Japan Business Systems, Inc.

A significant portion of the Group's sales consists of services utilizing products and solutions of Microsoft Japan Co., Ltd., and new project referrals and technical collaboration from the company are also an important pillar of business growth. If there is a significant change in contract terms or transaction conditions, or if the relationship deteriorates, this could have a material impact on operating results and financial condition. While a stable business relationship currently continues, the structure of high dependence on a single partner remains a structural risk.

In contracted development such as system integration and Cloud Integration, if unforeseen events cause additional costs or delivery delays, project profitability may deteriorate. The Group has established an estimate management system that incorporates cost forecasting based on work processes and appropriate profit margins, but the risk cannot be eliminated in increasingly complex projects. Deterioration in profitability not only has a direct impact on operating results but can also lead to a decline in customer evaluation.

In contracted development projects, if unforeseeable system defects or delivery delays occur, there is a risk of receiving damages claims from customers. The Group has established a project management system at each stage of proposal, order receipt, execution, and completion, but if disputes escalate, this could lead to financial losses as well as loss of social credibility. The likelihood is stated as "medium" and the impact as "medium" in the securities report.

The Group's business is highly dependent on human resources such as excellent engineers, system engineers, and managers, and if competition for recruitment intensifies or personnel outflow progresses beyond expectations, this could affect operating results and financial condition. The Group is promoting new graduate and mid-career recruitment, enhancing benefits such as company housing and cafeterias, and implementing training measures through e-learning and training centers, but competition for talent acquisition across the IT industry as a whole remains an ongoing challenge. Both likelihood and impact are stated as "medium" in the securities report.

Since the Group handles personal information and confidential information of customers and business partners in the course of business, information leakage could lead to damages claims from customers and loss of credibility. Measures such as obtaining ISO27001 (ISMS) and JIS Q 15001 (Privacy Mark) certifications, establishing an information security system headed by a CISO, and real-time threat monitoring in cooperation with an SOC have been implemented, but the risk of leakage via partner companies remains.

If a security incident occurs, such as a malfunction of internal information systems or unauthorized external access or malware infection, this could result in reduced operational efficiency and an impact on operating results. Measures such as backups, redundancy, penetration testing, security assessments, and cooperation with an SOC are being implemented, but the risk continues to exist given the increasing sophistication of cyber threats.

If deterioration in domestic and overseas economic conditions leads to a reduction in customer companies' system investment, this could result in decreased orders from existing customers and stagnation in acquiring new customers. Although the market is trending toward growth due to progress in cloud adoption, market size could shrink due to customers' promotion of in-house development or delays in product development by manufacturers. The Group is working to maintain competitiveness by continuously maintaining certifications with Microsoft and other manufacturers.

If the Group fails to predict or recognize the direction of rapid technological innovation in the information services industry, or fails to respond appropriately in a timely manner, this could result in a decline in competitiveness that affects operating results and financial condition. The Group plans to respond through recruitment, education and training, and development environment enhancement, but the risk continues to exist as the pace of technological change accelerates.

Yukihiro Makita, Representative Director and President, is the central figure in the establishment of the Group and plays an important role in overall business activities, raising concerns about the impact on operating results and financial condition should he become unable to continue in his duties. While the Group is working to avoid excessive dependence through strengthening its management structure and human resource development, the securities report states that a considerable degree of dependence remains. In addition, he, his relatives, and asset management companies hold 45.1% of voting rights, and there is also a risk of impact on the market price of shares if such shares are sold.

The Group provides customers with products and services from specific service providers, including Microsoft Japan Co., Ltd., and if there is a significant change in the market appeal of specific products or services, or if there is disruption in their provision, this could affect operating results and financial condition. While a stable business relationship is currently maintained, concentration on specific products remains a structural risk factor.