The Group has established the Risk and Compliance Committee under direct supervision of the Board of Directors, to promote integrated and cross-sectional risk management and compliance, including sustainability related matters, across the Tosei Group. This committee examines the company-wide policy, annual plan and other matters for risk management and compliance. Along with this, it oversees and manages the various risks surrounding the Group's businesses through the implementation of the Risk Management and Compliance Program and assesses the status of risk management and compliance of each group company. The committee is chaired by CFO and Senior Executive Officer who oversees all administrative divisions except the Internal Audit Department.

As a subordinate body of the Committee, the Business Law Liaison Committee, attended by all heads of the operational divisions, are held every month, during which participants are duly made familiar with amendments to laws and regulations. In case of occurrence of a contingency, a natural disaster, etc., a crisis management office directed by the President and CEO as the head will be established to collect information, confirm facts and circumstance, consider and implement countermeasures, and properly disclose information in a timely manner. The Board of Directors receives monthly reports on the results of deliberations and progress of the Risk Compliance Committee, and appropriately supervises the operation and compliance Risk Management System of these committees.

Regarding each Group company, the Company's full-time Directors, Executive Officers in the Administrative Division, members of the Internal Auditing Department, etc. are concurrently appointed as Director or Audit & Supervisory Board Member for each Group company with the remit of monitoring and supervising each Group company's responses to risks. Every month, each Group company reports management conditions and their responses to risks at the meeting of the Board of Directors or pre-Board meeting discussions of the Company, and the Risk Management and Compliance Committee's meeting. Moreover, the response of these Group companies and the results thereof are continuously audited or monitored by the Company's Internal Audit Department, which may also conduct checks using external agencies as necessary, and then the Internal Audit Department reports the results at the Board of Directors' meeting.

Climate Change Risks and Opportunities, which are of particular importance among the company-wide risks and should manage following the framework recommended by the TCFD, are led by the Sustainability Committee under the supervision of the Board of Directors. The Risk and Compliance Committee ensure the integrated Enterprise Risk Management by assisting and supporting the Sustainability Committee in its implementation of various measures.

Tosei has established the Risk and Compliance Committee, which consists of the Executive Officers, heads of each department, officers responsible for risk management and compliance at each Group company, and full-time Audit & Supervisory Board Members (observers), as a body to examine risk and compliance in Tosei Group in a centralized and cross-sectional manner. The committee deliberates on the recognition, analysis and evaluation of risks of each Group company, information gathering and discussion of countermeasures for individual events, and promotion of compliance. According to the "Risk Management and Compliance Program" formulated each fiscal year, we are strengthening our compliance awareness, implementing the PDCA cycle for risk management, and strengthening monitoring.

In order to promote compliance and accurately manage the various risks surrounding our business, the Group formulate and implement a group-wide Risk Management and Compliance Program every fiscal year. This program is approved by the Board of Directors after evaluating the effectiveness and functionality of the risk management process and through discussions by the Risk Management and Compliance Committee. In addition to the Program, Tosei and its Group companies formulate and implement individual programs that take into account the business environment and organizational structure of each company, and regularly report their progress to the Risk and Compliance Committee.

The Group aims to earn trust from stakeholders by drawing up plans and implementing measures even during normal times to address risks that might prevent it from conducting business activities and maintaining and improving corporate value, and by developing a system for minimizing losses.

As for the recognition, analysis and evaluation of risks, in accordance with the Risk Management and Compliance Program formulated at the beginning of each fiscal year; 1. implement a survey to identify about 30 significant risks that have material impacts on the Group's business (once a year), 2. with regard to the external environment, we conduct interviews with major business partners on specified themes in order to monitor real estate market conditions and transaction conditions, and conduct stress tests (twice a year), taking account of the financing status of financial institutions. The results are reported at the Board of Directors' meetings. In addition, at monthly Risk Management and Compliance Committee's meeting, the states of our responses to emerging risks are checked, continuous efforts to gather information on potential risks are made, and the details are reported at the Board of Directors' meeting held each month, in addition to which the outcomes of the responses are monitored by the Internal Audit Department. We have also instructed each Group company to formulate plans for managing risks and promoting compliance in light of each company's business operations, focusing on ensuring that the parent company organization appropriately supports these plans.

The Company has formulated a Business Continuity Plan (BCP) to ensure that, in the event of a natural disaster, incident, accident or other event that forced the Company to suspend its core business operations or that made business activities under the normal organizational / personnel structure difficult, the Group would be able to swiftly implement measures to continue business or resume business quickly.

Recognizing that information asset is one of our most important management resources, we have set out provisions for developing and maintaining information management environments in order to properly protect and efficiently utilize information in the Basic Policy on Information Asset Management, and we have established Information Asset Management Regulations and Personal information Protection Rules. In addition, every fiscal year we implement training for the information asset management, including personal information, and for the prevention of insider trading for all employees of the Company, and by doing so, we have continued to educate and inculcate rules for the handling of important information. In addition, to reduce the risk of information leakage and information isolation due to targeted attack e-mails, etc., we conduct mock drills and network vulnerability assessments by external third-party organizations. Regarding to the state of compliance with rules for the handling of information assets (printed and electronic information), in addition to self-inspections implemented at all departments and audits conducted by the Internal Audit Department, we have strengthened the penalties for breaches and continued targeted guidance for those who infringe the rules.

