CROSS CAT CO.,LTD.

Customer IT investment is highly susceptible to economic conditions and business trends, and if the Japanese economy stagnates or deteriorates, customer IT investment may decline. A contraction in IT investment could directly affect the Group's order volume and net sales. This is positioned as a particularly important risk, reflecting a business structure with high sensitivity to changes in the macroeconomic environment.

The Group is highly dependent on major clients affiliated with large manufacturers and system integrators, and a significant change in the ordering policies of these clients could materially affect the Group's business performance. The concentration of sales in specific customers is a risk factor for the stability of earnings and is classified as a particularly important risk. There is a risk that changes in clients' management strategies or a shift toward in-house development could lead to reduced orders.

In system development, estimates are prepared at each process stage, and quality control is conducted through the QMS along with project monitoring by the PMO; however, unforeseeable factors may cause quality or schedule issues, or defects may be discovered at the operational stage. The occurrence of unprofitable projects can lead to additional costs or recognized losses, directly affecting business performance. This is positioned as a particularly important risk, reflecting the structural challenges inherent to order-based businesses.

The Group strives to secure engineers through active recruitment activities, in-house training, and collaboration with partner companies; however, if it is unable to secure the necessary engineers due to labor market fluidity and the diversification of technological innovation, business expansion could be constrained and plans may go unachieved. Amid the ongoing tightness in supply and demand for IT talent, there is a risk that intensifying competition for hiring and rising personnel costs could affect profitability. This is classified as a particularly important risk.

As an information services company, the Group holds a wide range of information assets and strives to manage and handle information and provide training in accordance with its ISMS; however, should an incident such as a leak occur, business performance could be affected by a decline in social credibility and loss of customers. Given the nature of a business that handles clients' confidential information and personal data, security incidents could also lead to damages claims or contract terminations. This is positioned as a particularly important risk.

The Group strives to conduct compliance training and comply with laws, regulations, and internal rules, but it may not be able to completely avoid such risks. If a legal violation or an issue related to a business contract occurs, business performance could be affected by a decline in social credibility and claims for damages from customers. This is classified as a particularly important risk, as the materialization of legal risk can deal a blow both financially and reputationally.

In system development projects, unforeseen events can result in long working hours or excessive workloads; the Group strives to eliminate this through project monitoring, but if such situations arise due to unavoidable factors, business performance could be affected by declines in labor productivity, among other effects. Employee health issues can also lead to higher turnover and reduced recruiting strength, posing a risk of undermining the medium- to long-term human resource base. This is positioned as an important risk.

The information services industry can undergo significant changes in the technological environment; the Group strives to research diverse technology trends, but if it falls behind in responding to technological innovation beyond expectations, its business performance and financial condition could be affected. There is a risk that delays in skill transformation or capital investment in response to rapid technological changes such as AI and next-generation infrastructure could lead to a decline in competitiveness. This is classified as an important risk.

Amid increasingly demanding customer requirements for IT investment, the Group faces competition with other companies in the same industry in terms of both price and quality. The Group strives to enhance added value by leveraging its strength of being able to independently provide all processes from design through operation and maintenance, but if downward price pressure from external factors exceeds expectations, business performance could be affected. Declines in unit prices directly lead to lower gross profit margins, making the impact on the earnings structure significant.

The Group manages trade receivables through credit management and the recording of allowances for doubtful accounts based on internal rules; however, if a client's financial condition rapidly deteriorates due to changes in economic conditions, this could hinder the collection of trade receivables and affect business performance. In transactions with companies with a weak management foundation, there is a risk of unpredictable bad debt losses occurring, making credit risk management important during economic downturns.