Business Risks

The PARK24 GROUP (hereinafter called “the GROUP”) has defined strategic risks, external environment risks, financial risks, hazard risks, and operational risks as those that may cause physical, economic, or credit losses or disadvantages, and implements appropriate risk management to ensure that the Group can continue its business as a risk-resilient corporate group.
The Risk Management Committee has been established with the President as the chief risk officer and the chief compliance officer who chairperson to oversee the risks of the entire group.
The following is a summary of risks that our group recognizes as having the potential to significantly affect the investment decisions of investors. The following items are based on the judgment of our group as of the end of the current consolidated fiscal year, and since they include predictions about the future, these items may not match reality. In addition, other matters not mentioned below may affect our group.

(1) Risk Associated with the Parking Business in Japan

(i) Contract Cancellation Risk in the Parking Business

In Parking Business Japan, the Group’s core business, the majority of parking facilities are sublease-types, in which the Group does not own land or facilities but leases them from owners of land, parking facilities, and other assets based on lease contracts. If a large number of lease contracts were to be cancelled, the Group's business and operating results could be adversely affected.
Among sublease-type parking facilities, the "Standard" segment, which leases mainly flat lots from landowners, develops small parking facilities, while the "Partner Service" segment, which leases parking spaces for customers attached to facilities, promotes the development of parking facilities that are less likely to be cancelled by collaborating with the Group's other services, thereby stabilizing its business base.

(ii) Risk of Rising Land Prices

Rising land prices may lead to an increase in the willingness of landowners to sell (or cancel) their leases, or to higher rents in the new development phase, which could adversely affect the Group's business and operating results if higher cancellation rates and rents occur.
The Group promotes development in areas where rising land prices have little impact on rents. In the past, rising land prices have not led to higher rents, and the Group will continue to promote development in areas that are less susceptible to rising land prices.

(2) Risk Associated with the Parking Business International

In 2017, the Group brought SECURE PARKING PTY LTD and NATIONAL CAR PARKS LIMITED into the Group and now operates parking businesses in the United Kingdom, Australia, New Zealand, Singapore, Malaysia, and Taiwan.
In the event of unforeseen changes in taxation systems, laws, and regulations in various regions, changes in political and economic factors, social and economic turmoil due to epidemics, market and exchange rate fluctuations beyond the scope of predictions, social and economic turmoil due to outbreaks of terrorism and war, and other changes beyond the scope of prediction, the Group's business and operating results may be adversely affected. By establishing internal controls that enable autonomous compliance with laws and regulations and risk management in each region, and by building an optimal governance structure, the Group is working to detect risks in each region at an early stage and to take concrete and appropriate action before they become apparent.
In the UK, as of the date of submission of the Annual Securities Report, the Company's ownership in NATIONAL CAR PARKS LIMITED is 51%, and the remaining shares are held by Development Bank of Japan Inc. DBJ has the right to sell its ownership interest to the Company under a separate agreement ("put option"), which will become exercisable after November 2025. If DBJ exercises the put option, the financial position may be adversely affected.

(3) Risk Associated with the Mobility Business

(i) Risk Associated with the Safety of Services

In the event of an accident related to vehicle maintenance in mobility vehicles, customer trust in our group and our social reputation may be damaged, and demand for our services may decline immediately after the accident and over the medium-to long-term, adversely affecting our group's business and operating results.
The Group conducts not only statutory inspections but also adequate maintenance in accordance with the Group's standards.

(ii) Risk of Competitor’s Operations

In the mobility business, we are in competition not only with other companies in the industry but also with auto leasing companies, taxi companies, and other companies over quality, price, and service in the personal mobility market, and depending on the situation of other companies, the Group's business and operating results may be adversely affected.
The Group has the majority of shares within the domestic car sharing service market in terms of the number of vehicles and members and provides extremely convenient services. We will continue to enhance our competitive advantage by expanding our scale and enhancing our services.

(iii) Risk of Used Vehicle Market

Although we sell mobility vehicles to the used vehicle market as part of our sales cycle, a sudden change in the used vehicle market could have a negative impact on our group's business and operating results.
The Group has established a department that specializes in handling the sale of vehicles and is working to maximize revenues from the sale of vehicles by closely monitoring trends in the used vehicle market.

