PCI Holdings,INC.

The Group's business is dependent on trends in capital investment by domestic companies in software, semiconductors, and other areas. If a slowdown in the economy or changes in economic conditions reduce capital investment appetite, there is a risk of stagnation in new customer acquisition, decreased orders from existing customers, and cancellation of maintenance and operation contracts. As a countermeasure, the Group works to anticipate market trends in advance and secure competitive advantage.

Amid active global business consolidation in the semiconductor industry, if domestic semiconductor manufacturers shift their development outsourcing to overseas companies in Asia and elsewhere, there is a risk that orders for the Group's semiconductor-related business will decrease due to contraction of the domestic semiconductor development market. The Group addresses this by continuously monitoring customer demand trends and promoting optimization of its business portfolio.

The pace of technological innovation in the information services industry is remarkable, and if the Group fails to respond to changing needs and new technologies, or if consideration for safety and ethics in AI utilization is insufficient, there is a risk of decline in social credibility and brand image. The Group addresses this by establishing the "PCI Group AI Ethics Policy" and expanding and continuing its AI governance initiatives.

Due to increasingly diverse and sophisticated cybersecurity threats such as targeted cyberattacks, ransomware infections, and DDoS attacks, if confidential information or personal data is leaked or large-scale system outages occur, there is a risk of loss of social credibility, pursuit of legal liability, and incurrence of recovery costs. The Group addresses this through obtaining the Privacy Mark certification, group-wide deployment of security software, and regular information security training.

If the Group is unable to sufficiently secure and develop personnel with advanced IT skills or next-generation management executives, there is a risk of decline in business competitiveness and delayed decision-making due to the loss of talented personnel. In addition to enhancing various training systems and utilizing diverse recruitment channels, the Group systematically promotes the selection of candidate management executives through the Nomination and Compensation Committee and next-generation leader development programs.

In software development, semiconductor test design, and other areas, there is a risk of low profitability or losses if actual costs exceed estimated amounts, and in the case of delivery delays or failure to deliver, there is a possibility that penalties for delay or liability for damages may arise. The Group addresses this through thorough risk identification at the estimation stage, deliberation of large-scale projects at committee meetings, project progress monitoring after order receipt, and project management education.

In M&A and strategic alliances aimed at enhancing corporate value, if unrecognized liabilities are not identified during due diligence, or if the expected results are not achieved after the M&A, there is a risk that impairment of goodwill will become necessary, affecting the Group's financial position and business results. The Group conducts legal, financial, and business due diligence by external experts, and continues to monitor the degree of achievement of business plans after the M&A.

Lester Co., Ltd., the parent company, holds a majority of the voting rights of the Company's total issued shares, and sales to the parent company group account for a certain proportion of consolidated total sales. If the parent company group's management policy or business strategy changes in the future, this could affect the Company's business development, financial position, and business results, and there is also a risk of conflict of interest with general shareholders. The Company strives to ensure independent decision-making by building an effective governance structure.

The Company operates its business based on worker dispatching business licenses and paid employment placement business licenses. If, for some reason, the Company falls under grounds for disqualification and receives a business suspension order, or if legal regulations change, there is a risk that business continuity may be impeded. The Company strives for legal compliance through guidance to relevant departments by retained attorneys and the legal department, and continuous confirmation of legal amendments and new regulations.

If business locations or the supply chain are affected by the intensification of natural disasters caused by climate change, there is a risk of opportunity loss due to the suspension of production activities. There is also a risk of decline in social credibility if efforts to address climate change are judged to be insufficient, and a risk of increased response costs due to the introduction of new laws and regulations. The Company has expressed its support for the TCFD recommendations and strives to continuously analyze and disclose risks and opportunities related to climate change.