HIP CORPORATION

As the company provides technical services to the technology development departments of manufacturing clients, a deterioration in domestic and overseas economic conditions leading to reduced client development spending or restraint in outsourcing could affect the company's business results and financial condition. The company maintains transaction relationships with approximately 200 companies annually and works to minimize impact through diversification of its client base via new business development sales and by collecting information by industry and by company.

As engineer dispatch is the company's core business, operated in accordance with the Worker Dispatch Act, there is a risk that a business suspension order could be issued if the company falls under disqualification grounds or violates laws and regulations. Additionally, future amendments or relaxations of legal regulations could have an unfavorable impact on the company. The company thoroughly gathers information from relevant regulatory authorities and continues to respond appropriately and lawfully in a timely manner.

New entrants into the outsourcing industry or a shrinking industry scale could intensify inter-company competition, potentially leading to reduced technical fees or decreased orders due to low-price strategies by competitors or price reduction requests from clients. Technical fees are a key component of the company's business, and if this risk materializes, it is expected to result in decreased net sales and reduced profit margins. The company works to secure appropriate profitability through skill enhancement via engineer training and ongoing negotiation of contract terms with clients.

Engineers are the company's most critical management resource, and against the backdrop of a long-term decline in the working-age population due to the falling birthrate and aging population, it may become difficult to recruit and secure talented engineers. Insufficient securing of engineers would constrain business expansion and affect business results and financial condition. The company works to improve its recruiting capability and retention rate by promoting an engineer-first corporate culture, conducting careful recruitment activities, and building an environment that enables lifelong engineer careers.

As the company holds highly confidential client information and a large volume of personal information, in the event of an information leak, the company could suffer a loss of social trust and incur substantial response costs, potentially having a material impact on business results and financial condition. While no leakage incidents have occurred to date, the company strives to build a preventive framework through updates to confidential information management rules, thorough employee training, and strengthened information system management.

The proportion of net sales derived from the transportation equipment industry is high, at 31.8% in FY2024 (ended March 2024), 32.3% in FY2025 (ended March 2025), and 30.5% in FY2026 (ending March 2026), creating a risk that a downturn in that industry could have a concentrated impact on business results and financial condition. The company works to mitigate this industry concentration by strengthening collaboration among sales offices and business divisions nationwide and by conducting sales activities targeting a broader range of industries through new business development.

If business activities of the company or its clients are halted due to natural disasters such as earthquakes, accidents, or the spread of infectious diseases, this could lead to lost net sales, and the extent of the impact is difficult to predict given it depends on the scale of the disaster. The company works to reduce the impact on its business results by establishing an emergency response framework, including systems for confirming employee safety, regular replenishment and distribution of emergency supplies to all employees, backup of critical data, and support for telework.