fonfun corporation

In the cloud services market and DX market, new technologies such as AI, IoT, and big data analytics are rapidly emerging, and customer needs are becoming increasingly sophisticated and diverse. If the Group is slow to respond to these changes, it may face a decline in the competitiveness of existing services, obsolescence, or delays in developing new services, potentially affecting business operations. As countermeasures, the Group is promoting continuous collection and analysis of market and technology information, strengthening its research and development structure, utilizing agile development methods, and leveraging external technologies and alliances.

In the cloud services and DX solutions markets, there are numerous major domestic and international IT vendors, specialized companies, and new entrants, leading to intensifying price competition and service development competition. If the Group is unable to maintain its competitive advantage, this may lead to a decline in market share and deterioration in profitability. The Group addresses this by developing high-value-added services leveraging its proprietary technology and know-how, strengthening specialization in specific customer segments, and expanding the breadth of its solutions by utilizing services and technologies acquired through M&A.

Competition for highly skilled IT personnel, engineers, and consultants who drive cloud technology and DX initiatives is intensifying both domestically and internationally. If personnel acquisition and development do not proceed as planned, or if talented personnel leave the Group, this may result in delays in business expansion, a decline in service quality, and stagnation in new business development. The Group addresses this through establishing competitive compensation and benefits systems, utilizing flextime and telework systems, providing ongoing training and skill development opportunities, and improving employee engagement.

M&A is positioned as an important strategy for strengthening the Group's business foundation and expanding into new fields; however, if PMI (post-merger integration process) does not proceed as planned and expected synergies are not realized, or if the performance of acquired businesses falls short of expectations, this may result in a prolonged investment recovery period or impairment losses on goodwill, potentially affecting business performance and financial condition. As countermeasures, the Group aims to achieve early realization of synergies through risk assessment via detailed due diligence, establishing clear integration plans and KPIs, and appropriately allocating management resources.

Stable system operation is essential for the cloud services and DX solutions provided by the Group. If a system failure or service outage occurs due to natural disasters, accidents, cyberattacks, unauthorized access, computer virus infections, or other causes, this could disrupt customers' business operations, damage social credibility and brand image, and give rise to liability for damages. The Group addresses this by building robust system infrastructure, maintaining a 24/7/365 monitoring system, conducting regular vulnerability assessments and security audits, and establishing and operating an information management system compliant with international certification standards such as ISMS.

Due to the nature of its business, the Group has opportunities to handle customers' confidential information and personal information. If such information is leaked, lost, or damaged, this could have a significant impact, including a decline in social credibility and the occurrence of liability for damages. The Group strives to reduce the risk of information leakage by establishing and operating an information management system compliant with international certification standards such as the Information Security Management System (ISMS), and by thoroughly implementing information security education for all employees.

The Group is subject to various domestic and international legal regulations, including the Personal Information Protection Act, the Subcontract Act, labor-related laws, and intellectual property-related laws. If these regulations are amended or new regulations are introduced, this may result in additional response costs, changes to business operation methods, or the loss of business opportunities. The legal department works in cooperation with related departments to continuously monitor regulatory trends, and the Group strives to ensure compliance through the development of internal rules, establishment of operational systems, thorough employee education, and the use of external experts as needed.

Domestic and international economic downturns, rising inflation, interest rate fluctuations, and sharp changes in foreign exchange rates may affect the Group's business performance and financial condition through a decline in customer companies' willingness to invest in IT and their ability to pay, as well as through increases in the Group's funding costs and the occurrence of foreign exchange losses. The Group enhances its resilience to changes in the external environment by building a balanced business portfolio that avoids excessive dependence on specific customers, regions, or business fields, reviewing its cost structure, improving productivity, and managing funds appropriately.