FTGroup CO.,LTD.

The Group is subject to regulation under various related laws and regulations, including the Act on Specified Commercial Transactions, the Act against Unjustifiable Premiums and Misleading Representations, and the Telecommunications Business Act. Amendment, abolition, or tightening of these laws and regulations may affect business performance. This is a regulatory risk spanning multiple businesses, including telecommunications, sales agency operations, and electricity, and the wide scope of business areas means the potential impact is broad.

As the proportion of proprietary products and services—such as LED lighting, fiber-optic internet services via FVNO, fixed-rate maintenance services, and retail electricity services—increases, if product defects occur or services are suspended for an extended period, this could result in returns, damages claims based on the Product Liability Act, and other costs, potentially affecting business performance. As the proportion of proprietary products rises, the importance of this risk is increasing.

Because the retail electricity service procures electricity through the wholesale electricity trading market, the Group bears the risk that procurement prices may surge sharply due to fluctuations in power generation fuel prices, exchange rates, spikes in market prices during summer and winter peak demand periods, natural disasters, accidents, or system troubles. A sharp rise in electricity procurement costs would directly squeeze profitability and could have a material impact on business performance.

The sales agency business for telecommunications carriers, manufacturers, and others depends on the policies and terms set by the outsourcing companies, and changes to contract terms or deterioration of conditions may affect business performance. As this is one of the Group's core businesses, its revenue structure is at risk of significant fluctuation depending on the decisions of the outsourcing companies.

To strengthen sales activities and expand scale, the Group continues to hire new graduates and mid-career employees and conducts tiered training programs. If recruitment plans or human resource development do not proceed as planned, this may affect business performance. Securing human resources is a prerequisite for business expansion, and intensifying competition in the recruitment market remains an ongoing challenge.

In conducting M&A, the Group performs due diligence in cooperation with retained attorneys and certified public accountants. However, if issues not identified during due diligence—such as the emergence of contingent liabilities—arise after completion, or if the acquired company's business development does not proceed as planned, this may affect business performance. As the Group continues to pursue a group expansion strategy, the possibility of this risk materializing remains ongoing.

The Group holds a large volume of customer information across its various businesses, and if an information leakage incident occurs, it may result in damages claims and loss of credibility, potentially affecting business performance. Holding large volumes of customer information is unavoidable given the nature of the business, requiring continuous strengthening of security measures.

In the corporate solutions business, sales are conducted using lease contracts through partner leasing companies. If the contract conclusion rate declines significantly due to tighter credit screening by leasing companies, increases in lease rates, changes to relevant laws and regulations, or changes in accounting standards, this may affect business performance. Since lease contracts are a primary means of corporate sales, a decline in the contract conclusion rate directly impacts revenue.

Because the Group applies IFRS, goodwill is treated as a non-amortizing asset, and if the profitability of any business declines, an impairment loss may occur, potentially affecting business performance. As the Group pursues a group expansion strategy through M&A, its goodwill balance has been accumulating, creating a risk of a large one-time loss being recognized if the business environment deteriorates.