KYODO PUBLIC RELATIONS CO., LTD.

If material negligence, misconduct, or compliance violations occur, this may affect business operations, financial condition, and operating results. Given the nature of PR business, there are frequent opportunities to handle client information and press information, making the maintenance of a compliance system essential. The Group states that it strives to avoid the occurrence of such risks and to respond appropriately when they arise, but specific details of preventive measures have not been disclosed.

PR operations are easily adjusted according to client circumstances and are susceptible to budget cuts during economic downturns. In addition, there is a risk that the experience, knowledge, and know-how accumulated by the Group may become insufficiently utilized due to intensified competition from new entrants and the diversification of PR methods. Furthermore, media diversification driven by the rise of the internet may result in cases where the expected effects of traditional newspaper and magazine placements are not achieved.

In building media relations, maintaining continuous and favorable relationships with decision-makers at various media outlets is a key factor in service quality and effectiveness. If employees with extensive networks leave without proper succession, or if trust with the media is lost due to the provision of incorrect information or similar issues, this may affect financial condition and operating results. Succession of personal networks is not necessarily easy, and the high degree of personal dependency constitutes a structural risk.

The Group is promoting new business development, including M&A and business alliances, by leveraging the know-how of each business. If expected results are not achieved as originally planned due to changes in the business environment or other factors, this may affect financial condition and operating results. Failure of new businesses carries a risk that directly impacts the profitability and asset value of the Group as a whole.

For optional and spot projects, due to the PR industry's characteristic business practice in which the period from initial inquiry to the start of activities is extremely short, contracts are not prepared for all clients and projects. The absence of contracts may give rise to disputes or doubts regarding transaction terms. The Group works to mitigate this risk by promoting the conclusion of master agreements with major clients and establishing a director approval system under internal regulations.

As business expands, securing appropriate personnel is necessary, but this may become difficult due to the progression of the aging society with a declining birthrate. If personnel development and recruitment cannot keep pace with business expansion, the efficiency of business operations may be impaired over the long term, potentially affecting financial condition and operating results. The Group implements various development measures, including regular recruitment of new graduates, active hiring of mid-career employees, in-house study sessions, seminars, and management training.

Under a system in which individual teams handle everything from client relations to planning and media relations, temporary concentrations of workload can easily occur. If accidents arising from unforeseen circumstances develop into litigation or administrative sanctions, this could result in claims for damages as well as loss of social credibility and client trust. The Company has established a "Basic Policy on Work Style Reform" and strives to thoroughly manage labor and safety through awareness-raising activities for employees.

Client information and personal information are handled across the Group's businesses, and if an information leak occurs, this may affect financial condition, operating results, and social credibility. Kyodo Public Relations Co., Ltd., KeyWalker, and ULM have obtained ISO27001 (ISMS) certification, while Kyowa Public Relations, Total Communications, and VAZ have obtained Privacy Mark certification, among other information security management systems established across Group companies. However, the Group states that even with these measures in place, leakage risk cannot be completely eliminated.

The Group widely provides internet-based services, including DX services in the PR and AI/Big Data Solutions businesses and social media information distribution in the Influencer Marketing business. If incidents such as unauthorized access or data tampering occur due to increasingly sophisticated cyberattacks, this may affect business operations, cause service interruptions or suspension of transactions, and impact business continuity. A notable feature of this risk is that the expansion of digital services increases the Group's exposure to cyber risk.

Clients' PR-related budgets tend to be affected when large-scale natural disasters such as major earthquakes, various disruptions, large-scale accidents, or social unrest occur. If such events occur, budget cuts or freezes by clients may affect the Group's financial condition and operating results. The high sensitivity of PR budgets to economic conditions is a structural factor that increases vulnerability to external environmental risks.