Software Service, Inc.

In the medical information systems market, including electronic medical record systems, there are risks such as dependence on healthcare institutions' budget and capital expenditure priorities, opportunity losses due to delayed response to short-term demand, loss or contraction of recurring revenue caused by an active replacement market, and significant price reductions resulting from intensifying competition among several leading vendors. If the Company fails to achieve expected revenue or market share as a result, this could affect business performance over the medium to long term. In response, the Company is working to expand its product lineup, improve system implementation efficiency, and strengthen relationships with existing users.

Developing talent with both knowledge of medical and nursing care operations and specialized IT expertise requires several years of experience, and if the plan from recruitment to full productivity does not proceed as scheduled, this could affect business performance over the medium to long term. In addition, if a large number of system engineers, who make up the majority of employees, were to leave the Company, there is a risk that the absence of replacement personnel and delays in handing over duties could make stable business continuity and growth difficult to foresee. In response, the Company is working to actively recruit and provide educational opportunities such as internal and external seminars.

Underlying technologies such as development languages, operating systems, databases, cloud, and network equipment are evolving rapidly, and if responses to version upgrades, specification changes, end of support, or unexpected defects are delayed, product and service quality and development efficiency may decline, potentially having a significant impact on business performance. In addition, regarding AI technology, which is also rapidly spreading in the medical field, there is a risk that revisions to related laws, regulations, and guidelines could require a review of product and service development and operation policies. In response, the Company is working to grasp technology trends through collaboration and information gathering with diverse technology partners and to establish a system for the safe use of advanced technologies.

Medical information systems such as electronic medical record systems are critical infrastructure handling information related to patients' lives and bodies. If deficiencies occur in the systems or in implementation and maintenance services, this could give rise to claims for damages from healthcare institutions or legal liability based on breach of contract. In particular, there are concerns about long-term impacts due to suspension of operations at healthcare institutions or loss of trust, which could seriously affect business performance. In response, the Company has established a quality control department, strengthened the checking system at the time of implementation, and provides continuous specialized education and training for service personnel.

As the Company manages a large amount of information assets, including sensitive personal information of healthcare institutions, threats from cyberattacks such as ransomware and unauthorized access are becoming increasingly sophisticated and elaborate every day. If system outages, data tampering, or information leakage occur, this could seriously affect business performance and financial condition due to business suspension, loss of trust from customers and business partners, and liability for damages. In addition, there is a risk that failures or information leaks at external contractors to whom cloud services, communication lines, and equipment maintenance are outsourced could disrupt operations. In response, the Company has obtained and operates ISMS certification, established SSI-CSIRT (a member of NCA), and provides appropriate oversight of contractors.

The medical industry is strongly affected by public regulations and policy trends. Depending on trends in medical fee revisions and medical system reform, there may be an impact on the electronic medical record market and on the management policies of customer healthcare institutions, which could affect the business performance of the Group. In addition, changes in policy and legal regulations may necessitate the new development or major modification of medical information systems, and if the response to this is delayed, this could also affect business performance. In response, the Company has established a system for rapid response through information gathering in cooperation with healthcare institutions and participation in specialized academic societies related to medicine and law.

The Group has only registered trademarks for some systems, such as "e-Karte®," and has not filed for or acquired other intellectual property rights, creating a risk of infringing third-party intellectual property rights amid rapid technological innovation. If patents or other rights of which the Company is unaware have been established, the Company could face claims for damages or injunctions from third parties, which could affect business performance. In response, the Company is working to establish internal regulations, conduct prior investigations of competitors' services, and provide internal education.

If a large-scale natural disaster such as an earthquake, tsunami, typhoon, flood, or epidemic occurs, system implementation may be suspended or postponed at healthcare institutions in affected areas, and business activities may be restricted due to closure of the Group's offices, which could affect business performance. There is also a risk of data loss in medical information systems. In response, the Company has established data centers in two locations, Osaka and Tokyo, to maintain a data preservation system.

If infectious diseases such as novel coronavirus or influenza occur, spread, and become prolonged or serious, many customer healthcare institutions may prioritize infectious disease countermeasures and suspend or postpone the introduction of medical information systems, which could affect the Group's business performance. In response, the Company prioritizes the safety of customers, business partners, and employees above all else, implementing measures such as temperature checks, remote work, staggered work hours, and maintaining social distancing.

As a basic management policy, the Group has adopted "specialization," concentrating its business on medical information systems such as electronic medical record systems. This creates a structural risk whereby fluctuations in demand or a deterioration in the competitive environment in this market directly affect overall business performance. If the Company fails to achieve expected revenue or market share due to healthcare institutions' budget constraints or changes in capital expenditure priorities, this could affect business performance. In response, the Company strives to maintain competitiveness by expanding its diverse product lineup and providing high-quality services.