Business Engineering Corporation

There is a risk that changes in domestic and international social and economic conditions could alter customer companies' IT investment trends. Combined with intensifying competition with other companies in the same industry, this could cause significant fluctuations in the Group's business results, cash flows, and financial position. This is a structural risk specific to the IT industry, in which changes in the macro environment directly spill over into order trends.

Many of the systems delivered by the Group are important core systems for customers, and if a significant malfunction occurs, additional response costs and damages may arise. In addition, if estimate discrepancies or delivery delays occur due to unforeseen circumstances, costs may greatly exceed expectations, potentially worsening business results and other outcomes. Although the Group is working to strengthen project management across the group, this risk remains.

To respond to rapid technological innovation in the IT field, the Group focuses on enhancing the functionality of its services and products and on conducting product research and R&D activities for new businesses. However, there is a risk that the Group may not be able to respond appropriately if technological innovation progresses in unexpected ways. Delays in responding to technology trends directly lead to a decline in competitiveness, which could result in worsening business results and other outcomes.

The Group implements company-wide measures including the establishment of information security rules, regular training, and technical measures such as cyberattack countermeasures; nevertheless, there remains a risk of leakage of personal information or confidential information. If a leak occurs, the resulting damages payments and loss of trust could worsen business results and other outcomes. Given the nature of the business, which handles customers' core systems, failures in information management could seriously impact business continuity.

The Company has entered into a contract with SAP Japan Co., Ltd. concerning the provision of SAP products and services, and continues to maintain a stable business relationship; however, if there is a significant change in SAP Japan's market appeal, the Group's business results and other outcomes could deteriorate. A business structure highly dependent on a specific partner inherently carries the risk of being directly affected by changes in that partner's competitiveness or strategic shifts.

The Group's business depends heavily on securing diverse personnel with technical skills and expertise, and the Group is actively engaged in recruitment, training, work-style reform, and strengthening cooperation with partner companies. However, if competition for talent intensifies due to growing demand for IT personnel, or if recruitment and training initiatives do not proceed as planned, business results and other outcomes could deteriorate. As the shortage of personnel across the IT industry becomes structurally more severe, the likelihood of this risk materializing is increasing.

The Group actively invests in the development of software and services, and also makes investments in other companies for the purposes of establishing affiliated companies and strengthening collaboration. Although such investments are made after thoroughly considering their effects and risks, if sales of in-house developed software and services fall short of plan, or if the corporate value of investee companies declines, business results and other outcomes could deteriorate.

If employees of the Group or partner companies are affected or infected due to a large-scale disaster or infectious disease, or if major business locations or facilities suffer significant damage, business activities could stagnate or halt. Although the Group is working to strengthen business continuity, the impact of force majeure events cannot be completely eliminated, and this carries the risk of worsening business results and other outcomes.

The Group has established a code of conduct and compliance behavior standards, and conducts awareness activities and regular compliance training; however, if a serious compliance violation or legal infraction occurs, loss of trust and the occurrence of damages payments, among other things, could worsen business results and other outcomes. Given the nature of the business, which handles customers' core systems, a failure to comply with laws and regulations could directly damage the relationship of trust with customers.