MKSystem Corporation

The Group provides ASP services utilizing the internet, and has been subject to cyber attacks from external sources in the past. If the defense system becomes dysfunctional due to increasingly sophisticated and advanced cyber attacks, service suspension, customer attrition, and damages claims could occur, potentially having a material impact on business performance and financial condition. Multi-layered defense measures and monitoring systems are currently in place, but complete elimination of such risk is considered difficult.

The Group manages large volumes of HR and payroll information related to social insurance and labor insurance, as well as specific personal information including individual numbers (My Number). Information leakage carries significant risk of reputational damage and damages claims. It is difficult to completely eliminate internal misconduct, human error, and external attacks, and should a leak occur, it could seriously impact business performance and financial condition. The Group continues to develop its personal information protection framework, but the risk remains.

The Group's systems must respond promptly to amendments in laws and regulations related to social insurance and labor insurance, and large-scale system changes may be required in the event of major institutional reforms. Increased modification costs or delays in response could impact business performance and financial condition. The Group has established a framework for continuous response to legal and regulatory amendments, but the risk associated with large-scale changes cannot be eliminated.

The Company's services are built on Amazon Web Services (AWS), and although failure monitoring systems and redundant configurations have been implemented, there is a risk of prolonged service outages due to large-scale AWS failures, natural disasters, access congestion, and other factors. Should service suspension become prolonged, the resulting damage to customer trust and potential damages claims could impact the business and business performance. Dependence on a single cloud platform is explicitly identified as a risk factor.

The Group's main customers are certified social insurance labor consultant (Shakai Hoken Roumushi) offices. If the volume of work handled by such consultants changes due to deregulation allowing entry by other professionals or advances in information technology, the Group's core customer base could shrink, potentially impacting business performance and financial condition. A scenario in which the exclusive business regulations under the Certified Social Insurance Labor Consultant Act are relaxed is cited as a specific risk.

The Company provides services compatible with various electronic filing systems, including the e-Gov electronic filing system. If information gathering or response is delayed in the event of significant changes to systems or technical specifications, this could affect competitiveness relative to other companies. Although the Company has a track record of continuously responding to system changes, the risk of delayed response to major changes remains, raising concerns about potential impacts on business performance and financial condition.

Noboru Miyake, Representative Director and President, possesses extensive knowledge and networks in the fields of social insurance and labor insurance, and plays a critical role in the Group's business operations. Should he become unable to perform his duties for any reason, business operations could be disrupted, potentially impacting business performance and financial condition. The Group is currently advancing the delegation of authority and organizational development, but this dependency risk has not been fully resolved.

As of the end of March 2026, the Group operates with a small workforce of 130 employees, and securing and developing highly skilled system development engineers in particular is essential for business continuity and expansion. If personnel recruitment does not proceed as planned or key personnel leave, this could hinder business operations and constrain growth, potentially impacting business performance and financial condition. Due to the small organizational scale, dependence on individual personnel is high, making the relative impact of this risk greater.

Development costs for systems built for cloud services are capitalized and amortized over multiple years. If development investment exceeds initial expectations or revenue growth falls short of projections, the increased amortization burden could impact business performance and financial condition. As the scale of development investment expands, the scenario in which investment recovery risk materializes is explicitly noted.

The information services industry is characterized by rapid technological innovation, creating a risk that the Group's existing technologies and skills could become obsolete. Failure to respond promptly to changes in industry standards and market needs could result in a loss of competitiveness, adversely affecting business performance. In particular, the rapid advancement of AI and cloud technologies is recognized as a factor that could threaten the competitive advantage of existing services.