Risk Management

Business Risks and Other Risks

The main risks concerning Skylark Group's business operations, operating results and financial position, etc., which could have a significant impact on investment decisions made by investors are as follows. The forward-looking statements below in this document are judgments made by the Group as of the end of the fiscal year under review. The following are specific examples of risks that the Group anticipates in order to continue its business, but do not constitute an exhaustive list.

Investor Relations (IR) Business Risks

Risk Map

We conduct periodic risk reviews to identify and assess the risks surrounding our business, taking into account factors specific to our operations and industry. To clearly define the impact of various risks on our company, we develop and disclose a risk map that assesses their potential severity and probability.

Emerging Risks

Emerging risks are defined as significant long-term (3-5 years or longer) new risks that could significantly affect the business of Skylark Group in the future due to changes in the external environment, as described below. The Group Sustainability Committee monitors these risks on a regular basis, and deliberates on and reviews, as appropriate, the establishment of a system that enables prompt implementation of appropriate countermeasures and the implementation of such countermeasures.

Risk Name	Rights Infringement and Ethical Violations due to AI Utilization
Type	Technology
Description	If the use of AI pervades business operations, there is a concern that external information dissemination may include infringements of third-party rights or ethically inappropriate expressions/disclosures. On the other hand, as the use of AI spreads socially, the influence of AI on search engines and restaurant sites increases. There is a risk that our brand and corporate image could be spread with incorrect content, and concerns about reputational damage due to the spread of AI-generated fake news or fake reviews, as well as the sophistication of cyber-attacks abusing AI technology.
Potential Impact	Deep involvement of AI from the planning stages could dilute our uniqueness and brand identity, potentially leading to the commoditization of our services. Due to these effects, there are concerns that AI risks could have a multifaceted impact on our business performance.
Mitigation Measures	Regarding internal AI usage, we will establish AI usage rules and provide employee education to prevent inappropriate use and maximize effectiveness. At the same time, we will establish pre-check and post-monitoring systems to ensure rule compliance. Regarding information about us on the web and reputational damage, we will strengthen and continue our web monitoring system, and against sophisticated cyber-attacks, we will continuously implement strengthened security measures. Through these initiatives, we aim to strengthen business resilience in the AI era.

Risk Name	Risk of Changes in International Affairs
Type	Geopolitics
Description	We operate stores in Taiwan and Malaysia. Many foreign nationals, primarily from East and Southeast Asia, work in our domestic stores and factories in Japan. Furthermore, sales from inbound tourists are on an upward trend at our stores in Japan. In addition, for ingredient procurement, we import high-quality and cost-effective ingredients from around the world.
Potential Impact	If the business environment deteriorates due to political/social instability or strained diplomatic relations in specific regions, there are concerns about the continuity of business in those overseas locations, and soaring ingredient prices due to impacts on procurement from surrounding areas or logistics passing through those regions. Furthermore, there are concerns about worsening labor management due to the absence of foreign staff in Japan, and a decrease in customer numbers due to a decline in inbound tourists or reputational damage. As described above, risks associated with changes in the international situation are feared to have a significant impact on our business performance.
Mitigation Measures	To ensure business continuity at overseas bases, we will establish a system that allows for a rapid response in emergencies. We are diversifying procurement regions and routes and securing alternative means for emergencies, and we are also preparing for flexible menu revisions through coordination in procurement, menu development, and store operations. Regarding foreign staff, we are diversifying recruitment regions and building a support system and strengthening daily communication to ensure their peace of mind even in contingencies. As for customer measures, we are striving to expand our repeat customer base by enhancing the appeal of our menus and services. Through these measures, we aim to strengthen business resilience.

Risk Management System

Basic Approach

Skylark Group has established Group Risk Management Regulations and laid out a process for responding to risks, for the purpose of preserving its corporate value. In risk management, we begin with an overview of a diverse range of risks, identify risks to be tackled, and work to prevent them from manifesting. When a risk actually manifests itself, we minimize damage by responding swiftly and accurately, evaluate the results of our response, and confirm that measures have been taken to prevent re-occurrences before declaring completion.

Key Risks and Responses Relating to Execution of Business Operations

Occurrence of Food-related Accidents

Our basic policy is to establish and thoroughly manage quality, hygiene management and legal compliance standards with regard to various predicted risks in all processes from procurement of ingredients to processing, distribution, preparation and serving in order to prevent not only cases of food poisoning due to bacteria and viruses but also food-related accidents due to contamination by foreign objects and food allergies, and incorrect labeling.

