CORE CORPORATION

The estimated cost fixed at the time of order acceptance includes assumptions prone to fluctuation, such as labor costs and subcontracting work hours, and depends on the judgment of the project manager, entailing uncertainty. If specification changes or work-hour overruns lead to a significant change in the estimated total project cost, this directly affects business performance. The Company strives for early risk identification through monthly monitoring project review meetings, improved planning accuracy prior to project commencement, and optimization of the development structure.

Against the backdrop of a chronic shortage of IT talent, the Group outsources part of its development work to partner companies. If these partner companies are unable to secure sufficient technical capability or number of engineers, this may adversely affect operating results. The Company addresses this by maintaining long-term, stable business relationships with leading partner companies and by developing in-house engineers capable of handling specialized technologies.

Given the nature of its business, which involves handling confidential information such as customers' personal information, technical information, and trade secrets, the increasing sophistication and maliciousness of cyberattacks, including ransomware, could result in unauthorized access or information leakage. Such incidents could lead to business suspension, loss of social credibility, and liability for damages, adversely affecting business performance and financial condition. The Company works to reduce risk from technical, organizational, and financial perspectives through the establishment of an Information Security Committee chaired by the CIO, strengthened countermeasures based on the NIST Cybersecurity Framework 2.0, and enrollment in cybersecurity insurance.

Climate change is expected to lead to increased costs for maintaining the in-house development environment, higher carbon tax burdens, increased capital expenditure costs associated with the introduction of renewable energy, and heightened risks related to soaring raw material prices and procurement. In addition, damage to the Company's own facilities, employees, and networks caused by natural disasters could affect business continuity. The Company is working to reduce emissions through monitoring of electricity consumption and promotion of energy conservation, switching to 100% renewable energy at some business sites, and installation of solar power generation equipment.

The Company recognizes the risk that insufficient disclosure of climate change-related information based on frameworks such as the TCFD could lead to a decline in corporate value. At present, the Company is still in the stage of collecting and analyzing the necessary data and considering disclosure based on frameworks such as the TCFD, and establishing a disclosure framework remains a challenge.

Against the backdrop of intensifying competition for talent in the IT industry and a shrinking labor force due to the declining birthrate and aging population, there is a risk that recruitment of specialized personnel may not proceed as planned. If a shortage of recruitment becomes apparent, this could result in lost order opportunities, project delays, and adverse effects on the promotion of the growth strategy. The Company seeks to improve recruitment efficiency through the promotion of recruitment DX for centralized management and analysis of process data, standardization of online interviews, and acceleration of the selection process through the use of AI.

In addition to the risk of losing existing core personnel, advanced know-how and domain knowledge in system development and proprietary solutions are concentrated in specific veteran engineers. If this technology and know-how is not passed on to the next generation due to retirement or unexpected departures, it could lead to a decline in service quality, reduced customer satisfaction, and deteriorating development efficiency. The Company seeks to improve employee retention through the implementation of a PDCA cycle based on engagement surveys, the promotion of health management, and the enhancement of childcare and caregiving support programs.

With the rapid advancement of cutting-edge technologies such as AI and cloud computing, there is a risk that the skills of existing employees may become obsolete. In addition, delays in quickly developing the capabilities of inexperienced employees could hinder the maintenance of the development structure. The Company addresses this through the enhancement of its internal education and training system, expansion of its qualification acquisition support program, and vigorous promotion of reskilling, including the use of AI and generative AI.