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 utilization of AI becomes pervasive in our business operations, there is a concern that external information dissemination may include infringements on the rights of other companies or ethically inappropriate expressions and disclosure content. On the other hand, as the social adoption of AI expands, the influence of AI on search engines and restaurant websites will increase. Consequently, there are concerns regarding the risk that our brand and corporate image could be disseminated with incorrect content, the risk of fluctuations in brand recognition (decline in market advantage) due to the spread of AI-generated fake news or fake reviews, and the increasing sophistication of external technological threats that exploit 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 the internal utilization of AI, we will establish AI usage rules and provide employee education to prevent inappropriate use and maximize effectiveness. At the same time, we will develop pre-check and post-monitoring systems to ensure rule compliance. Regarding information about our company on the Web and fluctuations in brand recognition, we will strengthen and continue our Web monitoring system, and against increasingly sophisticated external technological threats, we will continuously implement enhanced 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 environment surrounding our business deteriorates due to political or social instability, the straining of diplomatic relations, or other factors in specific regions, there are concerns regarding the continuity of business in the relevant overseas locations, the stagnation of the supply chain caused by impacts on ingredient procurement from surrounding areas and logistics passing through those regions, and the effects on the continuity of raw material procurement and the price structure. Furthermore, there are concerns about the worsening of labor management associated with the absence of foreign human resources in Japan, as well as a decline in the number of foreign visitors to Japan and the subsequent decrease in the number of customers. As described above, there are concerns that risks from fluctuations in the international situation could have a severe 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 December 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 2025, the Group Risk and Compliance Committee held 8 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.

Grievance Mechanism (Whistleblowing System)

Skylark Group has established consultation and reporting channels accessible to a wide range of stakeholders. Our objective is the early detection, remediation, and prevention of recurrence regarding legal violations, misconduct, and human rights infringements that may cause disadvantage to stakeholders, including customers, investors, and society.
We have established the "Skylark Group Whistleblowing Hotline," operated by an independent external third-party organization, to accept reports from all Group officers and employees in Japan, as well as from business partners (suppliers). Additionally, the Customer Relations Office accepts consultations and reports from other stakeholders, such as customers, shareholders, and local community members.
In both channels, the personal information of the whistleblower and the content of the report are strictly protected, and confidentiality is rigorously maintained. Specifically, information that could identify the whistleblower will never be disclosed without the individual's consent.
Any retaliation against whistleblowers on the grounds of their report or consultation is strictly prohibited by our Internal Reporting Regulations, and we ensure strict compliance with this rule. Received reports are shared directly with Outside Directors and Full-time Audit & Supervisory Committee Members while ensuring the confidentiality of the whistleblower. We operate the system in accordance with internal regulations, which includes reporting the operational status periodically to the Board of Directors and disclosing relevant information to officers and employees.

Eligible Whistleblowers / Users

• Group employees (regular employees, contract employees, part-time workers), officers, and their families
• Former Group employees
• Employees and officers of business partners (suppliers)
• Business partners
• Customers
• Shareholders
• Local community members and other stakeholders

Investigation Process

• Reporting: Upon receiving a report through the internal whistleblowing hotline or other channels, the department in charge of compliance immediately initiates an investigation to establish the facts.
• Investigation and Deliberation: Investigations are conducted with the involvement of external experts (such as lawyers) as necessary, and the results are reported to the Group Risk and Compliance Committee.
• Correction and Disciplinary Action: If a violation is confirmed, strict disciplinary action will be taken against the violator based on employment regulations and other rules, and corrective measures will be implemented to prevent recurrence.
• Feedback: Appropriate feedback regarding the results of the investigation and the status of the response will be provided to the whistleblower in a timely manner, while maintaining confidentiality.

Anonymous Reporting and Confidentiality

The external reporting hotline is established within an independent third-party organization. Reports can be made anonymously and will be treated as confidential. The privacy of the whistleblower and the consultation will be strictly upheld, and information will not be disclosed or leaked to third parties. Furthermore, the external hotline is operated by a third party independent of the Company, and by receiving and managing reports from a neutral and fair standpoint, the privacy and safety of whistleblowers are protected.

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

Regarding the hotline for employees, we actively promote awareness by distributing posters for display in stores every month. In addition, we continuously conduct training for managers, regional managers, and other management personnel on appropriate procedures for responding to reports of bullying or harassment, as well as on maintaining the confidentiality of whistleblowers, in an effort to foster an organizational culture that does not tolerate harassment.

Whistleblowing and Consultation Channels

Eligible Users	Channel Name	Operator	Method	Scope / Content
Employees, Their Families, Former Employees	Harassment Hotline	External	Phone Web	Harassment and human rights infringements
	Whistleblowing Hotline			Internal reporting on misconduct, legal violations, etc.
	Health Consultation Service			Health inquiries, counseling, etc.
	Employee Consultation Service	Internal	Phone	Harassment and human rights infringements
	Next-Gen Childcare Support Hotline			Consultation on childcare, childcare leave, etc.
	Global Talent Support Hotline			Consultation for non-Japanese employees regarding daily life, work, and employment concerns
Business Partners(Suppliers)	Business Partner Whistleblowing Hotline	External	Phone	General consultation from business partners
Customers, Shareholders, Local Community Members, Other Stakeholders	Customer Relations Office	Internal	Phone Web	General consultation from customers, shareholders, local community members, etc.

*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).