Ishin Co., Ltd.

Multiple competitors exist in each of the HR business, public-private co-creation business, global innovation business, and media PR business domains, raising concerns about intensifying price competition due to an increase in new entrants. Since the HR business and public-private co-creation business are positioned as the core of growth, a relative decline in competitiveness would directly lead to lower profitability. While the Company is responding by establishing a unique business position and enhancing service value-added, the impact on business performance could be significant depending on changes in the competitive environment.

The HR business handles job seekers' resumes and application information, while the public-private co-creation business handles personal information such as the affiliations and contact details of civil servants, subjecting the Company to obligations under the Personal Information Protection Act. If an information leak occurs due to unauthorized external access or intentional or negligent acts by internal personnel, it could have a material impact on business performance and financial condition through damage claims and loss of trust. While the Company has implemented measures such as internal training, access authorization settings, and ISMS certification (ISO27001/ISO27701), risks related to the enactment or revision of new laws and regulations also exist.

The development and maintenance of various software-based services are handled by a small number of full-time employees and outsourced engineers, resulting in a high degree of dependence on specific external contractors. If issues such as a termination of the relationship with a contractor arise, this could lead to a decline in service quality and significantly affect business performance. While measures such as considering multiple external contractors and hiring engineers as full-time employees are being taken as countermeasures, the potential impact is assessed as significant.

Net sales and operating income tend to be concentrated in the second quarter (due to promotional needs tied to municipal budget formulation for the public-private co-creation business) and the fourth quarter (due to year-end budget consumption needs among corporate clients). In the results for the 21st fiscal period, the third quarter recorded an operating loss of ¥51,780 thousand, illustrating pronounced quarter-to-quarter volatility in performance. If the downside from seasonal fluctuations exceeds expectations, it could adversely affect annual performance.

The Group holds overseas subsidiaries and a venture capital fund in Southeast Asia, and is therefore affected by fluctuations in foreign exchange and other financial markets. The likelihood of occurrence is assessed as high, and depending on financial market trends, this could affect business performance and financial condition.

In the internet industry, the rapid development of AI-related technologies, including generative AI, is significantly changing service delivery methods and the competitive environment. While the Group is responding through continued human and capital investment and by strengthening in-house sales functions and customer success capabilities, delays in responding to unexpected technological innovations or rapid shifts in customer needs could lead to a decline in service competitiveness and affect business performance.

If personal information or confidential information belonging to business partners or municipal government personnel is leaked due to cyberattacks, unauthorized access, computer virus intrusion, or similar incidents, it could affect business performance through loss of trust and damage claims. The Company primarily uses AWS as its infrastructure and has implemented measures such as ensuring redundancy through availability zones, conducting periodic vulnerability assessments, and obtaining ISMS certification; however, the risk of contract termination with external service providers also exists.

The Company positions M&A as an important strategic tool for growing existing businesses and expanding into new business areas, and intends to continue pursuing it going forward. If issues not identified during due diligence or unforeseen events occur, there is a possibility that the anticipated contribution to business performance may not be achieved as planned, or that impairment losses on investment value may become necessary. While detailed due diligence conducted in collaboration with outside experts is used to mitigate various risks, it is difficult to completely eliminate risks that may arise after the fact.

The HR business, media PR business, and public-private co-creation business rely on clients' advertising and recruitment budgets as their revenue source, which are characteristically subject to adjustment depending on corporate business conditions. If economic sentiment deteriorates significantly, it could directly affect the Group's business performance through a reduction in client orders.

The market capitalization of tradable shares and the ratio of tradable shares are close to the listing maintenance criteria of the Tokyo Stock Exchange, and if these metrics decline for any reason, there is a risk of falling short of the listing maintenance criteria and stagnation in market trading. While the Company intends to improve liquidity through a combination of measures such as increasing the number of tradable shares through the exercise of stock options and partial sell-offs by major shareholders, if improvements in corporate value do not proceed as planned, it could adversely affect the supply-demand balance of the Company's shares.