DENTSU SOKEN INC.

In system construction services, unexpected troubles during the development process may increase development costs and reduce profitability. If a serious defect occurs after delivery, there is a risk of quality recovery costs, damage claims, and loss of credibility. As countermeasures, a PMO committee has been established to promote evaluation from the pre-proposal stage, progress management after order receipt, and standardization of the development process.

If the recruitment and development of excellent personnel does not proceed as planned, or if productivity declines due to deterioration of the working environment, business results may be affected. This is against a backdrop of continued tight supply and demand for IT personnel and intensifying competition for hiring. The company is strengthening new graduate and mid-career recruitment, and has introduced a retirement age of 65, a fellow system, a discretionary labor system, and work-life balance support measures.

If an interruption of information system services or a leak of personal information or confidential information occurs due to cyberterrorism, computer viruses, negligence, or other causes, there is a possibility of damage claims, loss of credibility, and business stagnation. Under the Information Security Committee, various regulations and guidelines have been established, and a security education platform has been introduced for all officers and employees. Major group companies have obtained ISO/IEC27001:2022 and JISQ27001:2023 certification and Privacy Mark accreditation.

If a natural disaster such as a major earthquake or heavy rain, an outbreak of a serious infectious disease, or a change in social conditions occurs, business results may be affected due to the occurrence of response costs and delays in service provision. In addition to establishing various response manuals and crisis response systems, the company has developed remote work systems and environments, striving to ensure the safety of employees and partner staff and to secure business continuity.

If a compliance issue or a violation of laws and regulations occurs, business results may be affected due to loss of credibility. The company prioritizes compliance with various laws and regulations, including the Companies Act, the Financial Instruments and Exchange Act, and the Act on the Protection of Personal Information, in conducting its business. It has adopted the "Dentsu Group Charter of Conduct" and "Our Declaration of Conduct," and implements compliance education for all officers and employees and has established a whistleblowing hotline, among other measures.

In investments in domestic and overseas companies and new business ventures, if significant changes in the business environment or other factors prevent execution as planned in the business plan, business results may be affected. An investment committee has been established to conduct prior screening of market trends, the target company's business performance, financial condition, and technological advantages, and to build a system for monitoring the management condition of investees and for responding when there is a deviation from the business plan.

If customers' IT investment trends change suddenly due to fluctuations in social and economic conditions, the business results of the Group may be affected. In cases of high dependence on specific customers or industries, a shift in a customer's management policy could directly lead to a decrease in sales. While closely monitoring domestic and overseas economic trends, the company works to formulate management strategies suited to market needs and to develop and cultivate new solutions in a timely manner.

If the company is slow to respond to rapid changes in customer needs and technological innovation (such as generative AI) in the information services industry, business results may be affected, compounded by intensifying competition from new entrants. In addition to active R&D, optimization of the group structure, and investments and alliances with domestic and overseas companies, the company strives to enhance the value it provides by strengthening software product functions and expanding services using the latest technologies such as generative AI.

If external partner companies experience personnel shortages or increases in outsourcing unit prices, or if unexpected changes in social conditions occur at overseas partner companies, business results may be affected. In addition, if suppliers of software products or IT equipment change their management policies or business plans, there is a risk of disruption in the provision of products and services to customers. The company works to maintain and improve profitability through joint efforts with partner companies to improve productivity, appropriate price pass-through, development of new partners, and maintaining close relationships with suppliers.

Dentsu Group Inc. holds 61.8% of the company's total issued shares, and changes in the parent company's management policy or business strategy may affect the Group's business operations. Through decision-making by consensus at the Board of Directors, in which independent outside directors hold a majority, the company strives to secure its autonomy and independence as a listed company while maximizing business synergies with the parent company group and protecting the interests of non-controlling shareholders.