Information Planning CO.,LTD.

Over 90% of net sales are generated from financial institutions, with management resources particularly concentrated on regional banks, second-tier regional banks, shinkin banks, and credit cooperatives. If there is a shift in administrative policy toward financial institutions or a suppression of system investment due to economic conditions, this could have a direct impact on business development and operating results. The Company maintains a policy of continuously stimulating demand for investment in credit risk management systems, but the structural dependence on a specific industry has not been resolved.

Multiple competing development companies exist in the fields of credit risk management systems and general affairs/accounting-related systems. While the Company seeks to differentiate itself by leveraging the accounting and tax expertise of certified public accountants and other specialized know-how in the financial industry, intensified competition with competitors and new entrants could result in lost order opportunities and price competition, adversely affecting operating results.

In the Systems Integration segment, deliveries tend to concentrate around the interim closing period (September) and the fiscal year-end closing period (March) of financial institutions, causing sales to skew toward the second and fourth quarters. In the System Support segment, database deliveries related to roadside land prices (published in July) and benchmark land prices (published in September) concentrate by November, causing sales to skew toward the first quarter. This seasonal fluctuation causes significant quarter-to-quarter variation in performance, complicating investors' assessment of results.

Among small and medium-sized financial institutions, adoption of jointly-used systems is increasing for the purpose of reducing initial investment burdens and standardizing industry practices, and the Company provides more than 20 types of jointly-used systems to Shinkumi Information Service Co., Ltd. As dependence on jointly-used systems increases, changes in investment trends toward such systems could affect business development and operating results. While the Company maintains a policy of responding in parallel with sales to individual financial institutions, the risk of concentration in a specific channel remains.

While the copyrights of package systems developed by the Company are basically held by the Company, there is a possibility that the Company may be infringing on third parties' intellectual property rights without its knowledge. In particular, judgments regarding the applicability of business model patents in the financial technology field are difficult, creating a risk of receiving claims for damages or injunctions from third parties. No litigation or disputes have arisen to date, but the Company is proceeding with legal responses in cooperation with law firms.

The Group has opportunities to access confidential information of client companies (mainly financial institutions) through system development, sales, and consulting activities, and if an information leakage were to occur, it could result in a loss of trust and claims for damages. While the Company has implemented measures such as establishing internal rules compliant with the Personal Information Protection Act, employee training, and internal audits, the risk of leakage due to unforeseen circumstances cannot be completely eliminated. Given the business characteristic of primarily serving financial institution clients, a failure in information management could directly lead to the loss of business relationships.

Growth of the Group requires not only experts well-versed in accounting, tax, and the financial industry, but also the securing of excellent personnel in sales, technology, administration, and System Support departments. While the Company conducts mid-career hiring in addition to focusing on new graduate recruitment, if the securing and development of personnel meeting the required qualifications does not proceed as planned, this could affect business development and operating results. Intensifying competition in the market for highly specialized personnel is a factor increasing the difficulty of recruitment.

The Group operates the Real Estate Leasing Business, and depending on trends in the real estate market, such as rising vacancy rates, declining rent levels, and increased supply of nearby rental properties, rental income could be affected. While the Real Estate Leasing Business has a different revenue structure from the Systems Business, deterioration in market conditions could affect the financial position of the Group as a whole.

If owned real estate is damaged due to a natural disaster or other unforeseen event, this could affect the Group's operating results and financial position. Physical damage to real estate assets could lead to the incurrence of repair costs and loss of rental income, and could also disrupt the base functions of the Systems Business.

While the Company's policy is to basically retain and utilize as management resources the copyrights of package systems it develops, there is no guarantee that the Company can continue to retain copyright ownership as a condition of contracted system development undertaken for business partners. If copyright ownership is transferred to a business partner, the Company's competitive advantage as intellectual property could be impaired, potentially constraining future business development.