AVANT GROUP CORPORATION

If cloud services handling customers' critical data related to statutory accounting, management accounting, business management, etc. are subject to a cyber attack, service suspension or loss of customer data may occur, potentially leading to payment of damages and a decline in reliability and brand image. This is positioned as the Group's sole "particularly important risk," and the Group is building a security management cycle compliant with ISMS, promoting SOC2 certification acquisition, and conducting cyber resilience assessments by external experts. The Group plans to continue investing in security measures in FY2026 (ending March 2026) as well.

In pursuing M&A for business expansion under the medium-term management plan "BE GLOBAL 2028," there is a risk that suitable candidate companies cannot be found or terms cannot be agreed upon. In addition, the subsequent discovery of contingent liabilities or unrecognized liabilities could lead to impairment of goodwill and other assets, potentially affecting business performance and financial condition. The Group seeks to reduce these risks through detailed due diligence conducted by the organization responsible for M&A and quantitative and qualitative monitoring of the management conditions of investees.

If investments in human resources, R&D, product development, and business infrastructure development aimed at achieving "BE GLOBAL 2028" fail to generate the expected results due to changes in the market environment or gaps with market needs, this could affect business performance and financial condition over the medium to long term. The Group strives to prevent the materialization of this risk and reduce its impact through careful decision-making based on evaluation of effects and risks at the investment consideration stage in accordance with authority regulations, and through progress monitoring after execution.

If a failure occurs in the cloud services provided by the Group and system/service operation is suspended, this could have a major impact on customers' operations, and if accompanied by loss of customer data, could have a significant impact on business performance and financial condition due to payment of damages. This could also lead to a decline in social credibility and brand image. The Group is promoting reinforcement measures from both the aspects of preventing failures and minimizing impact when they occur, striving for stable system operation and continuous service provision.

In the cloud-based service market, technological innovation and changes in market needs occur rapidly, and intensified competition, delayed response to changes, or increased costs such as system investment and personnel expenses could affect business performance and financial condition. The Group seeks to improve competitiveness through building a system for continuously monitoring the latest technology trends, pursuing optimal usability, differentiating its sales areas, enhancing customer support, and securing and training excellent human resources.

If the acquisition and development of excellent human resources with the specialized knowledge necessary for business promotion and growth does not proceed as planned over the medium term, this could affect future growth potential, business performance, and financial condition. The Group is promoting measures to strengthen recruitment and training systems, secure recruitment competitiveness by understanding appropriate market compensation levels, and encourage early success and retention through review of the personnel evaluation system.

When paying usage fees for cloud services provided by overseas companies in currencies other than yen, fluctuations in exchange rates may increase costs, potentially affecting business performance and financial condition. The Group hedges this risk through settlement via foreign currency deposit accounts, and has a policy of limiting the use of foreign currency deposits to the scope of actual demand and not conducting speculative transactions.

In the course of business promotion, the Group is subject to various laws, regulations, and public regulations, and violations could result in risks such as disposition by regulatory authorities, litigation, suspension of business activities, and damage to corporate brand value and loss of social credibility. The Group is promoting the building of a system for continuously monitoring the latest legal and regulatory trends, thorough dissemination to all officers and employees through the formulation of compliance-related regulations and education, and quantitative measurement and evaluation of compliance status by the Compliance Committee.

While exploring the introduction of AI-utilized management tools, if automated creation technology in areas such as programming languages becomes widespread, consulting revenue in the program development area may shrink. In addition, if the Group is unable to recruit highly specialized human resources necessary for implementing AI technology as planned, this could affect its business and performance. The Group is building a system for continuously monitoring the latest technology trends, exploring the utilization of AI in business areas, and working to acquire and secure highly specialized human resources capable of AI system development.

In handling personal information and confidential information of customers and Group stakeholders, if information leakage occurs due to unauthorized external access or errors by officers, employees, or outsourcing partners, this could have a serious impact on social credibility as well as affect business performance and financial condition. The Group has established systems for monitoring and preventing unauthorized access, such as firewalls and VPNs, obtained ISMS certification (ISO/IEC 27001:2013), formulated policies and conducted audits through the Information Security Committee chaired by the Group CIO, and conducts quarterly information security training for all officers and employees.