(4) Risks related to securing and developing Human Resources

If the Group is unable to secure and develop sufficient human resources with the high level of expertise needed to promote group management and business activities, we may not be able to create services that give us a competitive advantage.
The Group has formulated a human resources strategy to create a virtuous cycle in which each and every one of our diverse human resources works with vitality and enthusiasm to strengthen the organization, thereby leading the Company to the realization of the Group's medium term business strategy and increasing corporate value. In addition, we have set forth our vision for human resources as "human resources who can maximize their individuality, fulfill their expected roles, and continuously enhance their abilities," and we are striving to develop human resources that respect diversity and strengthen our organizational strength as the culmination of such efforts. In addition, to develop human resources to promote group management, we are working to strengthen leadership at the top and middle management levels to promote sustainable corporate growth.

(5) Risk of changes in the Economic Environment

Economic slowdowns worldwide or in specific regions can lead to reduced consumer spending and lower traffic volumes. As a result, demand for parking and mobility services may decline, which may adversely affect the Group's business, operating results, and financial position. In addition, changes in domestic and international economic conditions and trends in interest rates, exchange rates, prices, and other factors could increase the cost of procuring goods, which could adversely affect the Group's business, operating results, and financial position.
The Group will strive to reduce costs across the board in all areas of expenses, while enhancing convenience as an indispensable service to the world. In addition, we are controlling the rise in procurement costs through a wide range of procurement both domestically and internationally, as well as through price negotiations by utilizing economies of scale.

(6) Risk Associated with Legal Restrictions

In conducting its business in Japan, the Group is subject to various legal regulations, including the Parking Law, Road Traffic Law, and Road Transport Law. In addition, the Group is also subject to relevant laws and regulations in operating the overseas business. Changes in these laws, regulations, etc., or the introduction of unforeseen new laws, regulations, etc., could have a negative impact on our group's business performance and financial position.

(7) Human Rights Risk

If human rights violations were to occur not only within the Group, but also in the entire business domain related to our group's business, including our business partners, the Group's social credibility and brand value could be damaged, and the Group's business and operating results could be adversely affected.
The Group has established its "Human Rights Policy" in line with the International Bill of Human Rights (Universal Declaration of Human Rights and International Covenants on Human Rights), the declarations of the International Labor Organization (ILO), and the principles of the United Nations Global Compact. In addition, the Group conducts its business operations in line with the Guiding Principles on Business and Human Rights, and internally conducts human rights-related employee education and awareness activities, periodic monitoring at management-level meetings, and, when necessary, direct confirmation and investigation of external parties involved, etc. In addition, the Group is striving for appropriate management of these risks by directly confirming and investigating external related parties as necessary.

(8) Climate change and Environmental Risks associated with Climate Change

If the progress and spread of next-generation technologies, and the growing environmental awareness of our customers requiring the introduction of Electronic Vehicles (EV) and EV chargers in large numbers progresses, capital investment costs and EV-related specific management costs may increase. Furthermore, if fuel prices rise in the future due to changes in energy demand or other factors, the operating costs of the mobility business may increase, which could adversely affect the Group's business performance and financial position. On the policy and regulatory front, further restrictions on environmental regulations, such as taxation of greenhouse gas emissions, could have a negative impact on the Group's operating results and financial position. In addition, if our efforts to reduce environmental impact are insufficient, our group's social reputation will be damaged, which may adversely affect the Group's business performance and financial position.
With regard to climate change, which is a pressing issue, we are committed to working together with our customers, suppliers, and all other stakeholders by endorsing the Task Force on Climate-related Financial Disclosure (TCFD) and disclosing information to reduce our environmental impact. Information in line with TCFD recommendations is disclosed on the Group's website.

