System Integrator Corp.

Although the Group thoroughly manages projects using its proprietary product "OBPM Neo," there have been past instances of major project failures. The failure of even a single project could cause significant losses to the business, and depending on the scale, could have a material impact on operating results and financial condition. As a countermeasure, the Group is working to strengthen its PMO function to enable early detection and response to potential risks.

The IT industry is undergoing a shift from a package software sales model to a revenue model based on cloud services. If the Group's response to this change is delayed, it could result in slowing growth and sluggish performance, potentially affecting operating results and financial condition. The Group provides "OBPM Neo," "GRANDIT miraimil," "SAP S/4HANA® Cloud Public Edition," and other offerings as cloud services, and is promoting the expansion of its cloud service business. The success or failure of this business model transformation is a critical factor determining medium- to long-term competitiveness.

If unexpected significant bugs are latent or occur in already-sold products due to compatibility issues with hardware or operating systems, this could damage the credibility of the products and the company, potentially affecting operating results and financial condition. The Group strives to ensure quality through thorough testing in the final stages of development, but it is generally difficult to eliminate bugs entirely. Recognizing that improved product reliability directly contributes to long-term user acquisition, the Group is committed to the continuous discovery and elimination of bugs.

While the Group's policy is to plan and develop multiple products and services without relying on a single product, it is uncertain whether newly launched products and services will be accepted by the market and generate sufficient revenue, and this may take time. If sales stagnate due to misjudged market needs, intensified competition with rival products and services, or inadequate internal systems, recovering development investment could become difficult, potentially affecting operating results and financial condition. As countermeasures, the Group utilizes partnerships and M&A with other companies and conducts objective business continuity assessments based on KPIs.

If products or services developed by the Group infringe on the intellectual property rights of other companies, including patents, the Group could be sued by third parties and, if it loses, be ordered to halt sales or recall the products or services, potentially affecting operating results and financial condition. In addition to conducting prior review and verification when developing business, the Group strives to prevent infringement of other companies' rights through compliance training for employees. Patent risk in the software industry has the inherent characteristic of potentially increasing as the product lineup expands.

If the Group is unable to secure personnel with high technical skills and expertise as planned, and if the rapid pace of technological change delays engineer development, or if a deteriorating work environment leads to engineers leaving the company, this could make it difficult to release competitive products, potentially resulting in lost revenue opportunities and difficulty recovering investments. The Group is working on human resource development measures such as certification acquisition programs, tutor systems, employee training, and internal study sessions, as well as improving its personnel evaluation system, while also striving to prevent mass turnover by regularly monitoring turnover rates and employee satisfaction.