SUNDRUG CO.,LTD.

In dispensing operations conducted across 249 stores, there is a possibility of facing litigation or administrative sanctions due to defects or errors in dispensed medications. This could affect business performance through a decline in social credibility. The company is working to mitigate this risk by installing audit check cameras, considering the introduction of dispensing robots, and enrolling all stores in pharmacy liability insurance.

Dispensing fees and prices of prescription pharmaceuticals are set by law, and future revisions could directly affect business performance. This represents a structural risk in which the revenue structure is susceptible to changes in the system. The company is working to reduce costs and maintain profit margins by promoting low-cost operations utilizing digital technology, AI, and IoT.

The majority of products handled are procured from wholesalers and manufacturers, and fluctuations in purchase prices could affect net sales and gross profit. As a countermeasure against market fluctuations, the company is working to mitigate risk by strengthening new product development of private brand products, including high-value-added products and low-priced functional products.

In the event of a natural disaster such as a major earthquake, an unforeseen accident or crime, or a pandemic of a novel virus or bacterial infection, business operations could be disrupted due to human and physical damage at the head office, stores, and distribution centers, or due to supply chain disruptions, potentially affecting business performance. The company conducts regular annual training and drills based on its

In addition to aggressive store openings by other drugstore companies, competition with other industries could lead to a decrease in the number of customers visiting stores and a decline in average purchase price. In addition, competition for properties may lead to soaring rents, and a shortage of properties meeting strict store opening criteria may result in changes to the planned number of new store openings, which could affect performance forecasts. The company is working to improve profitability by strengthening its M&A and new store opening strategy, improving the precision of its merchandising policy, and enhancing sales promotion measures.

In store lease agreements, the company deposits or lends security deposits, guarantee deposits, construction cooperation funds, and the like to lessors, and there is a possibility that recovery of such funds could become difficult due to bankruptcy or other events affecting the lessor. The company works to avoid this risk by establishing collateral rights and gathering information on the financial condition of lessors.

The company may record goodwill in connection with business expansion through the acquisition of shares or equity interests, business alliances, and the like, and if the acquired business fails to generate the profits initially planned, this could affect business performance and financial condition, including through impairment of goodwill. The company works to reduce this risk through third-party evaluations, thorough prior due diligence, the formulation of detailed business plans, and regular monitoring after implementation.

Amendments to various laws and regulations, including the Act on Pharmaceuticals and Medical Devices, could affect store operations. In addition, if further deregulation proceeds following the lifting of the ban on online sales of over-the-counter drugs, competition with other industries could intensify, potentially affecting business plans and performance. The company addresses this through the enhancement of personnel training programs aimed at responding swiftly to legal revisions.

The Act on Pharmaceuticals and Medical Devices requires that a pharmacist or registered sales clerk be stationed at each store, and against the backdrop of aggressive store openings by competitors, recruitment competition has intensified, leading to continued increases in recruitment costs. If qualified personnel cannot be secured, this could affect store opening plans and impede growth, and even if such personnel are secured, rising personnel costs could affect business performance. The company is working to secure personnel and mitigate risk by developing diverse work arrangements and enhancing training programs to promote the acquisition of qualifications, as well as systems providing time for exam preparation.

The company manages customer information from its point card system, patient information related to dispensing operations, and employee information, among other data, using computer systems, and in the event of an information leak, this could affect business performance through a decline in social credibility. The company addresses this risk by establishing an information management system based on the Act on the Protection of Personal Information, monitoring by the Business Audit Office, conducting regular training, and confirming the status of measures at the Compliance and Risk Management Committee.