SystemEXE,Inc.

If malfunctions, bugs, delivery delays, or other issues occur in the systems provided, this could result in liability for damages to customers and loss of trust, potentially having a significant impact on business performance. As a countermeasure, the Company has established its proprietary development standard framework, "ExecTORA," and conducts company-wide risk management across five categories: quality assurance framework, project management, phase reviews, mutual checks, and quality indicator verification.

In a business model that is heavily dependent on the capabilities and qualities of information technology engineers, if the Company is unable to secure the necessary human resources due to a tightening labor market or accelerating wage increases, its performance will be affected. The Company is working to develop high-caliber personnel and curb attrition by actively recruiting new graduates and mid-career hires, introducing an evaluation and compensation system based on performance and roles, and enhancing various educational programs.

Rapid changes in customer companies' appetite for IT investment, intensifying price competition within the industry, and fluctuations in the economic environment, interest rates, and exchange rates could indirectly affect the Company's performance. As an independent system integrator (SIer), the Company has a customer base spanning a wide range of industries, diversifying its dependence on any specific industry. It also reflects regular market, competitor, and customer needs surveys in its business strategy, and addresses this risk by strengthening its overall corporate capabilities through investment in human capital and the use of the latest technologies.

Procurement of cloud and software licenses from a foreign-affiliated IT alliance partner accounted for approximately 13% of purchases in FY2026 (ending March 2026), and this dependence has tended to increase due to the recent acceleration of the shift to cloud services. Depending on the business trends of this supplier, the Company may be forced to change suppliers, which could affect its performance. The Company is expanding its supplier base by building relationships with other major cloud service providers.

Amendments to or new enactment of related laws and regulations, such as the Personal Information Protection Act, the Worker Dispatching Act, and the Act on Promotion of Subcontracting Small and Medium-sized Enterprises, could result in changes to service content, new costs, or loss of social credibility. The Company conducts regular checks on legal and regulatory amendment information and revises internal regulations through the department in charge, conducts group-wide internal audits through the Internal Audit Office, and provides compliance training using e-learning.

In the process of building customer information systems, the Company handles internal information related to customers' business operations. Any leakage of customer information or employees' personal information due to unforeseen circumstances could lead to loss of social credibility and claims for damages, having a significant impact on business performance. As a company certified under QMS, ISMS, and the Privacy Mark, the Company promotes development and operations that emphasize quality and information security, and works to improve the safety and reliability of customer data management.

Sales to the Mitsui Fudosan Group accounted for 21% of the Group's consolidated sales in FY2026 (ending March 2026), meaning that changes in the group's order trends directly affect business performance. As countermeasures, the Company is promoting diversification across multiple industries and building a system for acquiring new customers, but the degree of dependence remains at a high level.

In FY2026 (ending March 2026), outsourcing costs accounted for a high proportion of cost of sales, at just over 60%, and if the Company is unable to stably secure partners with a high level of technical skill, its performance will be affected. Since competitors also rely on similar partners, competition to secure them is intense. The Company is addressing this through consolidation of partner companies, building long-term business relationships, and strengthening offshore collaboration with its consolidated subsidiary in Vietnam.

Due to rapid technological innovation in the information services industry, if the Company's technologies become obsolete faster than expected, this could affect its performance through a decline in competitiveness. The Company continuously works to grasp the status of its technological capabilities through visualization of careers and skills, conducts training to acquire new technologies, and carries out cross-organizational technology verification and new service creation through its internal research activity, "EXE-Innovation."

A lawsuit seeking payment of contract fees related to a contracted development system (¥94,126 thousand) and a countersuit filed by the business partner (return of previously paid amounts of ¥150,715 thousand and damages of ¥112,438 thousand, totaling ¥263,153 thousand) are currently in litigation, and depending on the future course of the litigation, this could affect the Company's business performance and financial position. The Company maintains that the work under the contract has been completed and asserts that its claim for payment of contract fees should be recognized, but states that it is currently difficult to predict the impact.