NCD Co., Ltd.

If IT investment is restrained due to economic stagnation in Japan and overseas, it could have a material impact on the performance and financial condition of the IT-related business. In addition, restraints on redevelopment in the Tokyo metropolitan area, behavioral restrictions due to infectious diseases, and soaring raw material prices and supply constraints could also adversely affect the Parking System Business. As countermeasures, the IT-related business is promoting a shift in its business model from labor-intensive to high-value-added service provision, while the Parking System Business is working to maintain and strengthen its revenue base through structural reform.

The Group's business is highly dependent on human resources, and securing and developing excellent personnel with high expertise and added value is an extremely important issue. If the securing of personnel does not proceed as planned, or if the outflow of personnel cannot be curbed, it could adversely affect performance and financial condition. As countermeasures, the Group is formulating a human resources strategy based on the fundamental concept of autonomous career development, strengthening recruitment public relations, strengthening recruitment at regional offices (Kyushu) and overseas (South Korea), and promoting the utilization of senior personnel.

There is a risk that customers' personal information or other companies' confidential information could leak externally due to cyberattacks, fraud, negligence, system failures, etc., and information security incidents at outsourcing partners could also adversely affect operating results and financial condition through a decline in the Group's credibility. As countermeasures, the Group conducts regular vulnerability assessments, has obtained ISO/IEC27001 certification and the Privacy Mark, addresses risks associated with the use of new technologies including generative AI, and confirms the information management systems of outsourcing partners.

The pace of technological innovation in the information services industry is rapid, and failure to respond appropriately could lead to a decline in competitiveness relative to competitors, a decline in market share, and customer attrition, adversely affecting the performance and financial condition of the IT-related business. There is also a risk that quality deterioration or security vulnerabilities could lower the Group's reputation and credibility. As a countermeasure, the Group is promoting the strengthening of advanced IT technologies related to DX and generative AI, as well as the acquisition and development of highly skilled personnel, through planned investment in research and development and human capital.

MetLife Insurance K.K. is a major customer of the IT-related business, accounting for more than 10% of the Company's consolidated net sales, and a sharp reduction in transaction volume or termination of the business relationship could adversely affect the Group's performance and financial condition. As countermeasures, the Group continues to provide high-quality services to this customer while also expanding its customer base through the establishment and evolution of the service model and new value proposition activities in the IT-related business.

Both the IT-related business and the Parking System Business utilize outsourcing, and if it becomes difficult to secure quality outsourcing partners due to competition with other companies in the same industry, it could adversely affect performance and financial condition. As countermeasures, the Group is following trends among outsourcing partners through regular contact, discovering new candidate outsourcing partners, and promoting the in-house production of peripheral operations in the Parking System Business.

Deficiencies in internal controls or flaws in the monitoring system could result in fraudulent acts such as embezzlement by officers and employees, which could adversely affect operating results and financial condition through damage to reputation and credibility. As countermeasures, the Group strives to prevent, detect early, and respond promptly to fraudulent acts through the fostering of compliance awareness and regular training for officers and employees led by the Compliance Committee, and the establishment of an internal reporting system.

If large-scale natural disasters such as earthquakes, tsunamis, and typhoons, or terrorism, infectious diseases, etc., cause severe damage to employees, offices, bicycle parking facilities, system infrastructure, etc., it could adversely affect performance and financial condition. As countermeasures, the Group is promoting BCM, formulating BCPs, conducting regular drills, introducing a safety confirmation system, and improving business continuity by distributing the managed service operations of the IT-related business and the support center operations of the Parking System Business to the Nagasaki office, which serves as a BCP site.

Changes in related laws and regulations such as the Worker Dispatching Act and the Subcontract Act, or the unexpected introduction of new regulations, could result in loss of social credibility due to legal violations, payment of damages, increased compliance costs, etc., which could affect operating results and financial condition. As countermeasures, the Group continues regular legal and regulatory training for officers and employees, and strives to obtain timely information on legal amendments through legal advisors and legal affairs organizations and disseminate it within the Company.

If delivery delays attributable to the Group occur in the System Development Business or other operations, unprofitable projects could arise, adversely affecting performance and financial condition. As countermeasures, in addition to strengthening project management by each business division, the Group holds an order review committee comprising full-time officers for projects above a certain amount, establishing an appropriate monitoring system through deliberation prior to proposals and follow-up on status after orders are received.