Business Risks

The Group’s business requires the ongoing allocation of human resources aligned with customer segments and preferences, as well as the recruitment, placement, and development of talent suited to its evolving strategies.

In recent years, shifts in lifestyle, the casualization of fashion, and the expansion of online purchasing have required companies to adopt new sales approaches—such as increasing the share of e-commerce and strengthening digital marketing—and to offer product assortments and merchandising strategies that reflect rapidly changing trends.

To respond effectively, the Group must develop new business domains and secure talent with expertise in marketing, IT, and digital technologies. At the same time, due to demographic changes, increasing labor shortages, and rising labor costs, securing store personnel has become increasingly challenging.

Failure to appropriately allocate, recruit, and develop human resources, or unexpected employee turnover, could adversely affect the execution of store development plans, business strategies, and the achievement of the Group’s long-term vision.

Countermeasures
The Group is working to attract and retain talent aligned with evolving business needs by enhancing compensation, strengthening evaluation systems and career pathways, expanding training programs, and improving store operations.

The Group also utilizes a talent management system to centrally manage employee evaluations, career histories, skills, and career aspirations, thereby promoting optimal personnel allocation and enhancing employee engagement. Job rotation programs provide employees with diverse work experience.

To strengthen human resource development, the Group supports employees in pursuing external education and professional certifications. In addition, various leave systems and flexible work arrangements have been introduced to accommodate diverse working styles.

To improve productivity, the Group is also enhancing store operations through the introduction of technologies such as self-checkout systems.

Alignment with Management Strategy
- I. Become the #1 brand for highly sensitive customers’ satisfaction
- II. Spread highly sensitive customers around the world
- III. Create new contact points with highly sensitive customers

The Group procures products from various countries, and many transactions are denominated in foreign currencies. Exchange rate fluctuations—particularly yen depreciation—may increase procurement costs and adversely affect the Group’s business performance.

Countermeasures
The Group mitigates this risk by diversifying production locations to avoid dependence on specific countries. It also adjusts transaction terms with business partners in accordance with foreign exchange trends and appropriately reflects exchange rate impacts in product pricing.

Alignment with Management Strategy
- I. Become the #1 brand for highly sensitive customers’ satisfaction
- II. Spread highly sensitive customers around the world

The Group’s operations are currently centered on the apparel business in Japan, where the market is expected to contract over the long term due to a declining and aging population.

To address changes in customer lifestyles and market conditions, the Group is working to diversify its business portfolio across both apparel and non-apparel domains and to optimize resource allocation.

However, failure to achieve an optimal portfolio—due to insufficient expertise in new business areas or delays in brand development—may negatively impact corporate value and financial performance.

Countermeasures
The Group is promoting the development of new businesses in both apparel and non-apparel segments, while actively leveraging M&A and strategic alliances to acquire expertise and capabilities.

Through market segmentation analysis, the Group identifies growth areas and prioritizes management resources toward high-potential segments—particularly the mid-to-high-end market—while reviewing and optimizing operations in lower-growth areas.

Alignment with Management Strategy
- III. Create new contact points with highly sensitive customers

M&A and alliances are an effective means of expanding the Group’s value proposition amid a shrinking domestic market. However, failure to realize expected synergies or returns from such investments may adversely affect the Group’s corporate value and financial performance.

Countermeasures
The Group establishes rigorous investment criteria and processes, recruits professionals with expertise in M&A, strengthens dedicated organizational functions, and collaborates with external advisors. It also accumulates know-how through post-merger integration (PMI).

Alignment with Management Strategy
- III. Create new contact points with highly sensitive customers

The Group operates subsidiaries both in Japan and overseas, and effective group governance is essential to enhancing overall corporate value while maintaining strategic alignment.

Failure to align the strategies of group companies or differences in local regulations and business practices could hinder synergies and weaken governance and monitoring, thereby negatively impacting corporate value.

Countermeasures
As part of these measures, the Group has established basic policies and a management framework for the oversight of its subsidiaries under the Affiliated Companies Management Regulations, thereby ensuring that appropriate approvals and reporting are carried out for material business matters.
In addition, the Group has developed a management structure that enables effective oversight by seconding directors and auditors from the Company to its subsidiaries. Furthermore, the Internal Audit Department conducts internal audits of major subsidiaries to assess compliance with applicable laws and regulations, the Articles of Incorporation, and the execution of duties in accordance with internal regulations.

