DeNA Co., Ltd.

If the Company Group's response to technological innovation and business structural changes related to the internet and AI is delayed, its competitiveness may decline. If copyright infringement, personal information leakage, or ethical issues arise in connection with the use of AI technology, there is a risk that services may need to be discontinued, damages may be claimed, or the Group's credibility may be undermined. The Company Group has established the DeNA Group AI Policy and a multifaceted business review framework including compliance and risk management departments; however, given the nature of technological innovation, it recognizes that risks cannot be completely avoided.

The Company Group operates businesses for mobile devices running Android and iOS, and unpredictable changes to terms and rules or new settings introduced by OS providers may make it difficult to continue providing services as before. If response costs increase or accounts are suspended, this could affect the Group's business and operating results. The Group has established a development framework to adapt to the latest OS versions and a collaborative structure between administrative and business departments, but given the nature of the relationship with OS providers, complete avoidance of this risk is difficult.

User preferences in mobile games change rapidly, and a delayed response to user needs poses a risk of declining profitability. In recent years, game development costs have tended to rise, and there is a possibility that development of new titles may not proceed as planned. It is also explicitly stated that if changes to or termination of contracts with partners or IP providers make it difficult to continue providing key content, this could have a material impact on the Group's operating results.

In the operation of professional baseball, basketball, and soccer clubs, as well as facilities such as Yokohama Stadium, poor competitive results, declining attendance, and rising construction costs for new facilities due to soaring construction expenses may affect operating results. In the event of an accident such as a foul ball injury, there is a risk of large damages claims and reputational damage, and there are also risks of event cancellation due to natural disasters such as earthquakes and typhoons, as well as extreme weather events associated with climate change. Depending on the renewal status and terms of the usage contract for Yokohama Stadium, there may also be constraints on facility use.

In the ICT-based healthcare and medical business, revisions to laws and regulations such as the Pharmaceuticals and Medical Devices Act, the Medical Practitioners' Act, and the Act on the Protection of Personal Information may restrict business activities or result in additional costs. The Group handles large volumes of highly sensitive personal information such as health checkup data, and if information leakage or inadequate handling occurs, there is a risk of substantial damages claims or administrative sanctions. The Company Group has positioned this as a critical management risk and has established a rigorous information management framework, including ISO27001 certification and Privacy Mark acquisition, but recognizes that complete prevention of such risk is difficult.

The Company Group acquires and uses large volumes of users' personal information in providing its services, and if a significant incident such as an information leak occurs, this could affect operating results through damages claims or loss of credibility. Overseas businesses are subject to regulations such as the EU's GDPR and the US State of California's CCPA/CPRA, and violations could result in the imposition of fines or suspension of services. The Group has established personal information management regulations under a Personal Information Management Committee chaired by the President, but it is difficult to predict the timing of any information leakage or similar incidents.

The Company Group's business is heavily dependent on communication networks and computer systems, and if a system failure occurs due to a natural disaster, unauthorized access, computer virus, or similar cause, this could have a material impact on operating results. System downtime caused by unpredictable factors such as a sudden surge in access or outages of cloud services could also affect operating results. This is recognized as a persistent, inherent risk as long as the Group's business structure, centered on internet services, is maintained, and it is explicitly stated that a suspension of key services could have a material impact on operating results.

The Company Group utilizes M&A as an effective means of business expansion, and as of the end of the current consolidated fiscal year, goodwill of ¥20,747 million was recorded. If issues not identified during pre-acquisition due diligence, such as contingent liabilities or previously unrecognized debts, arise after an acquisition, or if post-acquisition business integration does not proceed as planned, goodwill impairment may be required, potentially affecting operating results. The Group conducts risk assessments and considers countermeasures when carrying out M&A, and maintains a system for continuously monitoring business conditions after completion, but complete avoidance of this risk is difficult.

The Company Group's services are subject to a wide range of legal regulations, including the Consumer Contract Act, the Act against Unjustifiable Premiums and Misleading Representations, the Telecommunications Business Act, and the Antimonopoly Act, and business activities may be restricted by stricter regulation or the enactment of new laws. There are also outsourcing transactions subject to the Act on Improving Transaction Terms for Specified Contract Workers and the Freelance Act, and overseas businesses are subject to commercial, personal information, and competition laws of each country. In the event of any violation of such regulations, the Group may be subject to administrative sanctions or guidance, which could affect operating results; the Group strives to reduce this risk through regular legal compliance training and the development of its management framework.

If the development of human resources and recruitment of external talent needed to respond to business expansion and diversification of operations does not proceed as planned, this may become a factor limiting competitiveness and business expansion, potentially affecting operating results. In particular, securing talent in the AI and engineering fields has become a challenge, creating a risk of delayed response to new technologies. In addition, if the development of internal management systems fails to keep pace with changes in business operations, appropriate business management may become difficult; furthermore, if reduction and management of fixed costs does not proceed as planned, or if excessive cost cutting prevents necessary investment, this could also affect medium- to long-term competitiveness.