ENECHANGE Ltd.

Given that the Group handles a large amount of personal information of users and information on business partners, if information is leaked due to external cyberattacks, unauthorized access, or human error, this could result in claims for damages or a loss of social credibility. As countermeasures, the Group has established security rules, conducted company-wide training and targeted email drills, and obtained and maintained Privacy Mark certification.

Because the Group provides services via the internet, it is highly dependent on communication infrastructure, and a system failure caused by natural disasters, man-made disasters, terrorism, war, or other events could make it difficult to provide services. The Group addresses this through highly available system design and the establishment of failure monitoring systems and response procedures.

If a specific electricity or gas company experiences a deterioration in its business or changes its customer acquisition strategy, if contracts with major corporate end-users are terminated, or if a major partner company in the offline business discontinues handling of relevant products, this could lead to a decline in sales capability and have a significant impact on the business foundation. The Group seeks to reduce its dependence on the trends of specific companies by expanding its range of services, increasing the number of partner operators, and strengthening end-user engagement.

A deterioration in economic conditions could reduce end-users' willingness to switch contracts, changes in search engine algorithms and the spread of generative AI could render conventional SEO-based customer acquisition methods obsolete, and intensifying competition from new entrants and electricity and gas companies strengthening direct sales could lead to a shrinking market share and declining profitability. The Group seeks to maintain its competitive advantage by adapting to the latest search logic, including the release of ChatGPT app functionality, and by developing high-value-added features that leverage its proprietary database.

If the Group is unable to secure and develop excellent specialized personnel as planned due to changes in employment conditions or other factors, this could result in a shortage of personnel or the departure of existing employees, potentially hindering business operations and development plans. The Group addresses this by utilizing diverse recruitment channels such as direct recruiting and referral hiring, maintaining telework and flextime systems, and operating a performance-based personnel evaluation system.

If an outsourcing partner such as a sales partner company in the offline business engages in insufficient or inappropriate solicitation practices, this could lead to disputes with end-users, reputational damage, and a decline in sales capability. The Group addresses this by thoroughly providing talk scripts and managing regulations, conducting regular monitoring, and strengthening the selection and guidance of outsourcing partners.

If new business development or fund management investment projects do not progress as planned, there is a possibility of delayed recovery of invested funds, failure to achieve expected profits, or impairment losses. As of the end of the current consolidated fiscal year, goodwill of ¥101,134 thousand and investment securities of ¥742,998 thousand are recorded. The Group addresses this through strict review and approval processes by the Board of Directors and other bodies, phased allocation of resources, and collaboration with local external experts for overseas projects.

In the Electricity Switching Support business, quarterly sales and profit tend to fluctuate significantly due to seasonal factors such as the peak moving season and weather conditions (mild winters, cool summers, etc.), while in the SaaS / System Development business, this is due to the concentration of new feature releases and promotional expenses in specific quarters. The Group seeks to smooth earnings by thoroughly managing monthly and quarterly budget-versus-actual performance, implementing agile cost control, and promoting recurring revenue.

If violations of laws and regulations such as the Electricity Business Act, the Act against Unjustifiable Premiums and Misleading Representations, or the Act on the Protection of Personal Information occur, or if third-party intellectual property rights are infringed, this could develop into claims for damages or litigation, leading to a loss of corporate brand value and social credibility. The Group addresses this by conducting regular legal training, staying abreast of regulatory changes through collaboration with external experts such as legal counsel, and establishing internal listing standards and operational guidelines along with thorough prior review.

The Group has a history of correcting its securities reports and other filings in previous fiscal years, with causes identified as including concentration of authority, an emphasis on business performance, insufficient checks and balances by administrative departments, insufficient information sharing with the Board of Directors, and a lax awareness of compliance. As recurrence prevention measures, the Group continues to implement decentralization of authority, strengthening of the Board of Directors' supervisory function, strengthening of accounting, legal, and internal audit functions, and building trust with the accounting auditor. However, if these improvement measures do not function as intended, this could lead to a loss of stakeholder trust and damage to the Group's brand.