Nippon RAD Inc.

Due to the rapid innovation of ICT technologies, including AI and cloud technologies, the technologies, skills, and know-how held by the Group may become obsolete, potentially causing the Group to lose its technological or price competitiveness. If there is a delay in responding to changes in market and customer needs, or if the Group falls behind in new technology trends, this could lead to a decline in competitiveness and a decrease in the number of orders received, affecting business results and financial condition. As countermeasures, the Group is working on developing employees' capabilities and promoting the acquisition of new technologies, organizationally discovering new technologies, and building differentiated solutions.

The IT industry has higher labor mobility compared to other industries, creating a risk that it may become difficult to secure and develop appropriate personnel necessary to respond to diversifying customer needs. If sufficient personnel cannot be secured and developed, the Group may be forced to reduce the scale of development or forgo orders, which could affect business results and financial condition. The Group is focusing on personnel allocation to each department, establishing a stable remote work system, and building a hybrid work system.

In the IT industry, in addition to the advancement of cutting-edge technology and diversification of customer needs, price competition is intensifying. If there are significant fluctuations in customer companies' IT investment trends or price competition exceeding expectations, this could lead to a decline in the selling prices of systems and services provided, affecting business results and financial condition. Additionally, if the Group cannot establish an attractive working and development environment amid an active job-changing market, this could also affect the execution of existing and new projects and the securing of personnel.

In contract development, unforeseeable circumstances such as decreased estimation accuracy, responses to specification changes, or software defects may lead to increased development man-hours and extended periods, resulting in costs exceeding the order amount and causing unprofitable projects. If multiple or large-scale unprofitable projects occur, this could have a material impact on business results and financial condition. As countermeasures, the Group is thoroughly implementing process and quality control based on ISO9001 certification, improving estimation accuracy measures, and building a project management system that includes checks by responsible personnel according to order amounts.

To build a foundation for future earnings, the Group has entered new businesses, including investments and loans in subsidiaries and affiliated companies, but it is difficult to accurately predict the impact of such investments and loans on the business. If the expected results are not achieved and losses are incurred, this could affect business results and financial condition. In making investment and loan decisions, the Group strives to avoid various investment risks by utilizing the Group's technology, know-how, and investment experience.

In handling customer data and personal information in information processing services, if unauthorized access or serious human error results in the loss, destruction, falsification, or leakage of customer information, this could lead to a loss of social credibility, loss of customer trust, and costs arising from damage claims, affecting business results and financial condition. As countermeasures, the Group promotes appropriate management based on its "Personal Information Protection Policy," conducts internal audits based on ISO27001 certification, and promotes activities to raise employees' security awareness.

If natural disasters such as earthquakes and storm/flood damage, or serious infectious diseases or pandemics occur, damage to offices, equipment, and employees could lead to a decline in workforce and resulting decrease in sales, as well as increased equipment repair costs. Additionally, disruptions to the supply chain due to regional conflicts and other factors could cause soaring prices of parts and raw materials and difficulty in stable procurement, affecting business results and financial condition. As countermeasures, the Group has prepared disaster response manuals, conducts disaster prevention drills, has established an employee safety confirmation system, and has implemented measures such as staggered work hours and telework.