JIG-SAW INC.

In the IoT market and generative AI market on which the Company's Data Control Business depends, unexpected factors such as a rapid slowdown in the pace of market expansion may lead client companies to scale back outsourcing of system maintenance and operations or shift toward in-house operations. If market growth is impeded, this could have a material impact on sales and business performance. As a countermeasure, the Company continues to monitor domestic and overseas market trends and economic conditions and to make flexible management decisions.

If various problems occur, such as power outages, network failures, natural disasters, epidemics, unauthorized access, computer viruses, or shortages or delays in the procurement of semiconductors and electronic components, stable service provision may become difficult, potentially having a material impact on the business and business results. Network infrastructure is primarily built around Sapporo, which is less susceptible to earthquakes, but the stable supply of semiconductors and other materials and the stable operation of the internet connection environment are fundamental prerequisites for the business. As countermeasures, the Company implements continuous data backup, enhanced security, diversification of procurement sources, development and operation of BCPs, and the establishment of a multi-location system.

As international transactions increase with the advancement of global expansion, sudden exchange rate fluctuations beyond expectations could affect the Company's financial position and business results. In addition, the enactment or revision of laws and regulations and changes in the political and economic situation at overseas locations may also affect business activities. As countermeasures, the Company implements foreign currency-denominated account settlement, natural hedging, and diversification of investments and financing.

As global expansion progresses, the enactment or revision of laws and regulations concerning tariffs and the movement of people, as well as the occurrence of international conflicts, may affect business activities at overseas locations and the stable supply of IoT-related equipment and materials including semiconductors, potentially impacting sales and profit/loss. International conflicts carry a risk directly linked to business continuity through shortages in the procurement of semiconductors and other materials. As countermeasures, the Company is diversifying its business partners and investees, developing and operating BCPs, and building a service delivery system from multiple locations.

The pace of technological innovation and changes in customer needs in the internet-related industry is rapid, and if feature expansion and development do not proceed as planned, or if rapid technological innovation, alternative technologies, or competing products emerge, or if the technology standards or platforms on which the Company relies change, the competitiveness and added value of the Group's services may decline. As countermeasures, the Company is implementing flexible feature expansions such as automatic control functions and operational visualization, while continuously engaging in research and development of advanced technologies including generative AI.

As the scope of generative AI implementation expands from data prediction and classification to the substitution of human operations, insufficient measures to ensure safety, accuracy, and confidentiality, or inadequate attention to copyright protection and ethical considerations, could lead to a decline in social credibility and corporate image, as well as financial burdens. In addition, delays in responding to generative AI carry the risk of loss or decline in business opportunities, market competitiveness, and brand image. As countermeasures, the Company has established a Generative AI Promotion Group and an Information Systems Management Office, and is promoting the development of regulations and manuals as well as AI governance initiatives.

The enactment or revision of new laws and regulations concerning the protection of personal information on the internet, or the establishment or revision of voluntary rules, may constrain the Group's business activities. In addition, in global transactions, import and export regulations of various countries may affect the business and business results. As countermeasures, the Company gathers information on and monitors the enactment and revision of relevant laws and regulations, conducts verification of applicability determinations related to import and export regulations, and assigns and trains personnel with qualifications required by laws and regulations.

Although there is currently no competitive threat, if competition intensifies due to future new market entrants, this could result in decreased sales due to price competition and unexpected expenditures or investments, potentially causing a material discrepancy in earnings projections. Securing reliable and stable earnings in response to the expansion and transformation of the internet-related industry market is recognized as an important challenge. As countermeasures, the Company is strengthening its competitiveness through diverse and wide-ranging business development, a variety of billing systems, and promotion of a subscription model with a low cancellation rate.

Due to the nature of management services, the Company may come into contact with clients' confidential information, and if an information leak occurs due to unauthorized external intrusion or human operational error, the Company may be held liable for damages, potentially affecting its business and business results. As countermeasures, the Company has obtained and maintains certification for ISO/IEC 27001:2022 and the Privacy Mark (JIS Q 15001:2023), conducts continuous training, has established detailed regulations, and maintains appropriate insurance coverage.

At SBI JIG-SAW Modernizations Co., Ltd. (in which the Company holds a 49% equity stake), established in January 2024, unexpected events such as a rapid deterioration in the external environment, a decline in business performance, financial regulations, or changes in the equity stake ratio could affect the Group's business and business results. The company plans to provide data control services for the financial industry and, over the medium to long term, to expand AI and IoT services globally. As countermeasures, the Company has established regulations for managing affiliated companies, dispatches officers and employees, and monitors business performance, legal compliance, the external environment, and financial condition on a monthly and quarterly basis.