ARCS COMPANY,LIMITED

The risk that store operations and merchandise procurement and other business activities may be disrupted by major disasters such as earthquakes, tsunamis, typhoons, and torrential rain, as well as fires, in-store accidents, and incidents. Loss of buildings and equipment may also occur, potentially causing serious impact on business continuity. As countermeasures, the company has formulated a business continuity plan (BCP) and disaster prevention manuals, established emergency contact systems, stockpiled emergency supplies and disaster equipment, conducted evacuation drills, and carried out planned renovation work to update store age.

The risk that the spread of infectious diseases and epidemics increases health risks for customers and employees, and that a pandemic could cause serious disruption to store operations. The company addresses this by developing response rules in line with public guidelines, thoroughly implementing infection control measures, gathering information from and coordinating with government agencies, and establishing systems for staff support across headquarters, departments, and stores.

The risk that securing and developing capable human resources becomes difficult due to a shrinking labor force from the declining birthrate and aging population, combined with intensifying competition among companies for talent. Employee turnover further compounds the loss of human resources, potentially affecting the quality of store operations and the ability to execute growth strategies. The company addresses this by establishing policies for improving the internal work environment, promoting diversity and inclusion, diversifying recruitment methods, and enhancing education and training programs.

If workplace health and safety issues such as excessive workloads or harassment occur, this could not only adversely affect the physical and mental health of employees but also damage the company's social credibility and create legal risk. The company addresses this through regular checks on excessive workloads and harassment with information sharing across the group, harassment training for each level of the organization, establishment of a "Harassment Guideline" and "Basic Policy on Customer Harassment Response," and coordination with occupational physicians.

The risk that global economic downturn caused by political instability such as terrorism, war, or conflict, along with surging energy prices and supply chain disruption, adversely affects business performance through rising costs and weakening consumer sentiment. The company addresses this by securing independent merchandise procurement channels at each group company, promoting the introduction of energy-saving equipment and considering diversification of energy procurement, and leveraging information sharing and scale benefits among group companies.

The risk that errors in food labeling or promotional advertising, or product issues such as food poisoning, could lead to reputational damage and damages claims, having a significant impact on brand value and financial condition. The company addresses this through continued awareness-raising via quality assurance promotion newsletters, guidance based on HACCP standards and thorough hygiene management across group companies, and regular checks of labeling rules and their implementation.

The risk that software and equipment defects caused by disasters or power outages, as well as cyberattacks such as computer virus infections, unauthorized access, and leakage or tampering of internal information, could seriously affect business continuity and the protection of customer information. The company addresses this through preventive maintenance management of hardware, monitoring of software operating status, network redundancy and connectivity monitoring, and formulation of various regulations and guidelines on personal information along with employee training.

The risk that sales and profits are squeezed by intensifying competition in the retail industry and changes in customer consumption trends. Fluctuations in interest rates, exchange rates, and stock prices are also factors affecting financial performance. The company addresses this through an area-dominant strategy to secure regional market share, marketing initiatives leveraging customer data, and building a strong financial base while strengthening relationships with financial institutions.

The risk that delays in responding to environment-related initiatives could worsen the fundraising environment and lower stock price levels. A decline in evaluation from ESG investors could lead to an increase in the cost of capital. The company addresses this by formulating a management strategy that emphasizes sustainability, actively disclosing ESG-related information through integrated reports and its website, and strengthening communication with investors.

The risk that delays in responding to legal amendments and stricter regulations, or the occurrence of harassment, social media risk, ties to antisocial forces, or serious misconduct, could lead to legal sanctions, damage to social credibility, and deteriorating business performance. The company addresses this through ongoing employee education and awareness-raising using the Arcs Group Philosophy and compliance newsletters, sharing of risk cases through the Compliance and Risk Management Committee, and coordination with outside experts such as legal counsel and the police.