KATO SANGYO CO., LTD.

The Group, whose core business is domestic food wholesaling, may be affected in its business performance and financial condition by factors such as sluggish consumption and market contraction due to economic trends and population decline, changes in lifestyles and consumption patterns caused by infectious diseases and other factors, and a decline in competitiveness resulting from intensified industry competition. In response, the Group continuously monitors the business environment and management conditions of each Group company, and strives to maintain stable business performance and a sound financial condition through monitoring by the Board of Directors and other bodies.

If problems concerning safety and quality assurance, including accidental causes, arise in handled products and private-brand products (produced at the company's own food manufacturing plants or by outsourced manufacturers), this could have a material impact on business performance and financial condition. The Group positions food safety, security, and quality improvement as important management issues, and strengthens its quality control system through efforts led by specialized departments, including sharing of regulatory information, thorough freshness management, prevention of accidents, and appropriate labeling.

The Group is subject to laws and regulations such as the Food Sanitation Act, the Food Labeling Act, the Product Liability Act, labor-related laws and regulations, the Act against Delay in Payment of Subcontract Proceeds, and environment-related laws and regulations. If business activities are restricted due to the tightening or revision of these regulations, or due to legal violations, this could affect business performance and financial condition. The Group strives to ensure legal compliance by having specialized departments collect and examine information on legal regulations and by conducting training and guidance as necessary.

The Group, which has sales and logistics facilities nationwide, could be affected in its business performance and financial condition if a large-scale, widespread natural disaster or an infectious disease epidemic exceeding expectations causes temporary closure of facilities or stagnation and delay of business activities, and if recovery is prolonged. The Group formulates and maintains a Business Continuity Plan (BCP) and conducts regular drills, and has established a system to provide operational support from other facilities in the event of localized disasters or disruptions.

The Group has built a network system that centrally manages commercial and logistics information from sales and logistics facilities nationwide at a data center. If a system failure caused by unforeseeable circumstances prevents the core system from operating stably and disrupts business processing, this could affect business performance and financial condition. In addition to performing maintenance and taking appropriate security measures to prevent unauthorized access and virus intrusion, the Group implements measures such as server redundancy and data backups, and conducts regular emergency drills.

The Group has subsidiaries and affiliated companies in Malaysia, Singapore, Vietnam, and China. If business does not proceed as planned due to changes in the political and economic situation of each country, fluctuations in exchange rates, changes in legal regulations, or social and economic disruption caused by natural disasters, terrorism, or infectious diseases, this could affect business performance and financial condition. The Group continuously monitors the business environment and management conditions of each company, mainly through specialized departments and Group employees dispatched locally, and strives to maintain stable business performance through monitoring by the Board of Directors and other bodies.

The Group extends credit to its customers. If a customer's financial condition deteriorates due to a worsening economic situation, changes in consumption trends, or other factors, resulting in delayed collection of receivables, this could affect business performance and financial condition. The Group strives to prevent the occurrence of non-performing receivables by periodically reviewing customer credit classifications and credit transaction limits.

If fixed assets acquired through capital investment, system investment, M&A investment, and other means fail to generate sufficient cash flow due to changes in the business environment or other factors, this could affect business performance and financial condition. The Group strives to reduce this risk by conducting thorough deliberation and review of investment decisions, making formal resolutions through the Board of Directors and other bodies, and subsequently monitoring as necessary.