Response Measure 1: Ensuring thorough washing of hands and health management by employees at central kitchens

We have established—and are thoroughly enforcing—the most effective hand washing procedures as verified in-house to prevent viruses and bacteria on employees' hands from being carried into our facilities. Hand washing is monitored 24 hours a day, and guidance is given to ensure thorough implementation of established procedures.

Response Measure 2: Hygiene guidance and regular in-house bacterial testing by the Quality Management Group

We design our production processes based on ISO 22000 management methods to enable provision of safe products, and check the operational status of each process. Our central kitchens have eight hygiene inspection rooms that perform unannounced monitoring and provide guidance on matters ranging from raw ingredients to central kitchen processing, and the state of store management.

Response Measure 3: Thorough measures to prevent and control the spread of norovirus

Because toilets and kitchens are used by many people, we disinfect them on a regular basis every day. If an employee is unwell, a norovirus test is conducted at the expense of the company, and the employee is only allowed to come in to work if a negative result is confirmed by this high-sensitivity test.

Labor Management Risks

With the diverse range of employment types that exist today, the environment surrounding employees is changing drastically, and continuous optimization of working conditions is essential for continuing to employ excellent human resources in the long term. Skylark is driving work style reforms such as enhancing labor management systems and improving working environments to enable all employees to work energetically and in good health.

Response Measure 1: Initiatives to enhance the labor management system

As a measure to enhance Skylark's labor management system, top-level management figures attend each labor management meeting in order to gain an understanding of the current situation and work to thoroughly improve upon it. We are also creating mechanisms to reflect the content of regular reviews and improvement proposals from the workers' union. We are also improving employee retention rates and working environments by continuously conducting level-specific training to enable employees to improve their skills and level of satisfaction.

Response Measure 2: Initiatives to enhance work-life balance by encouraging employees to take leave

We have increased our number of annual holidays from 108 to 117 days, with the aim of improving work-life balance. At the same time, we have increased the number of successive days of leave per six-month period by two days, from five days to seven days, and are implementing this along with the planned taking of annual paid leave. Additionally, as one aspect of our work style reforms, we abolished 24-hour operation at all stores in January 2020, and shortened late-night operating hours in July 2020 to make closing time 23:30 as the general rule. We aim to create a workplace in which employees can work stably in the long term.

Incentives Incorporating Risk Management Indicators

The achievement of key risk-related targets is also incorporated into the performance-linked compensation (phantom stock) for our directors, excluding outside directors and directors who serve as Audit and Supervisory Committee members.

Risk: Climate Change → Indicator: Reduction of CO₂ Emissions
Risk: Changes in Consumer Preferences → Indicator: Improvement of Overall Customer Satisfaction
Risk: Labor Management → Indicator: Enhancement of Employee Engagement

Risk Management System

Under the supervision of the Board of Directors, we have established the Group Risk and Compliance Committee as the organization responsible for overseeing risk management across the entire Group. The committee is chaired by the President and COO, with the Chairman and CEO and all executive officers serving as committee members.
The committee centrally identifies various types of risks and, taking into account the potential scale and likelihood of each, has identified 31 specific risks to be addressed (as of March 2025). For each identified risk, the committee defines the Group’s risk tolerance and designates a responsible department, which implements appropriate preventive and responsive measures.
The potential impact and likelihood of risks are reviewed annually to reflect changes in the business environment. In addition, the methods and processes for identifying, assessing, and managing risks are subject to an annual review by the Internal Audit Office to verify their appropriateness.
In 2024, the Group Risk and Compliance Committee held 11 meetings to review emergency situations that arose within the Group. The contents of the committee’s discussions are shared with outside directors to ensure transparency in the risk management framework. Furthermore, outside directors serve as advisors to the committee, enabling the Group to receive observations and advice from external perspectives.

Skylark has defined Emergency Guidelines under its Group Emergency Response Regulations with regard to particularly serious risks such as natural disasters, infectious diseases and food-related accidents, as issues that should be tackled with the combined power of the company.
Additionally, in order to ensure prompt sharing of the contents of emergency reports with senior management and other related departments in the company, we have established emergency contact routes and rules for reporting to management, and comprehensive efforts are being made to ensure that specific reporting standards and procedures are known within the company.
We have established rules regarding the sharing of information with outside officers, and are working to improve the provision of information on key risks and emergency cases, and the state of our response to them. We have also formulated the Group Business Continuity Planning (BCP) Regulations in order to clarify details of the Group's system for responding to emergencies, details of initial responses, and priority of operations.

