Sohgo Security Services : ALSOK REPORT 2021(1)

ALSOK REPORT 2021

Fiscal Year Ended March 31, 2021

SOHGO SECURITY SERVICES CO., LTD.

Securities Code: 2331

ALSOK Charter

Based on two core principles exemplified by "arigato no kokoro" (a feeling of gratefulness and gratitude) and "bushi no seishin" (a samurai spirit), we devote ourselves to protecting the safety and security of our customers and of society as a whole.

1. Fundamental Spirit

Under any condition that we face, we work hard to live by a fundamental spirit that reflects our management philosophy- as exemplified by a feeling of gratefulness and gratitude and a samurai spirit based on toughness, fairness, and generosity- to be a highly principled company.

2. Priority

Our top priority is to provide products and services of the first rank, while cultivating the highest levels of motivation in our employees and living up to shareholder expectations through attractive profit growth.

3. Basic Strategy

While security services remain at the heart of our business, as our basic strategy, we also seek to offer a diverse range of products and services in new fields to satisfy the needs of the everchanging times.

4. Contributing to Society

Allying ourselves with public bodies charged with protecting public safety and security, we commit ourselves to developing value-adding products and services, thereby always contributing to society.

• 1. We will devote ourselves to serving our customers and society as a whole in a way that reflects a feeling of gratefulness and gratitude.

• 2. We will embody a samurai spirit in everything we do based on toughness, fairness, and generosity, standing firm in the face of adversity and banding together to embrace success.

• 3. We will value autonomy in our actions, empowered by "yachoseishin" (the spirit of a wild bird)-which represents independence, self-respect, perseverance, acuity, and tenacity-and take responsibility for delivering results.

• 4. We will carry out our day-to-day activities based on the principles of sincerity, accuracy, strength, and speed.

• 5. We will know no complacency, always marching forward purposefully while growing and refining our business to continue to provide value to customers and to society as a whole, thereby continuing to be relevant.

• 6. We will pursue perpetual self-improvement and remain highly committed to compliance, thereby attracting and nurturing human resources of the caliber worthy of the industry leader.

Message from the Chairman

Value That the ALSOK Group Needs to Provide to Society

First of all, my thoughts are with all the victims of the current COVID-19 pandemic and I would like to express my sincere sympathies for those who have been infected with the disease.

ALSOK was founded in 1965, led by the experience of the founder who was a former police bureaucrat and was deeply involved in the operations of the 1964 Tokyo Olympic Games. Our corporate philosophy when the Company was first established emphasized "arigato no kokoro" (a feeling of gratefulness and gratitude) and "bushi no seishin" (a samurai spirit), and this philosophy is the fundamental spirit that underpins our operations, based on which we have done our utmost every day to ensure the safety of our customers and of society as a whole. To this day, the whole ALSOK Group has embraced this spirit as its unwavering origin that should be passed down across generations among all its employees and continues to pursue its ideals.

This year, the Olympic and Paralympic Games Tokyo 2020 were finally held. Holding true to ALSOK's founding philosophy, we were able to fulfill our responsibility as a representative of the Olympic and Paralympic Games Tokyo 2020 Security Consortium and make a wholehearted contribution toward ensuring that the Games were held in safety and security for all concerned. Going forward, we will be building on and refining the experience that we have gained through our involvement with the Olympics and Paralympics, and will continue to provide services based on this experience to all our clients.

In recent years, the threats facing society have been growing more diverse, as exemplified by, among others, crimes preying on children, senior citizens, etc., cybercrime and information leakage, intensifying natural disasters, and the global spread of infectious diseases and epidemics. As a company responsible for a critical component of social infrastructure supporting the safety of society, we devote ourselves to contributing to the resolution of these social issues through our business and to the sustainable creation of corporate value and further ensuring the safety of people who live in society.

Chairman and Representative Director Chief Executive Officer (CEO)

Atsushi Murai

CONTENTS

Overview 01

and Vision

ALSOK Charter/ALSOK's Four Principles

• 02 Message from the Chairman

• 03 Talk with the President

• 07 ALSOK's History of Value Creation

• 09 Financial and Non-Financial Highlights

• 11 The ALSOK Group's Business Operations

• 15 List of ALSOK Products and Services

• 17 ALSOK's Value-Creation Model

• 19 Medium-Term Management Plan (Grand Design 2025)

• 23 ALSOK's Strengths

• 25 Providing Products and Services That Help Resolve Social Issues

• 27 ALSOK's R&D

• 29 Quality Improvement Initiatives

• 31 Human Resource Development and Empowerment Initiatives

Note: ALSOK was a Tokyo 2020 Official Partner (Security Services and Planning).

