PRAP Japan, Inc.

The competitive advantage of the Group depends heavily on securing excellent human resources, and if the Group is unable to secure sufficient talent or if talent attrition occurs, this may affect its business results. Given the nature of the business as a professional services provider in the communications field, the quality and quantity of human capital directly translate into earning power. As a countermeasure, the Group is promoting improvements to the working environment, including responding to diverse work styles and measures to enhance employee engagement.

The Group's business foundation relies on favorable relationships with mass media and digital media, and if trust with the media is lost due to the provision of misinformation or other causes, this could have a material impact on business results. In the PR and communications consulting business, relationships with the media are a core source of competitive advantage, and damage to these relationships is directly linked to business continuity. As a countermeasure, the Group's in-house training institution conducts communication training with diverse instructors, including those from the media.

Due to the nature of the business, the Group frequently handles confidential client information and personal information, and if information leakage or unauthorized use occurs, this may affect business results through damages claims, loss of client trust, and loss of social credibility. In PR consulting operations, undisclosed management information and personal information are routinely handled, making failures in information management a risk that could shake the very foundation of the business. As a countermeasure, the Group has obtained ISO27001 (ISMS) certification or Privacy Mark certification, thoroughly enforces information security guidelines, and conducts regular in-house training and internal audits.

If the Group infringes upon the intellectual property rights of third parties in the course of conducting business, this could develop into litigation or other disputes, affecting business results and social credibility. In the communications consulting business, which involves content production and information dissemination, there is an inherent potential risk of infringing copyrights, trademarks, and other rights. As a countermeasure, the Legal Department investigates third-party intellectual property rights, and the Group distributes a compliance manual and conducts regular in-house training.

If clients reduce their PR and marketing-related budgets in response to changes in economic conditions, this may affect the Group's business results. PR and communications-related expenditures tend to be classified as discretionary spending by companies, making them a priority target for cuts during economic downturns. As a countermeasure, in addition to maintaining long-term relationships with existing clients, the Group is continuously promoting M&A, new business development, service differentiation from competitors, cost reduction, and productivity improvement.

While the Group actively promotes M&A, business alliances, and new business development with the aim of enhancing corporate value and expanding its business domain, if there is a significant deviation from the business plan due to deteriorating financial conditions or circumstances differing from forecasts, this may affect business performance and financial condition. Integration risks in M&A and misjudgments of the business environment in new markets inherently carry the risk of impairing invested capital. As a countermeasure, the Group is focusing on timely understanding of market conditions and the business environment, conducting research and analysis to improve forecast accuracy, and managing and improving progress on business plans.

Chinese subsidiaries, the Singapore subsidiary, and domestic subsidiaries serving Western companies are included in the consolidated business results, and losses arising from country risk, foreign exchange fluctuation risk, and discrepancies between local market conditions and business strategy may affect business performance. In particular, in the China business, geopolitical risks and changes in the regulatory environment may affect business continuity. As a countermeasure, the Group strives to understand market conditions in the relevant regions through regular information sharing with local subsidiaries and business divisions.