JTEC CORPORATION

The Group's business relies on technologists with rich sensibility and technical capability, and securing talented personnel is fundamental to business continuity. If the Group fails to secure personnel as planned under recruitment plans, or if the number of technologists declines significantly due to talent attrition, this may directly affect business performance. As countermeasures, the Group focuses on close follow-up by the recruitment department and training programs for younger employees who lack design work experience, among other initiatives.

The Technologist Intellectual Property Leasing business and the general staffing/engineer dispatch business are heavily influenced by the business performance trends of the manufacturing industry, which is a major customer segment. If a prolonged economic downturn continues, or if manufacturers continue to restrain capital expenditure and cut R&D spending, this may significantly affect the Group's business environment. The concentration of sales in specific industries (25.0% related to industrial equipment and 21.8% related to automobiles) amplifies this risk structurally.

The Group conducts staffing dispatch operations based on the Worker Dispatching Act, and is subject to legal regulation under this act and related laws and regulations. The Worker Dispatching Act is continuously being reviewed in response to changing circumstances, and if new regulatory tightening or legal amendments have an adverse impact on business operations, this may affect operating results. While the Company responds appropriately whenever legal amendments occur, depending on the content of future amendments, there is a risk of increased response costs or business constraints.

When technologists engaged in work within client companies are involved in the acquisition of patents, industrial property rights, and the like, disputes with clients may arise concerning the ownership of intellectual property rights. In addition, disputes may arise if, in the course of contracted work, it is alleged that third-party intellectual property rights have been infringed, which may also affect operating results. The Group addresses the ownership of intellectual property rights in its contracts with technologists and exercises meticulous care in the conduct of business, but it is difficult to completely eliminate this risk.

In the fiscal year under review, the sales ratio by industry showed a high dependence on specific industries, with industrial equipment-related sales at 25.0%, automobile-related sales at 21.8%, and information processing-related sales at 14.3%, while there was an imbalance with information and communication equipment-related sales at 2.8% and precision equipment-related sales at 3.9%, among others. If business conditions deteriorate in industries with large sales ratios and a client terminates a contract midway, and the Group is unable to quickly secure a subsequent client, this may affect business performance. The lack of progress in industry diversification heightens vulnerability to economic fluctuations in specific sectors.

Contract forms in the Technologist Intellectual Property Leasing business and the general staffing/engineer dispatch business include, in addition to staffing dispatch contracts, contracted work agreements and outsourcing agreements, the latter being a form in which compensation is received for work results. Under contracted work and outsourcing agreements, the Group may be held liable for defects in deliverables under warranty provisions, product liability, and the like, and if significant defects occur, there is a risk of financial burden such as damages. Specific details of the Group's countermeasures are not explicitly disclosed in the securities report.

If confidential information such as design drawings and confidential data known to technologists working within client companies is leaked externally due to unauthorized removal or misdirected emails, or if personal information of employees, applicants, customers, and others is leaked due to intent or negligence, this may result in loss of social credibility and legal risks such as litigation. The Group has obtained Privacy Mark certification and strengthens information management through raising awareness of information management, thorough guidance and education, and planned internal audits.

The staffing dispatch business market has low barriers to entry, with numerous operators present and a competitive environment marked by many new entrants. The Technologist Intellectual Property Leasing business also faces numerous competitors, and amid growing uncertainty about the economic outlook, intensifying competition may affect operating results. The Group differentiates itself through its strength in business development specialized in advanced technology, but depending on changes in the competitive landscape, there is a risk of price competition and declining orders.