Of matters concerning the Group's operating results and financial position, etc., those that could have a significant impact on investors' decisions are as follows.

Forward-looking statements in the text are the Group's judgments as of the end of the fiscal year under review, and actual results, etc. may differ from these forecasts.

Risks that are assumed to have a significant impact on management

In the Basic Regulations on Risk Management, the Group has defined seven individual risks (investment risks, financial and capital risks, personnel and labor risks, legal and compliance risks, IT strategy risks/ digital strategy risks, information security risks and crisis management risks) as events that could interfere with the achievement of management targets of the Group companies. We recognize a significant new risk in climate change, which is a risk with high significance.

In addition, in the GROUP VISION 2030, the Group has identified opportunities and risks for six materialities the Group has defined and related significant risks.

Materialities Major opportunities and risks
(○ opportunities, ● risks)
Major fluctuating factors Significant risks
Create a variety of lifestyles. ○Integration of all lifestyle scenes
●Mismatch with consumer needs
  • Economic trends, real estate market conditions
  • Competitor trends
  • Financial market (interest rates, share prices)
  • Consumer attitudes

Investment risks

Financial and capital risks

Create well-being communities and lifestyles. ○Increasing importance of community creation
○Growing needs for disaster readiness and disaster damage reduction
●Subordination in competition between cities
●Decreasing value due to insufficient asset maintenance and management
Create the sustainable environment. ○Growing needs to respond to the decarbonized and recycling-oriented society
●Escalation of climate change and natural disasters
●Increasing costs due to stronger environmental restrictions, etc.
  • Transition risks: Tighter legal regulations including carbon tax
  • Physical risks: An impact on the operation of facilities due to damage to buildings and rising temperatures

Climate change risks

Create value in the digital era. ○Increasing importance of utilizing customer contact points
●Appearance of disruptors to existing businesses
  • Trends of digital technology and companies, etc.

IT strategy risks

Digital strategy risks

Create an organizational climate under which diverse human capital is enlivened. ○Emergence of innovation due to diverse human capital
●Intensifying competition in the human capital acquisition market
  • Securing and cultivation of human capital
  • Long working hours

Personnel and labor risks

Create governance to accelerate growth. ○Strengthening of relationships with stakeholders by improving transparency
●Losses and a decline in confidence due to legal violations and defects in security systems
  • Cynberattacks
  • Defects in safety measures and BCP
  • Improper conduct and legal violation by officers and employees
  • Effectiveness of the Board of Directors

Information security risks

Crisis management risks

Legal and compliance risks

The timing and degree of the possibility that these risks surface and the quantitative details of the impact of these risks on the Group's operating results and financial position, etc. in cases where they do surface are not stated here because it is difficult to reasonably foresee them.

Our view of these risks is as follows.

(i) Investment risks

In the Urban Development business and the strategic investment business segments, which are asset-utilizing businesses that involve investment among the Group's businesses, tend to be susceptible to factors such as economic trends, corporate earnings, personal consumption trends, real estate market conditions and the competitive environment in Japan and overseas, policy changes by the government and the Bank of Japan, and the situation in business areas, particularly central Tokyo, and these factors could result in a fall in profit margins, a decline in profitability in individual businesses and a fall in the value of assets held.
The Group Corporate Planning Department of the Company is in charge of these risks and manages the risk amount by calculating and continuously monitoring the VaR after defining risks factors for each asset for investment.

(ii) Financial and capital risks

The Group raises funds for the development of real estate through equity, borrowings from financial institutions and the issuing of bonds. If interest rates rise sharply or if share prices fall markedly in the future, it could have a significant impact on operating results and financial position, etc.

With regard to financing from financial institutions, etc., we work to minimize the impact on operating results in the event of a future rise in interest rates by ensuring that most interest-bearing debt is long-term borrowings and fixing most interest rates for loans other than certain project financing in light of financial conditions to mitigate the impact of fluctuations in interest rates. At the end of the fiscal year under review, the ratio of long-term borrowings to interest-bearing debt and the ratio of fixed interest rates are 97.0% and 93.6%, respectively. In addition, the Group Finance Department of the Company is in charge of financing and conducts a trend analysis of the financial market and the quantitative simulation of an impact of rising interest rates on the Company.

In terms of equity, the Group Finance Department conducts a trend analysis of the capital market and provides feedback to the Board of Directors, etc. on the details of dialogues with shareholders and investors in IR activities to continuously ensure the appropriate share price of the Company.

(iii) Climate change risks

Based on the Environmental Vision established in 1998, the Group is stepping up its environmental initiatives on an ongoing basis through its business activities and recognizes climate change, above all, as an important issue. Transition risks and physical risks in climate change could have an impact on the Group's business. As transition risks, changes in policy trends such as tighter legal regulations including carbon tax, falling demand, and reputational damage to companies that are unable to respond to a low-carbon society are expected. As physical risks, the impact of declining snowfalls due to global warming on the operation of ski resorts and increasing costs due to damage to buildings and longer construction periods caused by the escalation of abnormal weather are expected. These risks could have an adverse impact on business.

The Corporate Sustainability Office of the Group Corporate Planning Department of the Company is in charge of these risks and deals with them on a Group-wide basis in cooperation with business departments. The Sustainability Committee deliberates and discusses details of initiatives and reports them to the Board of Directors as needed. In addition, the Company announced its support for the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in 2019 and has been participating in the TCFD Consortium, an organization in Japan that discusses TCFD initiatives. In terms of risks and opportunities of climate change for its business, the Company investigates multiple scenarios for climate change assuming rises in the average global temperature of 1.5°C, 3°C and 4°C.

