FAST RETAILING CO., LTD.

If members of management, including Chairman, President and CEO Tadashi Yanai, become unable to perform their duties, or if the company fails to secure key successor talent, there is a possibility of adverse impact on business performance. As countermeasures, the company has established a team-based management execution structure, has management personnel themselves engaged in successor development, and has built a system for recruiting and developing global management talent through specialized educational institutions.

Changes in the political and economic situation in countries where products are manufactured or business is conducted, terrorism or conflict, changes in legal and tax systems, large-scale natural disasters, and outbreaks of infectious disease may adversely affect the production, supply and sales system for products, as well as business performance. The company has established a flexible supply chain response system through diversification of production bases across multiple countries and regions, establishment of local production management offices, and the deployment of accounting, tax, legal and public relations specialists at each location.

Delays in greenhouse gas reduction, the transition to renewable energy, responses to biodiversity, waste reduction, and the shift to a circular business model may lead to a decline in social trust in the brand. There is also a risk that an increase in extreme weather events associated with climate change could adversely affect the entire business, including the product supply system. The company seeks to reduce these risks through initiatives in six priority areas based on its Environmental Policy, diversification of raw material and production factory procurement, and site selection from a BCP (business continuity plan) perspective.

Leakage or loss of confidential information such as customer information and trade secrets, violations of personal information protection regulations including the GDPR, and system outages caused by ransomware and other attacks may result in damages claims, substantial fines, difficulty continuing operations, and a decline in customer trust. The company has established an Information Security Office under the direction of the group-wide CSO, and implements measures such as regulation development, infrastructure strengthening, evaluation of outsourcing partners, regular security enhancement, and phishing drills.

Large-scale disasters such as earthquakes, typhoons, fires, or building collapses occurring in regions where production factories, retail stores, and headquarters offices are located may adversely affect the supply and sales system as well as the management control system. The company is advancing the establishment of an emergency response headquarters structure centered on the Risk Management Committee, the distributed placement of system infrastructure and recovery sites, and the global rollout of crisis management manuals.

Disasters, climate change, and other factors may make it difficult to secure sufficient supplies of raw materials such as cotton, cashmere, and down, and may cause prices to rise sharply, which poses a risk of adverse impact on the product supply system and business performance. The company eliminates dependence on specific suppliers through regional diversification of procurement sources and by promoting transactions with high-quality producers in each region, while also advancing the development of alternative materials.

Occurrences of human rights violations such as forced labor, child labor, and harassment within the group and its supply chain, or delayed response to the strengthening and legislation of supply chain human rights protection regulations mainly in Europe and the United States, may lead to a decline in trust among customers and business partners and adversely affect the product supply and sales system. Under the FR Group Human Rights Policy, the company has established a Human Rights Committee and promotes human rights due diligence, monitoring of supplier factories, operation of a hotline, and the establishment of traceability down to the raw material level.

Risks include reduced management efficiency due to misalignment of values and philosophy with business partners, uncollectible receivables, unintended transactions with antisocial forces, legal violations by business partners, loss, damage or theft of products, as well as the risk of administrative guidance due to insufficient response to the Logistics Efficiency Act effective in 2025 and the Act on Improving Transactions with Specified Wholesale Suppliers effective in January 2026. The company enforces the establishment and adherence to its Business Partner Code of Conduct, conducts credit checks on new business partners, appoints a logistics general manager, and has external specialized institutions conduct regular audits of warehouse operators.

Since each country's business imports a large portion of its products from overseas production factories, sharp fluctuations in settlement currencies may adversely affect the performance of each business, and there is also a risk that financial assets held in various currencies could cause large fluctuations in financial gains and losses due to exchange rate movements against the functional currency, the yen. The company executes forward foreign exchange contracts based on projected purchase amounts, and specific hedging policies such as hedge ratios and periods are discussed and approved by the Board of Directors.

Poor weather, climate change, and changes in consumer behavior in the countries and regions where the company operates may lead to decreased product sales and excess inventory, adversely affecting business performance. The company has established a system for timely collection of product information related to customer needs in the countries and regions where each group business operates, enabling rapid commercialization and production and sales of sufficient quantities, and has adopted a policy of responding flexibly to changes in the business environment.