UNIRITA Inc.

In an environment where DX is accelerating on a global scale, unexpected changes such as the rapid evolution of AI and the emergence of game-changing companies may occur. If the Group is unable to develop attractive new services that are timely and adapted to advanced technologies, this may have a material impact on business performance. The Group seeks to reduce this risk through progress management and rolling revisions of its medium-term management plan.

In the Product Services business and Cloud Services business, customer lock-in by competitors and the provision of software with similar functions through open-source methods may cause an extreme decline in product and service revenue. In a competitive environment where the pace of digital technology evolution is extremely fast, this threat continues to exist.

In contract-based agreements where the Group bears responsibility for completion, ambiguity in contract terms or unforeseen technical issues and project management problems may arise, resulting in cost overruns. If unprofitable projects occur, this may affect business performance through unexpected cost increases or payment of damages due to delivery delays.

The mainframe business within the Product Services business currently maintains high profitability, but there is a risk that traditional mainframe computers will fall out of use due to corporate consolidation, IT technology innovation, and the progress of cloud migration. If the Group is unable to provide timely and appropriate product upgrades and maintenance service cancellations increase sharply, this may have a material impact on business performance.

Under the strategy of "expanding service-provision-type businesses," the Group continuously invests in research and development aimed at growth areas in Cloud Services and the creation of new business domains. However, if the Group fails to grasp market trends accurately and in a timely manner, or if competitors get ahead in technology development, the investment may not succeed in generating returns. In a constantly changing market environment, there is an inherent risk that investment recovery is uncertain.

In the course of business operations, the Group frequently handles confidential information held by customers, and threats such as the increasing sophistication of cyberattacks leveraging AI are growing daily. If confidential information is lost, destroyed, or leaked, this may affect business performance and operating activities through a decline in social trust or the occurrence of liability for damages. The Group continually updates its prevention and loss minimization measures through strengthening its information security framework and employee training.

The Group's products and services may become subject to lawsuits alleging infringement of intellectual property rights due to unknowing use of third parties' patents or other rights. In addition, system failures caused by products or services may cause damage to customers, potentially leading to lawsuits, which, depending on their content, could have a material impact on business performance. The Group is building a framework to reduce litigation risk and minimize losses through strengthening its group legal function and employee training.

The Group positions M&A and capital/business alliances as important growth strategies for sustainable growth, but after execution, significant changes in market and competitive conditions, the emergence of previously unrecognized issues, difficulty in securing excellent talent, or discrepancies from the initial plan may occur. Although the Group seeks to reduce risk through due diligence, if the expected results are not achieved, this may have a material impact on business performance.

Large-scale disasters such as abnormal weather and earthquakes may destroy societal lifelines, making data management and system operation difficult under power supply outages or restrictions. The Group's products and services are involved in maintaining social infrastructure, and if a disaster exceeding expectations occurs, this may have a material impact on business performance. The Group addresses disaster preparedness through BCP planning formulated by its Crisis Management Committee, among other measures.