SHOWA SYSTEM ENGINEERING CORPORATION

If client companies' IT investment trends change significantly, or if price competition among industry peers develops at a level far exceeding the Company's expectations, this may affect the Company's business performance. As a countermeasure, the Company is strengthening information sharing with key persons, including client management, and working to enhance its own knowledge base while closely monitoring industry and competitor trends.

If a major client changes its management policy as a result of M&A or similar events, the priority placed on IT investment and the criteria for selecting vendors could change drastically, potentially having a significant impact on the Company's business performance. In light of the risk of transaction concentration with specific clients, the Company maintains close information sharing with major clients and is advancing its business development with an awareness of maintaining a balance among clients.

If a defect attributable to the Company is discovered in a delivered deliverable and notice thereof is received within one year, there is a risk of receiving a demand for cure, a claim for damages, a demand for price reduction, or contract cancellation. As a countermeasure, a dedicated group composed of experts conducts comprehensive project reviews, including quality and financial aspects, for all contracted development projects, aiming to prevent such incidents by identifying issues early and instructing improvements.

Although the Company itself does not collect personal information, if a leakage or damage incident occurs involving personal information entrusted by clients, this may affect the Company's business performance. Since obtaining Privacy Mark certification in 2005, the Company has continuously worked on personal information protection, and it strives to ensure proper handling through employee training based on the latest laws and case studies, along with periodic confirmation tests.

If a disaster such as an earthquake, fire, flood, terrorist attack, or computer virus infection occurs, all or part of the Company's operations may be suspended, potentially affecting its business performance. The Tokyo head office, Osaka branch, and multiple satellite offices are all located in buildings with excellent security and earthquake resistance, and the Company has formulated BCP measures to enable business continuity at other locations if operations become impossible at one location.