FURYU CORPORATION

The Crane Game Prizes and High-Price Hobby Products of the Sekaikan Business depend on Chinese outsourcing partners, and the Print Sticker Machine (Purikura) of the Girls Trend Business relies on concentration with specific manufacturing subcontractors. If manufacturing, procurement, or transportation is disrupted by geopolitical risks, tariff measures, import/export regulations, natural disasters, or similar events, this may affect the Group's business, results of operations, and financial condition. In response, the Group is diversifying suppliers and logistics providers, securing alternative sources of supply, maintaining appropriate inventory levels, and formulating business continuity plans (BCPs).

The majority of transactions with Chinese outsourcing partners in the Sekaikan Business are denominated in US dollars, and fluctuations in exchange rates directly affect business results. Although forward foreign exchange contracts are entered into for a certain portion of actual demand, it is not possible to hedge the full amount. The Group works to mitigate the impact through optimization of procurement, production, and inventory planning, as well as review of selling prices and product mix.

Given the business characteristic of targeting mainly young people, user preferences change rapidly, and the Print Sticker Business faces the risk of market contraction due to the declining birthrate. Delayed response to customer needs or an overall market contraction could lead to reduced appeal and lower sales. The Group addresses this through consideration of new marketing strategies focused on enhancing user experience value and expansion of a diverse product lineup.

Amid rapid changes in the competitive environment due to industry restructuring and M&A, as well as the growing importance of utilizing new technologies such as AI, delays in R&D investment, talent acquisition, and development structure development could lead to reduced competitiveness. Delayed response to new technologies may lower the competitiveness of products and services and the efficiency of business operations. The Group addresses this through continuous monitoring of competitor trends, securing and developing specialized talent, and strengthening collaboration with technology vendors.

Products and services related to characters and content are based on license agreements with rights holders, and termination of contracts, unfavorable changes in terms, or failure to meet supervision requirements could result in suspension of sales, delayed launches, or additional costs for the relevant products. Changes in relationships with rights holders may directly affect business results and financial condition. The Group addresses this by maintaining ongoing relationships with rights holders and establishing a system to verify contract and supervision requirements.

As the Group makes extensive use of information networks and computer systems in its business operations and acquires customers' personal and confidential information, there is a risk of information leakage or system outages due to cyberattacks, unauthorized access, or system failures. Should this occur, service disruptions, recovery costs, damages, loss of credibility, and administrative measures could affect business results. The Group works to prevent such incidents and minimize their impact through strengthening security management systems, managing access privileges, employee training, and conducting incident response drills.

If the head office, business locations, or business partners suffer physical or human damage from large-scale natural disasters such as earthquakes, fires, or floods, or from terrorist attacks or changes in the political situation, business activities may be disrupted. If damage exceeds expectations, there are concerns about the impact on business results and financial condition. The Group works to minimize the impact of such events through formulation of BCPs, securing alternative means for critical operations, and conducting drills.

As the Group's business domains expand rapidly, strengthening the human resource base in each department has become important; however, if talent development and recruitment do not proceed as planned, this could become a constraint on competitiveness and business expansion. Rising personnel and outsourcing costs due to intensifying competition for talent may affect profitability. The Group addresses this through revising its personnel treatment system, planned recruitment of new graduates and mid-career hires, and implementation of a development program centered on the "Dynamic Vision."

The Group must comply with domestic and international laws and regulations concerning personal information protection, intellectual property, taxation, import/export, and other matters, and stricter regulations or legal amendments are expected to expand constraints on business activities and increase compliance costs. In particular, the strengthening of personal information protection regulations progressing worldwide requires the prompt establishment of response systems. The Group works to mitigate the impact through continuous monitoring of trends in domestic and international legal amendments, development and strengthening of response systems (rules, operations, training, and audits), and use of external experts.