Business Risks

The Group promotes its business after grasping and analyzing assumed risks in the real estate development business mainly in the Group Management Meeting and taking countermeasures beforehand. However, when a delay in business schedule or increase in costs, etc. occurs due to bad weather, natural disasters, delay in approval and permission, soil contamination or buried objects being found, or other unforeseen events, the Group's operating results, financial position, etc. may be impacted.

The Group constantly monitors and analyzes the cost trends in each business, paying close attention to the impact on profitability. However, if there is a significant and rapid fluctuation in prices and the increase in costs cannot necessarily be reflected in rents or sales prices, the Group's operating results, financial position, etc. may be impacted.

While the Group constantly monitors and analyzes domestic and international economic trends and real estate market conditions and closely monitors the impact on its operations, the Group's operating results and financial position may be affected by rapid or drastic fluctuations in economic conditions or market conditions resulting in a decline in office needs due to deteriorating corporate performance in the rental office market, a decline in customers' willingness to purchase condominiums in the condominium market, or a decline in investment demand in the real estate investment market.

The Group has conducted stable fund procurement centering on interest-bearing debt in the form of long-term borrowings and has fixed interest rates for almost all long-term borrowings to minimize the impact of interest rate fluctuation. However, when interest rates rise, the Group's operating results as well as its financial position, etc. may be impacted and the value of assets owned by the Group may decrease.

The Group holds marketable shares in other companies that are deemed to help increase corporate value in the medium to long term through maintaining and strengthening business relationships as those for other purposes than pure investment (strategic shareholdings). Individual strategic shares are appropriately managed toward their reduction based on the "Corporate Governance Code (Principle 1-4)" by reporting their actual transactions and others periodically to the Board of Directors and assessing whether continuing to hold them is appropriate. However, when the market price of shares falls and the value of owned shares falls significantly, for instance, the Group's operating results, financial position, etc. may be impacted.

The Group believes that the intensification of policies and regulations related to climate change, as well as the increased frequency and severity of extreme weather events, could potentially impact the Group's business operations. Through discussions at the Sustainability Committee chaired by the Company's President & Chief Executive Officer, the Company has endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and has conducted scenario analysis in accordance with the recommendations of the TCFD to identify climate change risks and opportunities, evaluate their materiality, and examine their impact on the Group's business profit. Following this, we have set targets related to the promotion of a decarbonized society - one of our identified materialities - and we are engaged in efforts to achieve these targets. However, should there be further intensification of policies and regulations due to climate change in the future, the Group's operating results, financial position, etc. may be impacted.

The Group takes business continuity measures in cases of emergency, such as establishment of various regulations and manuals as well as implementation of periodic training in preparation for earthquakes, rainstorms, flooding and other natural disasters as well as wars, riots, terrorism and other man-made disasters. However, when natural or man-made disasters or such occur, business activities may be impacted as employees may suffer damage and the value of assets owned, managed or operated by the Group may decrease. Accordingly, the Group's operating results, financial position, etc. may be impacted.

The Group handles an enormous amount of personal and other confidential information in various businesses. Thus, the Group appropriately manages information by establishing informational management rules and information system management rules as well as by reinforcing systems to manage documents, data, etc. It further makes specific efforts, including enhancing security for information devices on both tangible and intangible fronts and conducting training to prepare for a potential information security risk while obtaining cyber insurance as needed. However, when information leakage outside the Group occurs due to cyberattacks, negligence of the Group's officers and employees, etc., the loss of social credibility of the Group, occurrence of compensation for damage, etc. may impact the Group's operating results, financial position, etc.

The Group conducts business activities under legal regulations including the Companies Act, the Financial Instruments and Exchange Act, the Labor Standards Act, the Real Estate Brokerage Act and the Building Standards Act. The Group has further established a legal compliance structure based on the "Compliance Charter" and the "Compliance Rules" and provides education such as periodic training to the Group and its officers and employees. However, if the Group and its officers and employees violate laws, regulations, etc., the loss of social credibility of the Group, imposition of fines and penalties, etc. may impact the Group's operating results, financial position, etc.

The Group's businesses are affected by regulations including ordinances, tax systems, etc. set forth by local governments as well as by laws and regulations. Accordingly, the Group promotes business after collecting information from relevant authorities, industry groups, professionals, etc. in a timely manner and takes appropriate measures. However, when relevant laws and regulations, ordinances, tax systems, etc. are established, revised, etc. in the future, this may impact the Group's operating results, financial position, etc. due to the newly arising obligations, increase in cost burden, restriction on rights, etc., possibly leading to a decrease in the value of assets owned by the Group. Furthermore, when a difference arises in views of tax reporting with tax authorities, the Group's operating results, financial position, etc. may be impacted.

The Group operates in China, Southeast Asia, and the United States based on "Growth in Overseas Businesses," one of the key strategies spelled out in the Group's Medium-Term Business Plan. In conducting business overseas, it strives to collect necessary and appropriate information through partnerships with local entities that are well-versed in the political or economic climate and laws and regulations in the respective countries or regions where it operates. However, if a project is halted, a schedule is delayed or costs increase due to the deterioration of political or economic conditions, any change of laws and regulations, and worsening security, to name but a few, in the countries where we operate, it may impact the Group's operating results, financial position, etc.