UT Group Co.,Ltd.

The proportion of net sales attributable to the semiconductor and electronic components sector is high, and the company may be affected by economic fluctuations arising from the approximately four-year silicon cycle. The impact on business performance can be either positive or negative, and estimating its magnitude is considered difficult. As countermeasures, the company is expanding its business domain into manufacturing industries in general, including automobiles, expanding the engineer dispatch business, and capturing demand for structural reform in its solutions business.

The company conducts its business under permits obtained from the Minister of Health, Labour and Welfare based on the Worker Dispatching Act and the Employment Security Act, and in the event of a serious violation of laws and regulations, there is a possibility that the permits could be revoked or business suspension could be ordered. Multiple group companies hold multiple licenses and permits, and revocation at even a single company could affect the entire business. The company addresses this risk through thorough compliance education and continuous strengthening of internal controls.

The company conducts its business based on a wide range of laws, including the Labor Standards Act, the Industrial Safety and Health Act, and the Act on the Protection of Personal Information, and if a violation of laws and regulations occurs, there is a possibility of permit revocation or loss of social credibility. In addition, if a leak of confidential information occurs while handling confidential information of client companies, there is a risk of cancellation of dispatch contracts or claims for damages. The company addresses this through thorough compliance education, strengthening of internal controls, and awareness-raising activities toward client companies.

Regarding technical staff who form the core of the business, there is a possibility that securing the necessary human resources may become difficult due to labor market conditions and the decline in the working population, particularly among the younger generation. There is also a risk of decline in gross profit margin due to increased recruitment costs from lower retention rates and relocation costs incurred when local hiring is difficult. The company is working to build a platform supporting diverse ways of working through approaches to diverse job-seeker segments, including women, seniors, and foreign nationals, and through developing job opportunities in each region.

There is a tendency for the number of contracts to decrease due to production cuts by domestic manufacturer clients, along with intensifying price competition with other companies in the same industry. On the other hand, if reassignment of technical staff, who are principally hired under indefinite-term employment, does not proceed smoothly, idle personnel may arise, putting pressure on profitability, and in the event of a sharp increase in contracts, recruitment costs incurred in advance may adversely affect profit and loss. The company aims for a long-term, stable supply of human resources by building partnerships with client companies.

The company procures funds necessary for business expansion through borrowings from financial institutions, and some loan agreements are subject to financial covenants. If these covenants are breached, borrowing interest rates may rise and the benefit of acceleration clauses may be lost, potentially affecting financial position and business results. The company manages its operations by balancing borrowings and equity capital, using a net DE ratio of 0.5 or less and a goodwill-to-equity ratio of 50% or less as key management indicators.

The company is actively pursuing strategic M&A and capital alliances, but if risk identification through due diligence or the post-acquisition integration process does not proceed appropriately, recovery of invested capital may become difficult, potentially leading to a risk of goodwill impairment. The company has established a dedicated organization for M&A and capital alliances, undergoes a decision-making process through deal review meetings and the board of directors, and conducts regular monitoring through the board of directors and management meetings even after acquisitions.

The company holds large volumes of personal information and confidential information, and if data were to be leaked externally due to cyberattacks or unauthorized access, it could significantly impact business performance. The company has established measures based on its personal information protection policy and information security management regulations, and strives to ensure high levels of information security and cybersecurity. Regular information security education is provided to officers and employees.

In the manufacturing industry to which technical staff are dispatched, the pace of technological innovation and changes in the business environment is accelerating, and if the company fails to grasp the direction of client companies' technological innovation in a timely and appropriate manner, it may not be able to appropriately adjust the skill sets and job categories of its technical staff, potentially losing competitive advantage. If the response is delayed, there is also a risk that the business model itself could become obsolete. The company strives to demonstrate flexible responsiveness to changes in market needs by maintaining and strengthening relationships with client companies.

In business activities including the foreign technical intern management agency business, if laws and regulations concerning human rights, such as those relating to forced labor, discrimination, and harassment, are not complied with, this could hinder business operations or damage social credibility. The company has established the "UT Group Human Rights Policy," supporting international human rights standards, and identifies company-wide risks, including human rights risks, through annual risk assessments, while formulating countermeasures and action plans to minimize losses.