Risk Management

Basic Concept

For risk management, the Company is committed to realizing business policies and taking measures to eliminate as much as possible every risk that may occur in the course of its corporate activities. It aims to ensure the safety and benefit of all stakeholders and aims for a swift response and recovery at times of emergency.

Promotional Framework of Risk Management

The Company established its fundamental policies on risk management measures and responses towards risks surrounding its business in the Risk Management Regulations. Also, the Risk Management Committee was established as a company-wide organization under the direct control of the President to conduct risk management on a company-wide basis, based on these regulations.
The committee takes charge of matters including integrated risk management, compilation of response policies, and maintenance and updating of the BCP. It convenes regularly and reports on its activities to the President, as well as the Management Meeting and the Board of Directors if necessary.
In addition, the process for identifying, evaluating, and managing risks related to sustainability issues is shared with the Sustainability Committee to integrate the risk management system on a company-wide basis.

Protecting Personal Information

The Company acquires personal information through legal and fair means, and utilizes it only to the extent necessary for its operations, such as business activities, exercise of shareholder rights, and performance of obligations. Personal information obtained is managed strictly and safely, in accordance with regulations stipulated by the Company. We take the necessary and rational measures against unauthorized access from outside and other frauds including leakage, loss, or fabrication of personal information. In case of entrusting personal information to external parties, we strictly supervise and manage the handling of personal information by such trustees.

Measures for major risks

Classification		Description of the risk	Status of risk response
Operating risk	Land and building rental business	Possibility that lower rents and higher vacancy rates may affect the Company's business results due to the impact of economic trends, performance of tenant companies, and fluctuations in building supply and demand Possibility that the business results may fluctuate significantly due to a large amount of real estate acquisition tax or registration license tax at the time of real estate acquisition being recorded as an expense	Minimizing the impact of market fluctuations by developing business with diversified asset types
	Regional concentration	Possibility that the business results may be significantly affected by a large-scale disaster and fluctuations in the supply and demand trends for real estate leasing in the Osaka area due to the concentration of properties in the Kansai area (particularly in Osaka)	More investments outside the Kansai area, mainly in the Tokyo metropolitan area, to reduce the regional concentration risk
	Dependence on specific clients	Possibility that the Company's business results may be impacted by the performance of three clients that provide over 10% of all net sales	Diversify our tenants through development and acquisition of new properties Offering appropriate services and building stronger relationships with tenants in order to reduce risks of major tenants moving out and to maintain and improve our fee levels
	Fluctuation in resource prices	Possibility of increase in operating costs due to higher rates of electricity Possibility of increase in development costs due to higher prices of building materials	Gather appropriate information and disclose the impact
Disaster risk	Natural disasters and man-made disasters	Possibility that our customers, buildings and facilities may be damaged and the business results and financial condition may also be affected (in the event of a large-scale natural disaster, such as an earthquake, windstorm or flooding, or a man-made disaster, such as fire or a terrorist attack)	Renewing our buildings to become compatible with business continuity measures. Strengthening resilience through developing BCP and holding drills.
Disaster risk	Spread of infectious disease	Possibility that the economy may deteriorate and the Company's business results may be adversely affected by the spread of new infectious diseases Possibility that the business activities may be negatively affected by the spread of infection within the Company, which is a disadvantage of a company managed by a small number of staff	Maintaining the health and safety of employees by revising work regulations including on remote work and taking infection prevention measures
Climate change risk	Transition risk	Possibility of increase in costs and tax burden in response to stricter energy conservation regulations and the introduction of a carbon tax	Strengthening efforts to promote energy savings. Introduction of renewable energy.
Climate change risk	Physical risk	Possibility that our customers, buildings and facilities may be damaged and the business results and financial condition may also be affected due to intensification of windstorm or flooding	Reducing the risk of submersion by relocating critical facilities to upper floors and installing flood-control panels Strengthening resilience through preventive maintenance, developing BCP, and holding drills.
Financial risk	Fluctuation in asset values	Possibility that impairment losses may be recognized in the event of a fall in market prices of our assets (such as land, buildings, and investment securities)	Working to prevent profitability decline such as by reshuffling properties and increasing their value. Examining investment securities individually on an annual basis at the Board of Directors Meeting as well as selling securities that are deemed to have little significance.
	Dependency on interest- bearing debt	Possibility of rising interest rates for interest-bearing debts	Leveraging the current low interest environment to reduce and fix the interest rates. Prolonging the average repayment period.
	Amendments to laws, regulations, and tax systems	Possibility that any changes to the laws and regulations related to real estate and construction may restrict the execution of operations in the building lease business and building management business and affect the business results Possibility that changes in tax and accounting systems may affect the Company's business results and financial condition	Gathering appropriate information on related laws, regulations, tax systems, and accounting systems, and disclosing the impact, although it is difficult to avoid the risks
Compliance risk	Violation of laws,regulations,etc.	Loss of social credibility and restrictions on business activities due to compliance violations	Selecting compliance committee members from various departments and regularly verifying the status of initiatives in the departments Using the Compliance Committee to disseminate information on compliance with laws, regulations, etc. through training sessions and other means
Information risk	Information security	Possibility of leakage of information related to our corporate activities and business operations, as well as personal information, through unauthorized access from outside and other frauds Possibility that cyberattacks on in-house systems may disrupt business operations	Implementing security measures to prevent unauthorized access, etc. Asking external parties entrusted with the handling of personal information to disclose the purpose of use and the handling of personal information, and strictly supervising and managing such trustees Establishing an information security management system and conducting training on the handling of information