Sustainability 33

and ESG

35

To Realize a Sustainable Society Sustainability and CSR Management

• 37 Consideration for the Global Environment

• 39 Community Contribution Activities

• 41 Corporate Governance

• 45 Directors, Audit & Supervisory Board Members, and Executive Officers

Financial Information

• 49 Financial Section

• 54 Corporate Information/ Stock Information/ Editorial Policy

Overview and Vision

Talk with the President

CROSS TALK

Making ALSOK a Company That Will Continue to Be Needed in the Future

In the fiscal year ending March 31, 2021, there was still no sign of the COVID-19 pandemic ending. With the impact of COVID-19 continuing to drag on, the world's major economies have begun to adjust their existing COVID-19 containment measures, with the aim of getting economic activity back to normal. Given the easing of restrictions on movement and the shift toward measures intended to build a post-COVID*1 future, what kind of strategy does ALSOK need to follow? As we did last year, we have asked Professor Atsushi Nakajima of the University of Niigata Prefecture to share his views on this topic.

What kind of strategy will ALSOK need to follow in

Theme 1

the "new normal" of coexisting with COVID-19?

Professor Nakajima: The COVID-19 pandemic is showing no sign of coming to an end. However, with the emergence of new mutations such as the Delta variant, the world's major economies have begun to adjust their existing COVID-19 containment measures. With the introduction of "vaccine passports" and measures to make COVID-19 vaccines mandatory for medical professionals, countries are easing the restrictions on movement while still maintaining broadly the same types of pandemic countermeasures as before. The change in course toward trying to balance measures to prevent infections with economic recovery is based on the assumption that, over the long term, COVID-19 is unlikely to be completely eliminated. As a result of this change, Europe and North America are continuing to see an upturn in economic activity.

It was against this background that the Olympic and Paralympic Games Tokyo 2020 were held this year. While there were divergent opinions as to whether the games should have gone ahead, one can still take the view that Japan's success in overcoming all the obstacles and holding the Olympic and Paralympic Games despite COVID-19 was a very impressive feat. The fact that the Games were being held during the middle of the bitter struggle against COVID-19 meant that they had to be held without spectators, and that rigorous PCRchecks, etc., had to be applied to all participants; prior to the commencement of the Games there were also concerns that they would exacerbate the spread of COVID-19 within Japan. In the event, I feel that Japan did a very good job of avoiding increased COVID-19 infection risk, and I think that this was attributable in part to ALSOK's hard work.

Aoyama: From a security perspective, the question of how to hold such a big event safely and securely, while also eliminating infection risk, was a major challenge. Not everything went smoothly, but I think that, in the end, it went quite well, including the bubble isolation system*2. Arranging security for a large-scale event such as this requires a very large number of security guards, and so we participated in the formation of the Olympic and Paralympic Games Tokyo 2020 Security Consortium, with ALSOK acting as a co-representative. A total of 553 security firms from all over Japan joined the Consortium, mobilizing a total of approximately 470,000 people, and it was clear that the successful holding of the Games without any serious trouble was due to the shared sense of mission displayed by the security sector as a whole. Going forward, given the need to balance measures to prevent infections with economic recovery, we can assume that restrictions on movement will be eased.

*1 Post-COVID: The period in which the transformation of values and modes of behavior resulting from the global COVID-19 pandemic take root in society.

*2 Bubble isolation system: An infection prevention method whereby the movement and residence of athletes and other related parties is confined to a specified area, and contact with the outside world is avoided to the maximum possible extent.

03

What is the "creative destruction"*3 that will transform the security business to respond to the "post-COVID" era?

The experience of organizing security for the Olympic and Paralympic Games Tokyo 2020 under the COVID-19 crisis will represent an important legacy for us, and I think it is extremely crucial to discuss how this experience can be utilized for self-protection, both at the corporate level and at the level of individual citizens.

Nakajima: The idea of working toward a "post-COVID" world appeared in Europe and North America earlier than it did in Japan. While people are already being encouraged to avoid the Three C's (confined and enclosed spaces, crowded places, and close-contact settings) and to minimize face-to-face contact with others, in the era of "living with COVID-19," I think that there will be a need for discussion of further digital countermeasures, and for further progress based on this discussion.

