SRA Holdings, Inc.

Rapid technological evolution in the information services industry, diversification and sophistication of customer needs, intensifying competition, as well as domestic and overseas economic conditions, IT investment trends, and changes in laws, regulations, tax systems, and accounting standards affect the business. The Group has positioned "Business Model Transformation" and "Promotion of In-house IP Products × Global Business" as growth strategies, but if sudden social changes exceeding expectations occur, this may affect business results. This is positioned as a particularly important risk.

In the Development Business, which is a core business, lump-sum contracts may be entered into, and there is a risk that profitability may deteriorate due to specification changes after the start of development or work processes exceeding initial estimates. SRA Corporation has established a progress and quality management system through a dedicated department, and has also set up a company-wide response system with the Representative Director and President as the head of the countermeasures headquarters; however, if projects with profitability falling below expectations occur, this may affect business results. This is positioned as a particularly important risk.

The Group is actively promoting business investment and financing through business and capital alliances and M&A with local companies aimed at developing overseas growth markets, and recorded a provision for doubtful accounts of ¥223 million related to overseas business investment and financing in the consolidated fiscal year under review. If the valuation of investments and financing fluctuates beyond expectations due to a sharp deterioration in economic conditions, exchange rate fluctuations, the materialization of risks specific to overseas markets, or changes in the management or business performance of investee companies, this may affect business results. This is positioned as a particularly important risk, and the Group intends to continue proceeding cautiously while carefully assessing the degree of impact.

If the market value of marketable securities held by the Group declines significantly, it will be necessary to record valuation losses, etc. In addition, foreign currency-denominated loans generate foreign exchange gains or losses due to exchange rate fluctuations; as the yen depreciated at the end of the consolidated fiscal year under review compared to the end of the previous consolidated fiscal year, a foreign exchange gain of ¥722 million was recorded, but exchange losses arise during yen appreciation phases. The Group conducts regular monitoring and timely information gathering, but if sudden fluctuations beyond expectations occur, this may affect business results.

Abnormal weather associated with climate change, natural disasters such as earthquakes, and man-made disasters such as fires, terrorism, and riots may cause direct or indirect damage to personnel, facilities, customers, and business partners. There is also a risk that activities across society as a whole may be restricted due to the spread of infectious diseases such as novel influenza or COVID-19. The Group is working to mitigate impact through flexible work arrangements including telework, but if serious damage exceeding expectations occurs, this may affect business results.

In the course of business, the Group may handle personal information and confidential information held by client companies, and there is a risk of information leakage, falsification, or loss due to cyberattacks or human error. The Group carries out appropriate management through the establishment of information security guidelines, acquisition of information security certifications, employee education and training, and regular internal audits; however, if unexpected cyberattacks or similar incidents occur, this may lead to claims for damages from customers and loss of credibility, potentially affecting business results.

Securing and developing personnel with specialized information technology skills is extremely important for achieving sustainable growth, but competition for talent with other companies in the same industry is intensifying. The Group is implementing measures such as broad-based recruitment activities, enhanced technical training, a system allowing employees to challenge themselves in desired work areas, and improved working environments through work-style reforms; however, if these do not proceed as planned, this may lead to increased recruitment costs and personnel expenses and a decline in competitiveness, potentially affecting business results.

The Development Business and Operations & Construction Business utilize business partners, while the Sales Business procures a wide variety of software products from domestic and overseas product suppliers. If personnel adjustment issues arise due to circumstances at business partners, or if difficulties in securing products arise due to changes in the business strategies of product suppliers, this may impair the stability and efficiency of operations and affect business results. The Group is working to reduce this risk by striving to maintain good trading relationships.