Alignment with Management Strategy
- II. Spread highly sensitive customers around the world
- III. Create new contact points with highly sensitive customers

The Group is strengthening its global expansion to further broaden the range of value it provides. In particular, it recognizes Taiwan and China as markets with strong medium- to long-term growth potential, and is working not only to expand new store openings in these markets but also to develop the ASEAN market.
In addition, China and the ASEAN region serve as important production bases for the products offered by the Group.
Under these circumstances, political or economic instability or conflicts in the relevant countries and regions could disrupt employee safety, store operations, and the procurement of raw materials and merchandise, which may adversely affect the Group’s business performance.
Furthermore, rising geopolitical risks, including instability in the Middle East, could lead to increases in energy prices and transportation costs, which may also have an adverse impact on the Group’s performance.

Countermeasures
In response to these risks, the Group will continue to strengthen its information gathering and market research capabilities regarding relevant countries and regions, including developments in the China–Taiwan relationship, while promoting the diversification of production locations to maintain an optimal procurement balance.
In addition, for countries where the Group operates stores, it is advancing the development and dissemination of business continuity plans (BCP). The Group has also established an overseas contingency response manual to ensure the safety of its employees abroad and conducts regular confirmations with local subsidiaries.

Alignment with Management Strategy
- I. Become the #1 brand for highly sensitive customers’ satisfaction
- II. Spread highly sensitive customers around the world

The Group operates a large number of stores primarily in major metropolitan areas in Japan, and its headquarters functions and logistics centers are also concentrated in the Tokyo metropolitan area.
In the event of a large-scale earthquake or other severe natural disaster in these regions, there is a risk of damage to store facilities, suspension of operations, disruption of headquarters functions, and interruptions to supply chains.
If the Group is unable to respond to such events in a timely and appropriate manner, this may adversely affect the Group’s business activities and financial performance.

Countermeasures
In response to these risks, the Group has formulated a Business Continuity Plan (BCP) and contingency response manuals in accordance with its Risk Management and Compliance Regulations, in order to ensure the implementation of measures for prompt recovery.
The Group has also established and strengthened its crisis management framework, and is working to enhance its response capabilities through initiatives such as conducting training in relevant departments.

Alignment with Management Strategy
- I. Become the #1 brand for highly sensitive customers’ satisfaction
- II. Spread highly sensitive customers around the world

The Group is promoting OMO (Online Merges with Offline), which combines physical stores and e-commerce platforms, with the aim of providing highly personalized and accurate services to each customer and enhancing overall customer experience.　
“UA Club,” the Company’s membership program designed to strengthen relationships with customers, has approximately 1.6 million active members and involves the handling of a large volume of personal information. To further enhance the effectiveness of UA Club, the Group also operates its own e-commerce application and website, and many customers utilize both physical stores and the Group’s e-commerce platforms.
While the Group exercises due care in handling personal and other confidential information, in the event that such information is leaked or otherwise compromised due to factors such as computer viruses, cyberattacks, or operational errors by employees or contractors, this could result in damage to the Group’s brand image and the incurrence of legal liabilities, which may adversely affect the Group’s business strategy and financial performance.
Furthermore, if such factors make it difficult to continue operating the logistics networks, information systems, and e-commerce platforms that support the Group’s business activities, delays in product supply may occur, which could also have an adverse impact on the Group’s performance.

Countermeasures
In response to these risks, the Group implements risk management measures and develops highly secure systems in accordance with its Information Security Regulations, in collaboration with specialized security firms, including measures to prevent unauthorized access, protect against computer viruses, safeguard data, and ensure robust user authentication.
In addition, to prevent information leaks from internal sources, the Group has established an Information Security Policy and is committed to ensuring the appropriate management of information. It also provides all employees (including contract employees) with information security training, as well as targeted phishing email simulation exercises.
Furthermore, the Group has established an Information Security Subcommittee within the Risk and Compliance Management Committee—chaired by the President and Representative Director, with executive directors serving as members and outside directors as observers—to facilitate discussions on these risks, including at the management level, and to enable the timely formulation and implementation of countermeasures.
With respect to personal information, the Group has established Personal Information Protection Regulations in accordance with applicable laws, including the Act on the Protection of Personal Information, and is working to build, evaluate, and continuously improve its personal information management framework.
Regarding information infrastructure, the Group is promoting system resilience by implementing cloud-based redundancy for its information systems and e-commerce platforms, while also advancing the development, review, and geographic distribution of its business continuity plans (BCP).

Alignment with Management Strategy
- I. Become the #1 brand for highly sensitive customers’ satisfaction
- II. Spread highly sensitive customers around the world
- III. Create new contact points with highly sensitive customers