Risks	Description of the risk	Status of risk response
Natural disasters, man-made disasters, etc.	The Company's buildings and facilities may be damaged and its business results and financial condition may also be affected in the event of a large-scale natural disaster, such as an earthquake, windstorm or flooding, sudden accident, or a man-made disaster, such as fire or a terrorist attack.	As a measure to mitigate these risks, the Company has been renewing its buildings to incorporate BCP measures. Furthermore, not just new buildings, but existing buildings are being transformed to structures that can withstand disasters, and the preparation and training for BCP measures are carried out for the implementation, in an effort to control the effects that such risks may have on business results and financial condition.
Building lease business	Lease business, such as rental buildings, tends to be easily affected by economic trends, corporate performance, and fluctuations in building supply and demand. There is the risk of our business results being affected by a fall in lease fees and a rise in vacancy rate. Any real estate acquisition tax or registration license tax imposed on real estate acquisition is expensed when incurred. Therefore, there is a possibility that the business results will fluctuate greatly due to expenses incurred in the event that the Company acquires large amounts of real estate.	As the Company's leasing business covers a variety of properties including office buildings, datacenter buildings, WINS buildings, and commercial buildings and logistics warehouses, the impact of market fluctuations is comparatively small. We will continue to promote balanced development of these four leasing businesses while reducing risks by focusing on medium- to long-term profitability in new investments.
Business developments in the Osaka area	Our leasing properties are focused in the Kansai Region (particularly in Osaka). Sales for the building lease business in Osaka showed a high ratio during the fiscal year ended March 2021, at 79.4%. Consequently, there is a possibility that the Company's business results will be impacted by a large-scale disaster, such as an earthquake, and fluctuations in the supply and demand trends for real estate leasing in the Osaka area.	As we have noted in our Mid-Term Business Plan, we are vigorously promoting investments in the Tokyo metropolitan area to reduce risks that may occur from excessive business concentration in the Kansai Region.
The level of dependence on specific clients	The Company has three clients that provide over 10% of all net sales. The performance of these clients may have a significant impact on the Company's business.	We will strive to diversify our tenants by actively attracting tenants to vacant properties in existing buildings and through development and acquisition of new buildings. Furthermore, we aim to reduce risks of current tenants moving out, and maintain and improve our fee standards. To this end, we will continue to offer appropriate services and build stronger relationships with tenants.
Fluctuation in asset values	In the event of a fall in market prices or profitability of our assets (such as land, buildings, investment securities), there is a possibility that the Company's business results will be affected by fixed asset impairment losses and processing based on financial instruments accounting.	We are striving to minimize the impact of a fall in market prices through distribution of regional portfolio and investments with a focus on location. Furthermore, we will work to prevent profitability decline such as by reshuffling assets and increasing their value. Every year, investment securities are individually examined at the Board of Directors' Meeting from both a quantitative and qualitative point of view, and sales are considered for securities that are deemed to have little significance.
Spread of infectious disease	The situation remains uncertain regarding when and how the COVID-19 pandemic will come to an end. Since we rent various properties such as office buildings, datacenter buildings, WINS buildings, and commercial buildings and logistics warehouses at fixed rents, we are aware that fluctuations in market conditions have relatively little impact on our business performance. However, if the pandemic continues for a prolonged period, the worsened economy could adversely affect the Company's business results.	We have a small number of employees, and most of them work at the head office. While this contributes to our efficient business, personal damage to our employees and others, in the event of an outbreak of infectious diseases, may negatively affect the Company's business activities. We are striving to maintain the health and safety of employees by promoting flexible workstyles such as working from home and commuting at different hours, by installing non-contact temperature cameras and panels for preventing droplet infection in our offices, and by encouraging them to take thorough general infection prevention measures such as hand washing and alcohol disinfection.
Dependency on interest-bearing debt	The Company has promoted development and acquisition of leasing properties with an aim to expand and stabilize its business foundation. However, much of the funds for construction and acquisitions are procured by loans from financial institutions or bond issues. Although most of the interest-bearing debts have a fixed interest rate, there is still a possibility of the Company's business results being impacted by fluctuations in interest rates in regards to loan renewals and new future investments.	We will take advantage of the current low interest environment to reduce the average procurement interest rate for interest-bearing debts. We are also taking measures to prolong the average repayment period to benefit from the merits of the low interest rates for longer periods of time.
Amendments to laws, regulations, and tax systems	In addition to the mainstay building lease business, the Company offers other services that accompany the core business, such as building management and construction contracting. Therefore, the Company's business is required to comply with laws and regulations, such as those related to real estate and construction. Any changes to these laws and regulations may impact the Company's business and performance. Furthermore, related tax system changes may affect the Company's business results and financial condition.	We strive to constantly gather information on revisions in related laws, regulations and tax systems, and implement appropriate measures.