Information Strategy and Technology Co., Ltd.

If the recruitment and development of highly skilled engineers necessary for DX promotion support does not proceed as planned, or if turnover exceeds planned levels, business expansion may be hindered. The Group is working to reduce turnover and strengthen recruitment through the use of recruitment agencies, expansion of referral hiring, technical and business training, regular meetings with supervisors and career development support, and enhanced employee benefits.

The Group relies on outside subcontractors (partners) for part of its system development operations. If it is unable to secure appropriate partners at the necessary timing, or if a partner breaches its contractual obligations, this could lead to increased quality assurance costs or claims for damages from customers. The Group addresses this through developing new partners via WhiteBox member acquisition, and through regular verification of quality standards and management systems along with improvement guidance.

The Group handles highly confidential customer information in Zero-Stage system development and personal information of engineers in WhiteBox. Should an information leak occur, it could result in response costs, damages claims, and significant damage to social credibility. The Group is strengthening its management system through obtaining Privacy Mark certification, establishing regulations for handling confidential information, and conducting education and guidance upon joining the company and on an ongoing basis.

The Group, which primarily operates under quasi-delegation contracts, conducts its business in accordance with relevant laws such as the Worker Dispatching Act, the Personal Information Protection Act, and the Subcontract Act. However, the enactment or revision of laws or the strengthening of regulations could impose new constraints on the business. The Group addresses this through thorough dissemination of its risk and compliance regulations, information sharing with retained counsel, and sharing of regulatory trends through the Risk and Compliance Committee.

Should a compliance violation occur involving officers or employees, it could have a material impact on operating results and financial condition. The Group seeks to reduce this risk by establishing and thoroughly disseminating its risk and compliance regulations, confirming compliance status through internal audits, and conducting regular legal compliance education and guidance.

An increase in highly capable companies specializing in supporting in-house system development, or expanded engineer hiring by IT consulting firms including through M&A, could intensify price competition and increase the risk of losing existing or new projects. The Group strives to maintain its competitive position through close communication with customers to identify latent needs, improving customer retention rates and promoting upselling among existing clients, and differentiating itself through improved service quality.

Since the Group's major customers are leading domestic and global companies, changes in customer management policies or suppression of IT investment resulting from economic downturns could directly affect the Group's business performance. The Group seeks to respond early through close monitoring of market trends and detailed information gathering and analysis from customers and partner companies.

The tradable share ratio as of the end of the consolidated fiscal year under review stood at only 26.8%. Should liquidity decline for any reason, this could lead to stagnation in market trading or a deterioration in supply-demand balance. The Group's policy is to improve liquidity through a combination of requesting partial sell-offs from existing shareholders and increasing the number of tradable shares through the exercise of stock acquisition rights.

Representative Director and President Jun Takai holds 67.4% of the company's shares (combined holdings of himself and his asset management company) and plays a central role in determining management policy and business strategy. There is a risk that business continuity could be affected if he becomes unable to perform his duties. The Group is working to reduce dependence on a specific individual through information sharing with other officers via the Board of Directors and management meetings.

The number of potential shares related to stock options for officers and employees is 582,771 shares (equivalent to 5.5% of the 10,637,253 total issued shares), and exercise of these stock acquisition rights could result in dilution of share value. As this is an incentive program that has been introduced, it is considered likely to materialize within a few years.