Hotto Link Inc.

The enactment of new laws or amendments to existing laws in Japan and overseas (such as the EU General Data Protection Regulation) may impose constraints on methods of information collection and service provision. This carries the risk of affecting the Group's business model itself. As countermeasures, the Group continues ongoing information gathering through interview-based surveys and research and development aimed at acquiring alternative data sources.

The Group acquires data from social media both on a paid and unpaid basis; if the operators of these platforms change their policies and restrict or prohibit the provision of information, this could result in a decline in service quality or an increase in the cost of obtaining information. This is a risk that could shake the very foundation of the Group's service provision, and the potential impact on its business and results of operations is significant. The Group addresses this through domestic and overseas interview-based surveys and information gathering to grasp the latest trends, reviewing relationships with stakeholders, and reorganizing the services it provides.

The Group's business depends on large-scale computer server clusters and internet communication networks; if a large-scale system failure or cyberattack causes a system outage, it could disrupt service provision and affect the Group's business and results of operations. As countermeasures, the Group implements preventive measures such as operational status monitoring, system redundancy, and security measures.

Human resources are the Group's greatest asset supporting its growth; failure to recruit and develop excellent personnel, or failure to fill positions with personnel matching the needs arising from business transformation, could have a significant impact on operating results and growth. Securing personnel with the necessary skill sets is a particular challenge during periods of business transformation. The Group is working to strengthen recruitment public relations through active referral-based hiring and the holding of recruitment events.

The Group's major customers are leading companies in various industries both in Japan and overseas; if the financial condition or results of operations of major customers deteriorate during an economic downturn in Japan or overseas, this could have a significant impact on the Group's business and results of operations. There is also a risk that increased inflationary pressure caused by geopolitical risk or soaring energy prices could lead to a decline in personal consumption and an increase in corporate costs, directly hitting the performance of major customers. The securities report does not specifically describe countermeasures.

In entering new businesses, including those related to Web3, and in making capital contributions or investments in other companies, there is a risk that the expected effects will not be achieved, or that the value of the investment may decline significantly due to deterioration in the investee's business condition or operating performance. This carries the risk of affecting the Group's business and results of operations. The Group seeks to reduce this risk by establishing an investment committee, conducting domestic and overseas information gathering and examinations involving experts, and developing management systems.

If trademarks held by the Group (such as "Hotto Link/HOTTO LINK," "ULSSAS," and "UDSSAS") are infringed by a third party, resolving the matter could require considerable time and expense. In addition, if the Group unknowingly infringes on a third party's intellectual property rights, it could face claims for damages or demands for royalty payments, which could affect its business and operating results. The Group seeks to reduce this risk through active protection of its rights and employee education.

The Group is strengthening its internal control systems through the establishment of regulations and manuals and the implementation of audits by auditors and internal audits; nevertheless, if a situation arises in which laws and regulations are violated or fraudulent acts occur, this could affect the Group's business and results of operations. The Group strives to prevent such risks through strengthened governance via the establishment of a Group management meeting and collaboration with experts.

As part of its growth strategy, the Group is considering and executing M&A both in Japan and overseas; however, there is a risk that, due to sudden changes in the business environment after an acquisition or unforeseen circumstances, the acquired business may not perform as originally targeted. This carries the risk of affecting the Group's business and results of operations. The Group seeks to reduce this risk by conducting thorough investigation and examination of profitability and investment recoverability prior to executing M&A transactions.

As the Group actively pursues global expansion, it faces a variety of risk factors, including exchange rate fluctuations, legal regulations, differences in business customs, labor relations, geopolitical risks (terrorism, regional conflicts, war), and the outbreak and spread of epidemics. If these risks materialize, they could have a significant impact on the Group's operating results. The Group strives to establish appropriate systems and frameworks through compliance with regulations in each country, employee education, and strengthened governance.