ODK Solutions Company,Ltd.

The company's core business is outsourcing of information processing systems, and it stores and processes large volumes of clients' important confidential information, creating a risk of information leakage due to human or non-human factors. Should confidential information be leaked, this could result in significant loss of social credibility, contract termination, damages claims, loss of business opportunities, and other damages. The company has obtained ISO/IEC27001 and ISO/IEC27017 certifications and is engaged in security management company-wide, but it states that eliminating all risk is difficult.

The company qualifies as a personal information handling business operator under the Personal Information Protection Act, and is also subject to strict handling requirements for specific personal information under the My Number Act, as well as penal regulations such as the Copyright Act and the Unauthorized Computer Access Act. If information is illegally leaked or misused through unauthorized access or other means, this could affect business performance. The company strives for strict internal management through ISO/IEC27001 certification and renewal of its Privacy Mark (P-Mark).

There is a risk that business operations could be disrupted by large-scale disasters such as earthquakes and floods, terrorism, epidemics, computer viruses, AI-based cyberattacks, and other events. Such occurrences are difficult to predict, and if damage occurs, this could affect business performance. The company has formulated a business continuity plan and works to minimize the impact of emergencies by regularly reviewing the plan even during normal times.

In the operation, development, and maintenance of information systems, there is a possibility that service interruptions or delays may occur due to system defects or human error. If services cannot be provided as contracted, increased costs associated with recovery and repair work could affect business performance. The company works to prevent recurrence through project process management, testing and review, and mandatory corrective action reporting.

The company is promoting the use of generative AI to improve efficiency in system development and operations as well as internal business processes, but risks are anticipated including leakage of personal and confidential information, infringement of intellectual property rights, and dissemination of misinformation. As AI technology advances daily, risks may materialize unexpectedly in the course of business use and could affect business performance. The company seeks to mitigate this risk by creating and continually updating its "Generative AI Usage Guidelines."

Since sales in the education business are mainly derived from outsourced operations related to university entrance examinations, most of which conclude in March, both sales and profit tend to be concentrated in the second half of the fiscal year (particularly the fourth quarter). Because fixed costs are also incurred in the first half, the company may record a loss through the first half, resulting in a business structure with significant seasonal fluctuation. The company states that eliminating this concentration is difficult given the nature of the business.

System development and maintenance as well as equipment sales are susceptible to economic conditions, new technologies, and product lifespans, and depending on circumstances, the range of performance fluctuation could become large. While the company aims to expand its business scope based on system operations, it states that eliminating fluctuations in sales due to increases or decreases in development and maintenance work is difficult.

Securing excellent human resources is essential to providing services that keep pace with the development of ICT technology, but competition for talent in the information services industry is intense. If the company is unable to secure and develop personnel as planned, or if recruitment and training costs increase, this could affect its business and business performance. The company addresses this by hiring high-value-added personnel and continuing employee skills development.

Since operations related to university entrance examinations constitute a core business, if reforms are implemented to the examination system, such as changes to the timing of examinations or examination administration guidelines, this could affect business performance. Depending on the content and timing of such system reforms, there is a risk that the content and scale of outsourced operations could fluctuate.

The company holds both listed and unlisted shares, and if the market value or substantial value of these shares declines significantly, valuation losses on held securities could arise, affecting business performance. In addition, gains or losses on the management of defined benefit corporate pension plan assets could increase or decrease retirement benefit expenses, which could also affect business performance. The company uses the simplified method for calculating retirement benefit obligations.