Sun* Inc.

Representative Director Taihei Kobayashi plays a central and important role in formulating and deciding management strategy, negotiating with business partners and clients, and promoting business operations at the practical level. If he becomes unable to perform his duties for any reason, this could have a significant impact on future business development and business results. The Annual Securities Report explicitly states that while the probability of this risk materializing is not high, it cannot be said to be zero. The Group aims to move away from excessive dependence through appropriate division of roles and delegation of authority within the management team, as well as the development and strengthening of management personnel.

In the course of handling confidential information such as customers' corporate information and personal data, if unauthorized access, computer viruses, information leakage by insiders or outsourced parties occur, the Group may suffer a loss of credibility or become liable for damages. As countermeasures, the Group has concluded confidentiality agreements, established personal information protection regulations and information security management regulations, obtained the Privacy Mark and ISMS certification in Japan and ISMS certification in Vietnam, and conducts continuous monitoring of external threats through the Risk Management Committee.

As the Group conducts business globally both domestically and overseas, it is subject to a wide range of regulations, including laws related to licenses and permits such as the paid employment placement business license, accounting standards, tax laws, and transaction-related laws. If a license is revoked or a business suspension order is issued, this could cause significant disruption to business activities. In addition, if legal violations such as accounting fraud or embezzlement, or unexpected litigation with third parties occur, this could have a significant impact on the Group's business results and financial condition through payment of damages or fines and damage to brand image. The Group strives to reduce this risk through the establishment of a compliance manual, the development of an internal control system, and education and awareness activities conducted by the Risk Management Committee.

The Group has established a consolidated subsidiary, Sun Asterisk Vietnam Co., Ltd, in Vietnam to conduct software development for Japanese clients, and is also considering expansion into Southeast Asia, Europe, and the United States. Changes in the political, economic, and social conditions of each country may worsen the business environment or cause employee turnover, and changes in tax systems and legal regulations, including investment restrictions and transfer pricing taxation, may affect the Group's business results and financial condition. There is also foreign exchange risk associated with translation into yen when preparing consolidated financial statements. The Group strives to mitigate these impacts by strengthening its management structure through cooperation between local group companies and the supervising organization, adjusting the quantitative balance between yen-based and foreign currency-based transactions, and through cash management.

In investments and loans such as capital contributions, capital expenditures, alliances, and M&A aimed at strengthening existing services, accelerating global expansion, and developing new business areas, if planned returns become difficult to achieve or impairment losses occur, this may affect the Group's business results and financial condition. When new businesses are added through M&A, risk factors specific to that business may also be added. With respect to private equity investments, the Group has established a "Private Equity Investment Business Manual" and seeks to reduce risk by making pre-investment due diligence mandatory.

Securing and developing personnel with advanced expertise, skills, and experience is an indispensable element for business promotion. If personnel cannot be secured and developed as planned, or if existing personnel leave the company, this may affect the Group's business results and financial condition. In addition, if the involvement of partners and outsourcing contractors increases, there is a risk that unforeseeable additional costs may arise and projects may be delayed, worsening profitability. The Group strives to secure talented personnel and prevent turnover through the granting of incentives such as stock options, the strengthening of human resource development programs, and the expansion of employee benefit programs.

In contract-based agreements, if development troubles or post-release defects occur, the Group may bear part or all of the additional costs, which could worsen profitability. In addition, if progress or acceptance timing deviates from the initial plan, this may affect business results for each quarter or fiscal year. The Group selects contract projects above a certain scale as "high-risk projects" and strives to curb unprofitable or delayed projects through checks on the validity of order-time plans and cost estimates, as well as regular monitoring and management of progress and issues.

If corporate IT investment, DX investment, and human capital investment are curtailed due to changes in economic conditions, the business environment for the Digital Creative Studio Business may deteriorate, affecting business results and financial condition. Similarly, if intensifying competition makes it difficult to secure competitive advantages over competitors in terms of cost and technological capabilities, a similar impact may occur. The Group is working to evolve its services through continuous environmental analysis, differentiate itself through higher value-added offerings, and improve productivity by raising utilization rates and curbing unprofitable projects.

In the creation of new businesses and services and in collaborations and strategic alliances, a certain period of time and investment is required before stable revenue is generated, which may lower overall profit margins. If expected results are not achieved or the business environment changes such that progress does not proceed as planned, it may become difficult to recover the investment, affecting business results and financial condition. The Group strives to reduce this risk through advance preparation of multiple scenarios and decision-making based on the verification of and countermeasures for each risk, while maintaining a stable foundation through its core business and making balanced decisions.

In the gaming domain, which is being pursued as part of efforts to strengthen the entertainment domain, competition is intensifying due to a rapid increase in the number of content providers and titles, and content can quickly become obsolete due to changes in user preferences. If the Group is unable to respond in a timely manner to technological innovation and changes in preferences, this may affect business performance. In addition, if unforeseen events occur, such as changes to contract terms or contract termination with platform operators such as the App Store and Google Play, this may also affect business performance. The Group avoids taking large risks solely within the gaming domain and strives to build a stable revenue model through its own existing titles and collaborations with other companies.