D.I.System Co., Ltd.

The information system services provided by the Group are susceptible to economic conditions, and an economic downturn accompanied by reduced, delayed, or in-house shifted IT investment by clients could shrink the scope of the Group's services. It is recognized that there is a certain degree of risk that clients may change their IT investment decisions in response to domestic and overseas economic trends, raising concerns about the impact on the Group's business and performance. The Group addresses this by continuously monitoring client companies' IT investment trends.

Natural disasters such as earthquakes and fires, or the outbreak of epidemics, could adversely affect the business activities of the Group or its business partners, potentially impacting performance. It is recognized that there is a certain degree of risk that this could materialize, and following the COVID-19 pandemic, the Group has strengthened health management guidance for employees and is proceeding with considerations for business continuity.

The information processing services business has low entry barriers, and the number of competitors may increase going forward. If competition for human resources and pricing intensifies further due to an increase in competitors, this could affect the Group's business and performance. The Group counters this by leveraging its strength of providing all-around services from system development to infrastructure and networks, and currently assesses the likelihood of this risk materializing as low.

Innovation in IT technologies such as computer languages, infrastructure, and networks is accelerating, and failure to respond adequately and in a timely manner to rapid changes in technology trends could affect the Group's business and performance. The Group addresses this through the continuous recruitment and training of engineers and the enhancement of development environments, and currently assesses the likelihood of this risk materializing as low.

Dependence on sales to the NTT DoCoMo Business (formerly NTT Communications) group is high and on an upward trend, at 13.2% in FY2024 (ended September 2024) and 14.6% in FY2025 (ended September 2025). If transaction volume with this group were to decline significantly or continuation of the transaction relationship became difficult, this could have a material impact on the Group's business and performance. The Group is working to reduce this dependence by expanding transactions with other customers.

In the development of clients' information systems, the Group may handle personal information, and if an information leak occurs from the Group or its partner companies (subcontractors), this could affect the Group's business and performance through claims for damages from clients or loss of trust. As countermeasures, the Group has obtained Privacy Mark certification and ISMS (ISO/IEC 27001:2022) certification, established an Information Security Committee, conducts employee training, and records access logs, among other measures.

In lump-sum contract development projects, if unprofitable projects arise due to errors in estimated man-hours or technical factors, this could affect the Group's business and performance. Before accepting orders, the Group thoroughly analyzes client requirements and verifies estimates through relevant departments, and after accepting orders, manages progress and identifies and addresses issues at each stage of the development process. The Group currently assesses the likelihood of this risk materializing as low.

Business expansion requires securing and developing engineers, technical sales staff, and management personnel, and if this does not proceed as planned, it could affect the Group's business and performance. Furthermore, if the development of candidates for management positions fails to keep pace with progress in securing personnel, there is a risk of a decline in management functions. The Group addresses this by strengthening recruitment activities and thoroughly implementing internal training.

The Group's business is subject to legal regulations such as the Worker Dispatching Act and the Act against Delay in Payment of Subcontract Proceeds, and if the Group falls under disqualifying conditions or violates laws and regulations, it could be ordered to suspend business or have its license revoked. In addition, the enactment or revision of new laws and regulations, or changes in judicial or administrative interpretations, could also affect the Group's business and performance. The Company and three subsidiaries have obtained worker dispatching licenses and have established a compliance system.

In the education services field of the Education Services & Security Solutions business, some clients rely on receiving the Ministry of Health, Labour and Welfare's "Human Resources Development Support Subsidy." If changes are made to this subsidy program, clients' investment in education could decline, potentially affecting the Group's business and performance. The Group addresses changes to the program by continuously gathering relevant information.