HIKARI BUSINESS FORM CO., LTD.

The Company, which serves a broad range of clients including government agencies, securities firms, financial institutions, life and non-life insurers, and general business corporations, faces the risk of declining order volumes and lower order unit prices due to fluctuations in the domestic economy or deterioration in consumption trends. The structure is such that deterioration in the business environment on the client side directly spills over into the Company's business performance. The annual securities report contains no mention of specific countermeasures, and structural vulnerability to economic fluctuations remains.

Due to the progress of digitalization and internet adoption, the traditional business form market, including computer forms for office use, is on a shrinking trend. Although the proportion of sales related to data output has been increasing, business forms still account for a major portion of sales, and a delayed response to market changes could impact business performance. In addition, the increasing complexity of sales formats accompanying market changes creates a risk of fluctuation in the timing of revenue recognition.

In response to the shrinking business form market, the Company recognizes the need to promote its own business model transformation. However, if the response to market changes is significantly impaired, it could have a material impact on business performance, and there is a risk that the pace of executing the transformation may fail to keep up with the competitive environment and market changes. The annual securities report contains no mention of specific progress or numerical targets for the business model transformation.

Printing paper, a key material for the Company's main products, carries the risk of rising procurement prices from paper manufacturers due to trends in oil prices and the overseas chip and pulp markets. If such increases cannot be fully absorbed through manufacturing cost reductions or passed on through selling prices, business performance would be adversely affected. The Company states that it strives to secure a stable supply of printing paper at the lowest possible cost.

Amid the growing severity of ransomware damage across society, the Company handles large volumes of clients' personal and confidential information, and if a cyberattack or information leakage were to occur, it could significantly impact business performance through loss of social trust or claims for damages from clients. As countermeasures, the Company newly established the Information Security Management Office (directly under the Representative Director and President) in January 2025, and has implemented multi-layered defenses including the introduction of EDR and MDR, and the use of personal information detection tools, data encryption, and mis-sent email prevention services. Furthermore, in May 2025 the Company established a CSIRT to build a rapid response system in the event of an incident.

The Company obtained Privacy Mark certification in March 2003 and received its 11th renewal certification in March 2025, while its ISO27001 certification, obtained in 2013, received its 4th renewal certification in December 2025. These certifications form the foundation of client trust, and if the Company were unable to maintain such certifications, there is a risk of loss of order opportunities and client attrition. At present, the Company has continuously received renewal certifications, and system development is being maintained on an ongoing basis.

In the BPO market, while some projects, such as call center operations and reception desk services during the COVID-19 pandemic, continue over multiple years, other projects are extremely short-term and one-off in nature, creating a risk of unstable continuity in orders received. Depending on the nature of the project, fluctuations in sales can be significant, potentially having a major impact on the Company's business performance. This is set against a backdrop of diversifying and increasingly complex forms of outsourcing demand due to drastic changes in the business environment surrounding companies.

While the BPO market is expected to grow as a destination for corporate outsourcing, competition may intensify due to an increase in the number of entrant companies. The Company has built up a track record during the COVID-19 pandemic, but differentiation from competitors is essential to securing continued orders, and failure to win orders would impact business performance. The annual securities report contains no mention of specific countermeasures against competition.

Against the backdrop of the shrinking business form market, the Company is shifting toward the data output-related business, but if its technological response fails to keep pace with the rapid progress of digitalization and internet adoption, this could lead to a decline in competitiveness. As sales formats become more complex alongside market changes, delays in system responsiveness could also affect operational efficiency and the management of revenue recognition. The annual securities report contains no mention of specific technology investment plans.

Although the Company has established a thorough safety management system, the annual securities report explicitly states that if an accident occurs under conditions beyond what was anticipated, it could result in loss of social trust or claims for damages from clients, significantly impacting business performance. The Company aims to ensure business continuity through the establishment of the Information Security Management Office and the launch of the CSIRT, but risks from unknown threats or human error cannot be entirely eliminated. The ongoing development of safety management systems for facilities and systems, as well as personnel management measures, remains an issue going forward.