Future Corporation

Because the Group receives disclosure of confidential information such as clients' technical and management information, it positions information management as one of the most critical management priorities. If confidential information or personal information is leaked due to computer viruses, unauthorized external intrusion, or intentional or accidental acts by officers, employees, or partner companies, the Group may face loss of customer trust, litigation, suspension of orders, and other consequences. Although measures such as establishing a security committee and obtaining ISMS certification have been implemented, complete prevention cannot be guaranteed.

The Group recognizes securing and developing excellent human resources as the most critical factor for its business development, and recorded recruitment expenses of ¥1,325 million and training expenses of ¥781 million in the fiscal year under review. If efforts to secure and develop human resources are unsuccessful, growth potential may be impeded, and if the Group is unable to secure orders exceeding the increase in fixed personnel costs associated with headcount growth, business performance may deteriorate. The Group is addressing this through diversification of recruitment activities and increased focus on professional development training.

In large-scale projects, unforeseen troubles, additional costs arising from discrepancies between estimated and actual man-hours, and delivery rescheduling due to specification changes can have a greater impact on sales and profit for the period compared to small and medium-sized projects, and may also result in opportunity losses due to additional personnel deployment. In addition, when a large-scale project ends, changes in the assignment of numerous consultants may be concentrated, potentially preventing timely responses. The Group strives for early identification of issues through the assignment of experienced project leaders and intensive implementation of phase reviews.

Although the Group is strengthening quality control and project management, if management fails to function effectively due to unforeseen troubles or other factors, increased man-hours, delivery delays, and additional work for quality improvement may occur, potentially worsening project profitability. The Group has established real-time monitoring through an in-house developed project information sharing and visualization system, as well as a review structure by engineers with extensive quality control experience. Although warranty reserves and provisions for project losses have been established, actual losses may exceed these provisions.

Competition in research and development of cutting-edge technologies such as AI, IoT, and big data is intensifying on a global scale, and the Group is also actively engaged in these efforts. However, if the Group's response to technological innovation or its research and development activities are unsuccessful, its competitive advantage may be undermined, potentially affecting business performance. The Group addresses this by establishing specialized departments focused on research and development of cutting-edge technologies, but rapid changes in technology trends also carry the risk of asset obsolescence.

If overall corporate IT investment declines sharply due to external factors such as domestic and international economic trends, foreign exchange rates, or tax system changes, the performance of the IT Consulting & Services Business may be affected. The Group aims to build a customer base that is not dependent on the market conditions of any specific industry by establishing long-term partnerships with clients across multiple industries; however, it may be difficult to respond to sudden macroeconomic changes. In the Business Innovation Business, there is also a risk that online sales and advertising revenue may decline due to economic trends and intensifying price competition.

The Group may make securities investments or conduct M&A for purposes such as strengthening business ties or developing new businesses, but there is a possibility of incurring losses equivalent to the amount invested due to business failure of the investee, among other factors. Depending on the deterioration in the investee's business performance, impairment processing may be required, which could affect the Group's business performance. Although the Group strives to improve the precision of its investment decisions, it is difficult to completely predict future changes in the business environment.

The Group capitalizes software for internal use as well as cloud-based and template-type software for customers as assets; however, if expected sales revenue declines significantly due to changes in technology trends or sudden changes in market conditions, impairment processing may become necessary. In the Business Innovation Business, product orders are placed based on demand forecasts, but if actual orders fall short of forecasts, excess inventory, valuation losses on inventory, and impacts on cash flow may occur. There is also a risk that production costs for digital content may not be recovered.

When a large-scale project moves into the development phase, the proportion of revenue dependent on a specific customer may temporarily increase. Changes in the specific customer's management conditions or IT investment policies may temporarily affect the Group's business performance. The Group strives to reduce this dependence by diversifying customer industries and project phases, strengthening relationships with existing customers, and focusing on acquiring new customers.

In the event of a large-scale disaster or the spread of an infectious disease, employees, business locations, and systems may be affected, and business performance may be impacted by recovery costs, opportunity losses due to business interruption, and cancellation or postponement of projects. Although the Group has established a system for responding to emergencies in advance, it may be difficult to respond to disasters or the spread of infectious diseases on a scale exceeding expectations. The Group strives to mitigate risk through the development of its Business Continuity Plan (BCP).