Nippon Information Development Co.,Ltd.

In system development, there is a risk that project costs may exceed order amounts due to overly optimistic estimates or unexpected accidents, resulting in unprofitable projects. The recording of provisions for losses on order backlog and damages arising from delivery delays may affect business performance and financial condition. As countermeasures, the company has established an internal project manager certification system, set up an estimate review committee for large-scale projects, and implements progress monitoring through EVM (Earned Value Management) and milestone reviews.

The majority of client companies are large enterprises in manufacturing, transportation, retail, and life/casualty insurance, as well as government agencies. If exchange rate fluctuations, economic downturns, political developments, natural disasters, or other external factors reduce clients' willingness to invest in IT, the Group's order volume may decline, affecting business performance and financial condition. The order amount per client is less than approximately 15% of total orders, so customer concentration risk is considered limited. As a countermeasure, the company is promoting business expansion into new technologies and new fields, aiming for highly profitable business development in new markets and with new customers.

Pressure to reduce service unit prices is intensifying due to cost-cutting pressure stemming from deteriorating performance among client companies, excessive competition caused by hardware vendors shifting into software services, and increased low-cost offshore outsourcing to China, India, and other countries. If unit price declines continue, this may affect the Group's business performance and financial condition. As a countermeasure, the entire Group has obtained ISO9001 certification and strives to establish a quality management system and provide high value-added deliverables.

Securing and developing capable engineers and key personnel is essential to the Group's growth, and failure to do so may affect future growth, business performance, and financial condition. On the other hand, hiring engineers with cutting-edge skills may significantly raise recruitment costs and personnel expenses, and ongoing education and training also contribute to increased costs. As countermeasures, the company is working on talent development through on-the-job training, internal and external training programs, and tiered career development plans, as well as securing personnel through diversified recruitment methods and year-round mid-career hiring.

The company outsources part of its program development and operations work in system development to external business partners. If good relationships cannot be maintained or personnel with the necessary skills cannot be secured, this may affect the expansion of orders received. As a countermeasure, division head-level executives regularly visit core business partners to maintain close information exchange, and the company works to maintain good relationships by expanding incentives through long-term contracts under a core partner system.

If an outbreak of a new infectious disease or highly virulent influenza, or a natural disaster exceeding expectations, occurs, employees, buildings, and equipment may be affected, resulting in a temporary suspension of business. Such a business suspension may affect the Group's business performance and financial condition. As countermeasures, the company has established emergency disaster response regulations and a business continuity plan (BCP), and has built an employee safety confirmation system, among other measures.

Given the nature of the business, which involves handling customer information and personal data, if an unexpected information leakage incident occurs, it may result in liability for damages and a decline in corporate credibility, which could adversely affect contractual relationships in other businesses. As countermeasures, the company has obtained ISO27001 certification and the Privacy Mark, and has established an information security committee, implemented various security measures, and conducts employee training.

In the information services industry, significant changes in the technological environment can occur over a relatively short period. If technological innovation progresses faster than the company anticipates, this may affect business performance and financial condition. As a countermeasure, the company strengthens collaboration among its R&D department, which handles advanced technology research and talent development, its development department, which captures customer trends, and its sales department, which identifies market trends, thereby establishing an organizational structure capable of accurately responding to the technological innovation demanded by customers and the market.

Employee retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate. If actual results differ from these assumptions, or if the assumptions are changed, the impact accumulates and affects expenses and obligations in future periods. In particular, a decline in the future discount rate could affect the Group's business performance and financial condition.

If investment securities, business equipment, software, and other intangible and tangible fixed assets fail to generate the expected cash flows, declining profitability may make it impossible to recover the invested amounts, potentially requiring the recognition of impairment losses. If such impairment losses occur, they may affect the Group's financial position and business results.