Verifying multiple scenarios for climate change risks and business opportunities based on recommendations by the Task Force on Climate-related Financial Disclosures (TCFD)

In addition, in the GROUP VISION2030, the Company has positioned environmental management as the Group policy. As a target for climate change, the Group will aim to achieve its own carbon minus, which means that the Group's CO2 emissions are less than the volume of CO2 emissions reductions achieved by the renewable energy business, a strength of the Group. Moreover, in May 2021, the Group has also acquired SBT certification of the 1.5°C level, the first developers in Japan to do so. The Group aims to reduce CO2 emissions by 46.2% from the level in FY2019 by FY2030, with the aim of reducing CO2 emissions by the high level required for the 1.5°C target, which was considered to be a non-binding target in the Paris Agreement.

(iv) IT strategy risks/ digital strategy risks

The IT environment surrounding the Group and society is evolving rapidly, and if the Group is unable to respond appropriately and promptly to technological innovations and changes in customer demand, it could have an impact on the Group's operating results and financial position, etc.

The Group IT Strategy Department and the Digital Transformation Promotion Department of the Company are in charge of these risks, and they examine the possibility of application of new technologies to each business.

In addition, in the GROUP VISION2030, the Company has positioned DX as the Group policy and promotes the following three measures. First, in the operation process, the Group will work on a shift to creative operations by promoting labor saving, including the digitalization of workflow and process automation. In CX (customer experience), the Group will work on impressive experience creation through advances in customer contact points, including the integration of online and offline (so-called OMO (Online-Merge-Offline)). In innovation, the Group will work on new value creation by utilizing intellectual assets. Through these efforts, the Group will strive to transform its business with digital technology. We believe that the Group will be able to provide new added value by working on DX, given that it has abundant contact points with customers because it engages in many BtoC businesses. We will promote DX to transform the BtoC businesses into our strength.

(v) Personnel and labor risks

The Group recognizes highly specialized personnel as one of its strengths. However, if we are unable to secure and cultivate human capital on an ongoing basis due to recent changes in the social structure such as the declining birthrate and aging population, it could become a major factor to inhibit the growth of the Group.

In charge of these risks, the Group Human Resources Department of the Company aims to create a company that will be selected by its employees with measures in response to their diverse workstyles, such as telework and the work-from-home system, in addition to the reduction of long working hours and the encouragement of taking paid leave. In recognition of these initiatives, the Company was selected by the 2021 Health & Productivity Stock Selection program, in which the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange select listed companies that think about the health of their employees from a management perspective and take strategic measures in that regard, for the second consecutive year.

In the GROUP VISION2030, human capital and organizational climate are considered to be one of the themes to strengthen the management base. Human capital and organizational climate are capital that is the most important to realize the transformation and growth of the Group but are invisible externally, and we will aim to foster an innovative organizational climate with a sense of unity by inheriting the founding spirit of “Challenge-oriented DNA.”

(vi) Information security risks

The Group handles large volumes of personal information of customers in the Urban Development business, the Property Management & Operation business and the Real Estate Agents business segments. If an information leak occurs due to a cyberattack or the act of a Group employee, it could result in a decline in the social credibility and brand image of the Group and could have an impact on the Group's operating results and financial position, etc.

The Group General Administration Department and the Group IT Strategy Department of the Company are in change of these risks, and they take steps to strengthen information systems through security measures and improve the literacy of employees by providing training including an exercise to deal with targeted e-mail attacks.

(vii) Crisis management risks

If an earthquake, a storm, a flood or any other natural disaster occurs in Japan or overseas, if an act of terrorism, an accident, a fire, an infectious disease or any other human disaster occurs, if an environmental problem or a defect in real estate is discovered, or if population change accelerates markedly, a dispute could occur in relation to damage to assets held or the fulfillment of compensation obligations, etc., and this could have an impact on the Group's business performance and financial position, etc.

In charge of these risks, the Group General Administration Department of the Company will work to minimize the impact by taking safety measures that will become necessary when a disaster occurs, developing BCP and providing training as preparation for disasters.

Since the previous fiscal year, the COVID-19 pandemic has been having a significant impact on the Company's business performance. In response to requests from the government and local governments, the Group is making efforts to prevent the spread of COVID-19, such as the temporary closing or reduction in operating hours of commercial facilities, facilities and retail stores and the introduction of a work-from-home system for employees.

(viii) Legal and compliance risks

If a situation that violates laws and regulations occurs as a result of the Group's employee or business activity, or if the payment of compensation for damages incurred becomes necessary, it could result in a fall in the social credibility and the brand image of the Group and could have an impact on the Group's operating results and financial position, etc.

In charge of these risks, the Group Legal Affairs Department of the Company strives to fully enforce compliance management by building a compliance system at each Group company, including the formulation and promotion of an activity plan (compliance program) to realize compliance. Specifically, the Department strives to make compliance fully known to all officers and employees of the Tokyu Fudosan Holdings Group by establishing the Tokyu Fudosan Holdings Group Code of Conduct that will become the standards of behavior for them, developing the Tokyu Fudosan Holdings Group Compliance Manual as a specific manual to understand and practice the Code of Conduct, and providing training periodically.

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