SOFTMAX CO.,LTD

Due to demographic changes and reforms of the social security system and healthcare system, the management environment for medical institutions is becoming increasingly severe. If growth of the medical information systems market stagnates due to trends in laws and regulations or healthcare system reforms, this could affect the Company's business performance. The Company seeks to respond promptly through the collection of market information and sales activities tailored to market conditions.

In the medical information systems market, competition with major computer manufacturers and medical information system companies is intense, and the competitive structure is also changing as adoption is promoted in the hospital segment of 399 beds or fewer. If product prices decline due to changes in the competitive environment, profitability may decline and affect business performance. The Company is pursuing differentiation through its long-accumulated technology and know-how, R&D utilizing generative AI, and functional expansion through integration with other companies' systems.

Against the backdrop of rising healthcare costs due to an aging population, the Ministry of Health, Labour and Welfare has adopted a policy of optimizing healthcare costs. If a negative revision to the medical fee schedule is implemented, it could put pressure on the management of medical institutions, the Company's principal customers, and dampen their willingness to invest. As a result, cancellations or postponements of medical information system implementations may occur, and depending on the content of the revision, the Company's development burden could increase excessively. The Company gathers information from medical information system-related organizations and medical institutions and has established a system for prompt response.

The comprehensive medical information system "PlusUs" is required to guarantee performance across the entire infrastructure, including hardware, middleware, and databases, and further legal regulations, such as standardization of specifications and standards, may be implemented in the future. If the Company is slow to respond to legal regulations or fails to respond appropriately, the costs of new development and modification of the system may increase, affecting business performance. The Company seeks to respond promptly through the collection of information from related organizations and medical institutions.

Due to the rapid progress of software technology innovation, there is a risk that the Company may be unable to accurately anticipate or determine whether its software infringes on the intellectual property rights of third parties. If patents or other rights of which the Company is unaware are established, the Company could face lawsuits seeking damages or injunctions against use, and may incur various legal costs. The Company addresses this through internal education on intellectual property and by promoting the filing and acquisition of its own intellectual property rights.

Responding to the rapid advancement of IT technology and securing personnel with advanced development skills are important challenges for business expansion. If the Company is unable to secure personnel as planned or is slow to respond to new technologies, this could affect business performance. The Company works on regular new graduate recruitment, active mid-career hiring, and timely hiring of specialized personnel, while also promoting engineer education and R&D activities aimed at acquiring new technologies.

Medical information systems such as electronic medical record systems play an important role as business infrastructure for medical institutions. If unforeseen defects or malfunctions occur, this could lead to a decline in social trust and give rise to liability for damages to customers. Because the impact on medical practice is direct, the risk of quality defects is particularly significant. The Company has established a quality control department that operates development processes compliant with ISO 9001, and strives to improve quality.

New types of cyber threats, such as computer viruses and ransomware, are emerging daily, and even with thorough countermeasures in place, there is a possibility that the Company could become a source of infection and cause harm to users. In particular, ransomware damage at medical institutions has been increasing, and if an infection occurs, there is a risk that the Company could face claims for damages or litigation costs from users. The Company takes measures such as applying the latest antivirus software, building security systems, and promoting data backups.

In the course of performing their duties, employees are in an environment where they have access to medical institutions' clinical information as well as personal and confidential information. Should an information leak occur, this could lead to a decline in social trust and give rise to liability for damages to customers. Because medical information is highly sensitive, the impact of a leak could be particularly severe. The Company has obtained Privacy Mark certification and ISMS certification, and has strengthened employee training on information management and implemented measures to prevent internal leaks.

In the event of large-scale earthquakes, tsunamis, typhoons, floods, or other natural disasters, or the spread of infectious diseases, medical institutions in affected areas may cancel or postpone system implementations, and the Company's business activities may be restricted due to closures of its offices, among other effects, potentially impacting business performance. The Company has established a system for gathering information from customer medical institutions and a disaster management system, and has put in place a framework to establish a response headquarters and respond promptly in the event a risk materializes.