Needs Well Inc.

The Group's core business is system maintenance and development for general corporations, and it is subject to a certain degree of influence from domestic corporate IT investment trends. If deterioration in economic conditions or a business downturn causes customers' willingness to invest in IT to decline, this may result in sluggish acquisition of new customers, a decrease in orders from existing customers, and cancellation of maintenance and operation contracts. The Group seeks to minimize such impact through early identification of market trends and continuous implementation of countermeasures.

The information services industry comprises numerous operators ranging from large to small scale, and price competition arising from offshore development and other factors is occurring. If competition intensifies or competitors improve their technological and service capabilities such that the Group's relative service strength declines, this could lead to a decrease in orders or cancellation of maintenance and operation contracts. The Group addresses this by monitoring market trends and continuously improving its technological and service capabilities.

The information services industry is characterized by rapid technological innovation, with new technologies and services being continuously introduced. If a significant change in the environment occurs due to technological innovation exceeding expectations and the Group is unable to respond to such change, this may affect the Group's financial position and business results. The Group continuously monitors trends in technological innovation and takes ongoing countermeasures.

The Group regards the acquisition and development of excellent personnel, who form the foundation of the IT services business, as an important issue, and has established systems such as promotion of new graduate recruitment, technical training programs, and qualification incentive systems. If recruitment and development measures cannot be implemented as planned and sufficient personnel cannot be secured, this may affect the Group's financial position and business results through a decline in its ability to execute business. As personnel shortages directly lead to lost opportunities for receiving system development orders and quality deterioration, this is an important risk for business continuity.

For system development projects undertaken off-site, unforeseeable factors may cause quality or scheduling issues during the development process, or defects after delivery. Although the Group has established a monitoring framework based on ISO9001, including pre-order estimate review meetings and post-order quality management and project management, if an unprofitable project occurs, this may affect the Group's financial position and business results through the incurrence of additional costs. This risk is particularly heightened for lump-sum contract projects, for which the Group bears responsibility for quality and delivery deadlines.

While the Group's strength lies in its continuous business relationships with specific industries and major customers, this also results in a structure with a high degree of dependence on specific customers. If a customer's business operations are affected by changes in economic conditions and the customer's policies or development plans are changed, the Group may be unable to secure its planned sales, which may affect its financial position and business results. Diversifying the customer base remains a challenge.

In the course of its operations, the Group handles personal information and confidential information of customers and business partners, and has implemented measures such as obtaining ISO27001 and Privacy Mark certifications, establishing an Information Security Committee, and conducting employee training and access log management. However, if an information leak occurs from the Group or from a partner company, this could result in claims for damages from customers or loss of credibility, which may have a material impact on the Group's financial position and business results. The risk of leakage via partner companies is also recognized as subject to management.

In system development projects, unforeseen events not included in the original plan may occur, and long working hours may result from the need to strictly observe quality and delivery deadlines. This risk is particularly high for lump-sum contract projects, for which the Group bears responsibility for quality and delivery deadlines; if long working hours develop into employee health problems or labor issues, this may affect the Group's financial position and business results through a decline in labor productivity. The Group strives to eliminate such occurrences through appropriate labor management and project monitoring.

The Company dispatches employees to work at customer sites and thoroughly complies with notification requirements and laws and regulations to the supervisory authorities under the Worker Dispatch Act; however, if its license is revoked or it is subject to a business suspension order, this could cause material disruption to its business operations. In addition, subcontracting to partner companies is subject to the Subcontract Act, and if the Company receives a recommendation from the Japan Fair Trade Commission due to a violation, this could lead to a loss of social credibility. While the Group currently recognizes no facts constituting a violation of legal regulations, there also exists the risk of changes in laws and regulations.

If a natural disaster such as an earthquake, typhoon, or tsunami, or the spread of an infectious disease such as COVID-19 occurs, normal business operations may become difficult at the Group's main business locations in the greater Tokyo metropolitan area and at its nearshore location in the vicinity of Nagasaki Prefecture. Prolonged spread of infectious disease also carries the risk of decreased customer IT investment demand and the risk of non-collection of trade receivables, which could lead to deterioration of financial position. While the Group addresses this through the promotion of telework and remote development and by establishing a business continuity framework, if extensive damage occurs, business continuity itself may become impossible.