In FY2023, as in previous years, we conducted mock drills related to targeted e-mail attacks and vulnerability assessments of our internal network by an external third party to reduce the risk of information leaks and information isolation triggered by network crimes which are becoming more complex and sophisticated. Furthermore, as our initiatives for preventing the leakage of important information, we inspected the state of compliance with rules for the handling of information assets and conducted self-inspection on employees' use of social networking services (SNS) with a focus on risks of information leakage caused by the use of SNS and the like, in order to raise employee awareness.

The Group considers compliance to be one of its most important management issues and has established The Tosei Group Ethics Code and The Tosei Group ESG Action Guidelines to be followed by all directors and employees of the Group. We are working to strengthen our compliance by ensuring that all employees are fully aware of the code and guidelines.

The Group has established the Tosei Group Ethics Code, matters to be complied with when employees carry out operational activities, and keeps them informed of and complied with the code through distributing the Tosei Group Risk and Compliance Guidebook and training, etc. In addition, we conduct a questionnaire survey to all directors and employees of the Group annually to assess the degree of penetration of compliance and the Group Philosophy and to regularly check its effectiveness, and revise the code and training programs.

The Tosei Group promotes sound business activities under the Tosei Group Ethics Code, which states ensures compliance with laws and regulations and fair business practices.

The Tosei Group Risk Compliance Guidebook clearly outlines our commitment to fair business practices and compliance with laws and regulations from a global perspective. In addition to compliance with the Anti-Monopoly Act, the Subcontract Act, the Building Lots and Buildings Transaction Business Act, the Financial Instruments and Exchange Act, and other laws, the guidebook specifically outlines actions that impede fair, transparent, and free competition, and strives to foster compliance awareness.

The Tosei Group Ethics Code prohibits bribery or other similar giving or receiving of unfair advantage in any way. All types of activities which lead to corruption such as money laundering and illegal political contributions and donations are prohibited, such as entertaining, gift-giving, and the giving and receiving of cash or a cash equivalent to customers or business partners for the purpose of offering undue or improper advantage or enjoying preferential treatment.

The Group established the Tosei Hot Line as a whistleblowing hot line, which Group officers and employees (including those who have been retired for less than one year, advisors, temporary staff) can use to report any identified breaches of the Tosei Group Ethics Code or identified breaches or potential breaches of laws and regulations including corrupt practices. Whistleblowing reports are treated in confidence. There is also the option of using an external hot line to make reports anonymously. Whistleblowers are protected under the Whistleblower Protection Act and the Risk and Compliance Regulations, to ensure that they do not suffer any detriment as a result of making a whistleblowing report. When investigating the facts, the Group uses external experts, such as legal advisors and certified public accountants, where necessary, and promptly takes corrective measures and recurrence prevention measures in the event of discovery of a breach or potential breach. The Group follows up by verifying whether the corrective measures and recurrence prevention measures worked effectively and by making sure that whistleblowers did not suffer any detriment. The Board of Directors appropriately supervises the maintenance and operation of the whistle-blowing system by receiving regular reports from the Risk and Compliance Committee on the operation of the whistle-blowing system.

In FY2023, the Company distributed a video lecture by the director of the Company as compliance training. In particular, the Company strived to raise awareness on the Company's stance on whistleblower protection and the importance of preventing harassment to officers and employees.

Moreover, separate from the whistleblowing hot line, the Group has established the Harassment and Work-Style Consultation Hotline in the personnel organizations of each Group company for the purpose of preventing harassment and speeding up its detection, and dealing with inquiries about work-style reform and personnel systems.

In case an investigation of the facts reveals a violation or potential violation of laws and regulations, the Company will take disciplinary action against the violator, as well as other appropriate measures, corrective actions, and measures to prevent recurrence, and report the matter to relevant administrative agencies and taking legal action as necessary.

Based on Risk Management and Compliance Program drawn up at the beginning of each fiscal year, trainings related to relevant laws and regulations and measures to cultivate awareness of legal issues have been implemented. In addition, compliance and corporate philosophy questionnaire is circulated every fiscal year to all officers and employees of the Group in order to identify issues and consider responses to such issues, and reflect them to each measure for the next fiscal year's Program.

In FY2023, the Group conducted various types of training based on the Risk Management and Compliance Program approved by the Board of Directors. More specifically, the legal advisors offered a training course focusing on cases of violation of laws and regulations deeply relevant to the Group's business. Furthermore, the Company provided Antisocial Forces Response Training aimed at eliminating ties with anti-social forces, Financial Instruments and Exchange Act Training for employees engaged in financial instruments business, and training related to information asset management (including personal information management and prevention of insider trading training) to educate and inculcate rules for handling important information. Also, ESG Training was provided to raise sustainability awareness throughout the Group and strived to promote the understanding of environmental and social issues, as well as ethic codes and compliance in general (including prohibition of all types of activities that lead to corruption). The Company made efforts to promote legitimate and appropriate business activity and to raise awareness of compliance with laws and regulations by distributing video lecture by full-time directors on the Group's philosophy and the whistleblowing system.

To further foster employees' compliance awareness, instructions from the officers during morning meetings, display of compliance slogans in offices, simple videos on the group-wide internal website are provided. Through such activities, the Group also continuously sought to increase the understanding of the Tosei Group Ethics Code and the Whistleblowing Hot Line and to promote understanding of relevant business acts and insider trading rules, prohibited activities that directly lead to breaches such as harassment and bribery to further foster employees' compliance awareness and to penetrate the Group's common rules.