Business Risks

Among risks that have the possibility of having a significant impact on the operating results, financial position, etc. of the Group, major risks are as follows. In addition, some matters that do not necessarily fall under affecting risk factors are also disclosed from the perspective of proactive information disclosure to investors. Furthermore, the risks indicated below do not cover all the risks associated with the Group. There are other risks which may influence the judgement of investors.
 To enhance corporate value continuously, based on the understanding of such risks and with an aim to avoid their occurrence and work to take accurate measures in the case they arise, the Group strives to continuously monitor and control risks thoroughly by building an appropriate risk management structure.
 Forward-looking statements in the document are the judgement of the Group based on information available as of the end of the fiscal year under review.

*For the Group’s risk management system, please refer to the Risk Management section.

(1) Risks related to COVID-19

The global pandemic of COVID-19 is having a great impact on the economic environment in Japan and abroad. As for the Group’s financial results for the fiscal period year December 2021, it mainly affected our operations, including urban hotels and parking facilities.
 Although Japan’s economic activities are expected to return to normal thanks to progress of vaccination, the growing use of therapies, and other various governmental policies, including economic countermeasures, given that we continue to be forced to address the impact of COVID-19 and watch the effects, including changes in the financial and capital markets, the outlook for the future is expected to remain uncertain. If the pandemic does not end and the economy stagnates or deteriorates, the Group’s operating results, financial position, etc. may be impacted. The same concern is shared with foreign countries in which the Group develops businesses (China and Southeast Asia); if the pandemic does not end and the economy slows down or weakens, it could impact the Group’s operating results, financial position, etc.

(2) Risks related to real estate development

The Group promotes its business after grasping and analyzing assumed risks in the real estate development business mainly in the Group’s 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 items being found, or other unforeseen events, the Group’s operating results, financial position, etc. may be impacted.

(3) Risks related to trends in the real estate market

The Group constantly grasps and analyzes economic conditions and real estate market conditions in Japan and abroad and pays close attention to their impact on its management.
 However, rapid or significant changes in economic conditions or market conditions may reduce demand for offices in the rental office market along with deteriorating corporate performance, may weaken client appetites for purchasing in the residential housing market, or may lower demand for investment in the real estate investment market, etc.
 In such cases, the Group’s operating results, financial position, etc. may be impacted.

(4) Risks related to interest rate fluctuation

The Group has conducted stable fund procurement centering on interest-bearing debt in the form of long-term loans and has fixed interest rates for almost all long-term loans to minimize 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.

(5) Risks related to owned shares

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 or not 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.

(6) Risks related to environmental issues and climate change

The Group formulates policies and strategies for priorities in promoting sustainability at mainly the sustainability committee, including setting a greenhouse gas emission target and reviewing ways to expand the use of renewable energy in real estate it develops or owns. Furthermore, the sustainability promotion council, a subordinate body of the sustainability committee, reviews specific measures to carry them out. It also strives to disclose information, including scenario analysis concerning risks and opportunities future climate change may bring to the Group’s operations through expressing support for the TCFD (Task Force on Climate-related Financial Disclosures), for example. However, when a change in a social or economic environment due to intensified climate change leads to further tightening of laws and regulations on environmental issues, etc., the Group's operating results, financial position, etc. may be impacted.

(7) Risks related to natural disasters and man-made disasters

The Group takes business continuity measures in the case of an 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.

(8) Risks related to information leakage and security

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. Furthermore, it makes specific efforts, including enhancing security for information devices on both the hardware and software 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.

(9) Risks related to legal compliance

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. Further, the Group has 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, when 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.

(10) Risks related to establishment and revision of legislation, the tax system and government policies

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, such 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 of 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.

(11) Country risks related to the Group’s overseas operations

The Group operates in China and Southeast Asia based on the “Growth in Overseas Business,” the priority 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, it may impact the Group’s operating results, financial position, etc.