BASE CO., LTD.

Given the nature of the business, which involves handling customers' confidential information, an information leak could result in claims for damages or loss of trust, materially affecting business and financial results. The Group has obtained Privacy Mark certification, established and disseminated information security regulations, conducts regular education and comprehension tests for employees and business partners, and implements measures for prevention, detection, response, and recovery against cyberattacks.

Due to the declining working-age population from the falling birthrate and aging population, securing a stable supply of talented personnel has become difficult across the entire IT industry. If recruitment and training do not proceed as planned, business and financial results could be affected. In addition to Japan, the Group works to reduce this risk through regular new-graduate recruitment from major universities in China, mid-career hiring, and enhanced in-house training.

The top four groups—the Fujitsu Group, Mizuho Securities, the Nomura Research Institute Group, and the NTT DATA Group—account for approximately 60% of net sales for FY2025 (ending December 2025). A review of business policy or deterioration in performance at these customers would directly affect the Group's business results. As countermeasures, the Group is working to maintain trust through high technical capabilities and to expand new customers through sales activities in collaboration with SEs.

The Group's core business, System Development (Open Systems) for general corporate clients, is subject to customers' IT investment appetite, which is influenced by economic conditions and market environment. A decline in IT investment due to an economic downturn or other factors would affect business and financial results. The Group mitigates concentration risk by receiving orders from a wide range of industries, including securities, banking, insurance, manufacturing, distribution, and public sectors, thereby reducing dependence on any specific industry.

In M&A transactions or business alliances aimed at strengthening and expanding the business foundation, if the initially anticipated effects or profitability are not achieved, this could affect business and financial results. As a risk mitigation measure, the Group has established a policy of conducting due diligence prior to any M&A transaction.

If unexpected circumstances arise on a project, temporary long working hours may occur in order to maintain quality and meet delivery deadlines, potentially causing employee health and labor issues as well as declining labor productivity and quality, which could affect business and financial results. The Group mitigates this risk through thorough project management and efforts to identify and resolve issues at an early stage.

With increasing sophistication and complexity of technology and shortening delivery timelines, an unexpected increase in man-hours or delivery delays could occur, leading to deteriorating profitability that affects business and financial results. The Group mitigates this risk by improving estimation accuracy through process-based estimating, thoroughly managing profitability on a per-project basis, and establishing a dedicated department for project support.

Numerous operators exist in the information services industry, and if competition intensifies due to declining demand or an increase in new entrants, the Group's relative competitiveness could decline, affecting business and financial results. The Group mitigates this risk by enhancing technical capabilities, service quality, and productivity through expanded technical and management training.

For the Group, whose strength lies in mixed Japanese-Chinese teams, if approval or renewal of residency status for Chinese employees is no longer granted due to changes in Japan-China relations or government policy, or if recruitment plans are affected by travel restrictions due to a pandemic or other events, business and financial results could be affected. The Group mitigates this risk by establishing a remote recruitment system, utilizing local subsidiaries, and expanding its domestic recruitment framework.

Business activities conducted through the Group's Chinese subsidiary inherently involve risks such as unexpected changes in laws and regulations, deterioration in diplomatic relations, sharp fluctuations in foreign exchange rates, and war, conflict, terrorism, or epidemics. Should unforeseen circumstances arise, business and financial results could be affected. The Group mitigates this risk by closely monitoring political and economic developments in China and keeping the proportion of China operations within consolidated net sales minimal.