(9) Risk associated with Financial Matters

The Group raises funds for its operations through bank borrowings, bond issues, and other means. In the event of a deterioration in the business environment, turmoil in the financial markets, changes in the tax system, financial policies, or guarantee systems of government financial institutions, or a downgrade of our credit rating, it may become difficult or impossible for us to procure funds on favorable terms, which may increase our fund-raising costs and adversely affect our business performance and financial position. In addition, if the local currency construction of overseas group companies were to be suspended, the Group's operating results and financial position could be adversely affected. In addition, assets and liabilities of overseas group companies denominated in local currencies are converted into yen for the purpose of preparing consolidated financial statements. Therefore, sharp fluctuations in exchange rates may adversely affect the Group's business performance and financial position.
The Company has a policy of limiting risks associated with future interest rate fluctuations and other financing risks by equalizing debt maturities, lengthening debt maturities, and fixing interest rates paid overtime.

(10) Natural Disaster Risks

In the event of damage to parking facilities and mobility vehicles or catastrophic damage to facilities such as management centers due to earthquakes, tsunamis, floods, typhoons, snow, volcanic eruptions, etc., the Group's business, operating results, and financial position could be adversely affected due to difficulties in providing services to customers and large costs incurred for repairment or replacement, etc.
The Group has various business continuity plans (BCPs) in place to prevent or mitigate such damages as well as to diversify the areas where parking and mobility services are deployed.

(11) Risk of spread of infectious diseases

In the event of an epidemic of a serious infectious disease in Japan or overseas, the Group's business may be unable to continue due to restrictions on economic activities, customers refraining from going out, or employees becoming ill, which may have a significant impact on the financial position and business performance of the Group.
The Group is working under guidelines to prevent the spread of infectious diseases. In particular, for the operation of our mobility business, we regularly clean the inside of our vehicles, and we have also installed sterilization products in our vehicles so that customers can sterilize the vehicles. In order to ensure the health and safety of employees at each site, we have established guidelines for office presence rates as appropriate depending on the status of infection spread, and have created a system that allows employees to work flexibly by staggered working hours or working from home etc. We also take necessary measures to prevent the spread of infection and ensure appropriate business operations by using online meetings to avoid unnecessary travel and contact. We have also taken other necessary measures to prevent the spread of infection and ensure appropriate business operations.

(12) Risk of IT Systems

Our group is developing businesses that are highly dependent on ICT systems, such as the provision of services to customers and related operations, and the importance of these systems will increase in the future. In the event of a natural disaster, accident, computer virus, unauthorized access, power supply restrictions, large-scale power outages, malfunction or failure of such systems or communication networks, in addition to making it difficult to maintain business operations, a loss of credibility could adversely affect the Group's business and operating results.
In addition to establishing a code of conduct for the handling of information, etc., the Company is strongly aware of cyber security, and in order to respond to such threats, it has established the "Information System Establishment, Operation and Control Regulations" and built an operation system, which is regularly inspected and improved to ensure security measures and risk management. In addition, to avoid the risks related to natural disasters, the Group ensures the backup function and stable operation of services by decentralizing the areas where our data centers are located.

(13) Risk Associated with the Leak of Customer Information

The Group retains a vast amount of information on its customers, including membership information for the Times CLUB membership point program and Times CAR mobility service, and is required to properly manage such personal information under the Personal Information Protection Law and other similar laws and regulations in overseas countries.
In the event of a large-scale leakage of personal information due to unauthorized access, business negligence, or some other cause, the Group may incur substantial compensation costs and suffer a loss of credibility, which could affect its business performance.
The Group has established a privacy policy, ensuring that information managers are thoroughly informed of the importance of information management through education and training, and takes all conceivable measures for information security, including system countermeasures. In addition, the Group is continuously revising its business procedures and making system modifications in order to eliminate security holes.

(14) Risks Related to Procurement

If the Group's suppliers have problems related to violations of laws and regulations or human rights violations, they may stop supplying our group, delay deliveries, or damage the corporate image of our group as an ordering source, which may adversely affect our group's business and operating results.
In addition to evaluating and selecting suppliers on a case-by-case basis, at the start of a new transaction, the Group stipulates in the basic agreement that the supplier will cooperate with our business activities in line with our procurement guidelines, and after the transaction begins, we strive to ensure stable procurement by strengthening communication with our suppliers through questionnaires.