Aoyama: Now that variant strains of COVID-19 have been confirmed, our company has been exploring, since last year, what can be done to help revitalize economic activity while coexisting with COVID-19. During the COVID-19 pandemic, the most important thing we can do to ensure the safety and security of our customers is to prevent them from being affected by COVID-19, and to this end we have been discussing what kind of assistance we can provide. Actually, besides providing COVID-19-related products such as thermal imaging cameras, photocatalytic air purifier and sterilization devices, and PCRNakajima: Going forward, the shift toward the digital economy and the green economy will become even more pronounced.

While I get the impression that Japan has been rather slow off the mark in digitalizing its economy, in Europe and North America digital transformation (DX) is accelerating. For example, the European Union (EU) is implementing GAIA-X,*4 a project to build a common, EU-wide digital economy platform. This project will enable all data to be stored in the same format; the idea is to create a platform that allows big data to be used with maximum effectiveness without being dependent on private companies such as Google. It is no longer a case of competing on individual digital technologies; the building of GAIA-X is a concept that will have a game-changing impact in the era of the digital economy.

At the same time, as regards the development of the green economy, the world's leading economies (including Japan) need to respond to global warming, which is proceeding faster than originally expected, and the target year for becoming a net zero emissions country, which was originally set for the second half of the 21st century, has now been moved forward to 2050.

Aoyama: There are many aspects of the security business that our company has been involved in for the past 57 years which now seem old-fashioned, and we need to transform these areas in a revolutionary manner. The keywords for achieving this goal, as I see it, are digital, safety and security, and going green. With the spread of teleworking (working from home) and remote working, cybersecurity needs have grown, and there is considerable discussion regarding the growth of cashless payments and the adoption of digital currencies. The environment in which our company operates is being dramatically transformed. In response to this change, in our individual businesses-including security, facility management, and long-term care-we need to generate new demand from a customer-focused standpoint at the level of the individual customer, and need to offer services that provide safety and security from a new perspective.

test kits, we have been implementing a wide range of different types of support, including providing security services for quarantine facilities for people with mild COVID-19 symptoms, vaccination centers, etc.

Given that the security business and building maintenance business operate in the physical world, there are inevitably some aspects of them that are difficult to digitalize. Nevertheless, we have been rolling out the ALSOK Ventilation-Facilitating Solution, which links the ALSOK-G7 Electronic Security System with environmental sensors capable of measuring carbon dioxide concentration to notify users of ventilation status, as well as the ALSOK Congestion Status Distribution Service, with which, using security camera images, updates on crowding status of stores and facilities (i.e., whether an area is becoming overcrowded) can be easily sent to a facility's official website or to digital signage. And we have been promoting the development of our non-face-to-face sales operations using online business discussions, etc., and the expansion of distance learning of our employees and the provision of more efficient ways of construction work. Going forward, we will also be working to customize the products and services that we provide.

Taking our security services as the core element, this is the time for us to redefine and adjust the services that we implement, to provide customers with safety and security that go beyond the conventional scope of security services, and aim to bring about a transformation of our business.

Nakajima: The current pandemic is a natural disaster. While it hasn't damaged machinery directly, it is a fact that, for us as people who use machines, the pandemic has caused harm to how we think, how we live, and the way in which our society operates. I think that, if we can overcome this situation, then that, in and of itself, will lead to creative destruction.

When it comes to DX, it is not a matter of competing on individual digital technologies or on adoption rates or installation rates; rather, it is a case of dramatic change brought about by applying newly generated technologies to needs that have emerged in a completely new area. I get the feeling that this is what is starting to happen now. ALSOK is providing services based on an architectural approach, and I hope this will rapidly generate major changes.

Aoyama: In the future, with the trend toward digitalization and going green, new businesses, frameworks, and services will emerge, and the range of areas where we can help to ensure customers' safety and security will expand. As to how the processes of digitalization and going green will proceed, ultimately, it is the provision of services by people that will help to ensure the safety and security of local communities. ALSOK will be supporting these developments in a variety of different ways.

*3 Creative destruction: A concept advocated by the economist Joseph Schumpeter, whereby new, efficient equipment and methods drive out old, inefficient equipment and methods, replacing them and in doing so stimulating economic growth.

*4 GAIA-X: An infrastructure concept announced by the German and French governments to support the flow of data while safeguarding security and data sovereignty.