does not proceed as intended, this could affect the business results and financial condition of the Group as a whole. This risk spans both domestic and overseas affiliated companies, making the complexity of management particularly high.

During the more than three years of the COVID-19 pandemic, the impact on the Group's business results and financial condition was limited; however, the possibility of a new outbreak of infectious disease, including variant strains, cannot be ruled out going forward. Should an epidemic occur, it could have a significant impact on the overall economic environment and impede the Group's business activities. The Group intends to continue maintaining an adequate risk management framework.

Japan depends on the Middle East for approximately 90% of its crude oil imports, and if problems stemming from international circumstances such as conditions in the Middle East intensify or become prolonged, there is a risk of rising prices and delayed procurement of petroleum-derived raw materials and equipment. Although the Group's business is not in an industry that would be fully impacted, it may be affected directly or indirectly. This is recognized as an important cost management risk amid continued instability in the international situation.

The Company has established a commitment line with a syndicate of banks, which includes collateral restriction clauses and financial covenants. Based on the consolidated financial results for the fiscal year under review, the likelihood of breaching these covenants is judged to be extremely low; however, in the event of a breach, the Company could be required to repay borrowings, posing a risk to its financial condition. Maintaining financial discipline remains an ongoing challenge.

The Group owns real estate held for sale and is currently promoting sales activities; however, if sales do not proceed smoothly due to changes in the economic environment or other factors, business results and financial condition could be affected. Should the real estate market deteriorate or demand decline, there is a risk of valuation losses on inventory of real estate held for sale and delays in the recovery of funds. This is a significant risk directly linked to the profitability of the real estate business.

The Group holds business-use assets such as its head office, sales offices, and real estate for lease, and depending on real estate price trends and profitability, some assets may become subject to impairment. Should an impairment loss be recognized, it would affect the Group's business results and financial condition. It should be noted that the larger the scale of assets held, the greater the potential impact of impairment risk.