The Five Key Policies of the Group Business Continuity Planning (BCP) Regulations

1. Act with human life as the top priority
2. Prevent secondary disasters
3. Ensure that the departments responsible for sales, products/merchandise, production, purchasing and business infrastructure cooperate closely to form an integrated unit, and act in coordination with local communities and government agencies
4. Transfer authority depending on the nature of the emergency
5. 5. Summarize responses and work to prevent re-occurrences once the state of emergency has been lifted

In the past, too, in the event of a natural disaster or infectious disease outbreak, we have established response headquarters based on our Group Business Continuity Planning (BCP) Regulations, and consolidated all information at the headquarters to enable it to make timely and appropriate policy decisions. By disseminating this information to all restaurants and stores, we respond promptly and appropriately to emergencies.

Internal Reporting System

For the purpose of the early detection, correction, and prevention of recurrence of violations of laws, regulations, and other misconduct that may be disadvantageous to stakeholders such as customers, investors, and society, our Group has established the "Skylark Group Internal Reporting Desk." With a specialized outside company serving as its point of contact, this desk accepts whistleblowing reports from all of our domestic Group officers, employees, and business partners.
At this desk, the personal information of reporters, such as their names, and the content of reports are strictly protected to ensure complete confidentiality. In particular, information that could identify a reporter is never disclosed without the individual's consent. Furthermore, our internal reporting regulations strictly prohibit any disadvantageous treatment of an individual for making a report or seeking consultation, and we ensure thorough compliance with these regulations.
While ensuring the confidentiality of the reporter, reports received are shared directly with outside directors and full-time Audit & Supervisory Committee members. The system is also operated in accordance with internal regulations, which include periodically reporting on its operational status to the Board of Directors and disclosing this information to officers and employees.

Eligible Parties for Reporting and Consultation

• Employees of Skylark Group (full-time, contract, and part-time "crew" members), executives, and their families.
• Former employees of Skylark Group.
• Employees and executives of Skylark Group's business partners.

Anonymity and Confidentiality

The external contact point is an independent, third-party organization. Reports can be made anonymously and will be treated with the strictest confidence. The privacy of those who report or consult is strictly protected, and information will not be disclosed or leaked to third parties.

Prohibition of Unfavorable Treatment and Retaliation

Individuals who use this reporting and consultation service will not receive any unfavorable treatment from affiliated companies.

Awareness and Training

To ensure awareness, information about the employee consultation service is distributed to all our restaurants every month in the form of posters. We also conduct training on the procedures through our corporate meetings.

How to Report or Consult

Eligible Parties	Service Name	Provider	Method	Scope of Consultation
Employees Employee Families Former Employees	Harassment Consultation Service	External	Phone WEB	All harassment-related issues
	Whistleblowing Hotline			Internal reporting on fraud, legal violations, etc.
	Health Consultation Service			Health, counseling, etc.
	Employee Consultation Service	Internal	Phone	All harassment-related issues
	Next-Generation Support Service			Consultation on child-rearing, childcare leave, etc.
	Global Talent Consultation Service			Consultation for foreign national employees on concerns regarding daily life, work, and employment
Customers	Customer Service	Internal	Phone WEB	General inquiries from customers
Business Partners	Dedicated Whistleblowing Hotline for Business Partners	External	Phone	General inquiries from business partners

*The Health Consultation Service (phone/web) and the web portals for other consultation services are available 24 hours a day, 365 days a year.
*For our overseas subsidiaries, we have established internal contact points that provide support in the local language. 

Reports and consultations from our business partners are handled by an independent third-party organization, ”Dial Service Co., Ltd.”

Hours of Operation	Weekdays：12:00 PM - 9:00 PM Saturdays, Sundays, & National Holidays：9:00 AM - 5:00 PM　*Closed from December 29th to January 4th.
Dedicated Phone Number for Business Partners	TEL：0120-330-280 *This phone number is exclusively for our business partners. For customer inquiries, please contact our Customer Service at 0120-125-807 (9:00 AM - 6:00 PM).