Startia Holdings, Inc.

There is a risk that demand for multifunction printers and related maintenance services will gradually decline due to paperless initiatives driven by DX promotion and the consolidation of business offices in regional areas. A decline in sales prices and counter service unit prices due to intensifying competition, as well as customer attrition, may affect business performance. As countermeasures, the Company is strengthening relationships with existing customers, acquiring customers through M&A, and expanding its paperless-related business.

There is a risk that the entrenchment of remote work and hybrid work arrangements will change the demand structure for conventional office-oriented communication equipment. Changes in office demand and communication environment needs may affect the market environment and adversely impact business performance. The Company addresses this through partnerships with co-working space providers and by offering a diverse range of communication services.

In the new electricity retail business, there is a risk that electricity procurement prices from JEPX and power generation companies may fluctuate due to weather, temperature, global affairs, exchange rates, and other factors. When procurement prices spike, a time lag in passing on costs to customers' electricity rates may cause short-term deterioration in cash flow, affecting the financial condition. The Company addresses this by securing fixed-price procurement through bilateral transactions with power generation companies and introducing mechanisms for agile price pass-through.

Rapid technological innovation such as generative AI poses a risk of diluting the intermediary value the Group provides between AI infrastructure providers and customers, potentially impairing profitability. If internal AI utilization and human resource development lag behind competitors, the Group may also miss medium- to long-term growth opportunities. As countermeasures, the Company is promoting service development leveraging generative AI technology, integrating offerings under the Cloud CIRCUS brand, and introducing a subsidy program for AI-related certifications to raise overall AI literacy.

Cloud CIRCUS uses tools and API services from overseas vendors, primarily in Europe and the United States, as components of its offerings, and usage costs have already risen due to yen depreciation and overseas inflation. There is a risk that M&A or business restructuring by overseas vendors could result in the suspension or reduction of services, preventing continued use as before. The Company addresses this by building an agile price pass-through framework, increasing customer switching costs, and considering backup plans.

While M&A is positioned as a key growth strategy, there is a risk of delays relative to the expected pace of progress, discovery of previously unrecognized liabilities after acquisition, and failure to achieve synergies or goodwill impairment losses if PMI does not proceed as planned. These factors may adversely affect business performance and financial condition. The Company addresses this through thorough due diligence, accumulating internal M&A success cases, and prioritizing PMI quality to achieve early integration of management structures and promote cross-selling.

In the DX Solutions Business, the Company is making aggressive investments in software development to strengthen Cloud CIRCUS functionality, and holds numerous tangible and intangible fixed assets as well as goodwill. If significant changes in the business environment or operating conditions reduce profitability such that sufficient future cash flows cannot be generated, recognition of impairment losses may become necessary, affecting business performance and financial condition.

As the Company handles a wide range of personal information and confidential business information of customers and business partners, the risk of information leakage is increasing amid the spread of RaaS and the sophistication and commoditization of cyberattacks driven by AI advances. In the event of an incident, there is a risk of loss of social trust, liability for damages, and significant disruption to business continuity. In addition to maintaining ISMS and PMS certifications, the Company is working to enhance cyber resilience through the introduction of EDR and ZTNA, conducting targeted phishing email training, and considering the introduction of MDR.

Demand is high for personnel with the sales skills, specialized knowledge, and technical capabilities necessary for business expansion, and in recent years there have been instances where the expansion of necessary personnel did not proceed as planned. Maintaining competitive salary and benefit levels, along with rising recruitment and training costs, may affect business performance and financial condition. The Company addresses this by raising salary levels through revisions to its personnel system, employing unique recruitment methods (such as mahjong-based recruitment), establishing direct partnerships with universities, and improving the workplace environment by promoting young employees.

In the event of unforeseen circumstances such as large-scale earthquakes, floods, or other natural disasters, serious infectious diseases, or terrorism and war, business activities may be disrupted due to severe damage to employees, facilities, and systems. This could result in compensation to customers, decreased sales, and costs for restoring facilities and systems, affecting business performance and financial condition. The Company addresses this through BCP formulation and regular review, introduction of safety confirmation systems, earthquake resistance measures, disaster drills, and establishment of remote work systems, but notes that it is difficult to completely prevent all damage.