TSUNAGU GROUP HOLDINGS Inc.

An economic downturn or deterioration in employment conditions could lead to a broad range of impacts across the entire business, such as a reduction in recruitment work for part-time and temporary staff, a decrease in the volume of job listings placed on recruitment media, and a decline in the number of staffing contracts. While demand for human resources services is currently increasing due to improved business sentiment among large corporations and manufacturers, the market environment inherently carries the risk of sudden changes due to shifts in industrial structure, legal amendments, and changes in social conditions. While the Group recognizes the mid-to-long-term labor shortage as a factor supporting demand, it is working to establish a system for rapid response to environmental changes.

While the Company's core business of outsourced recruitment services for part-time and temporary staff is recognized as having few competitors, there is a risk that competition could intensify due to new entrants with substantial capital and brand recognition. In the DX recruiting field, numerous companies, including major players, have already entered the market, and if differentiation and functional improvement are insufficient, there are concerns about the impact on business performance. In the Staffing Business as well, it may become difficult to secure customers and staff amid a large number of competitors.

The Group conducts business operations premised on internet and IT technology, primarily in the DX recruiting field, where industry-standard services are constantly evolving amid remarkable technological innovation. If substantial costs are incurred for introducing new technologies or expanding functionality, or if the expected service quality or implementation effects cannot be achieved, this may affect the Group's financial position and business results. The Group strives to absorb new technologies in a timely manner and expand functionality, but keeping pace with the speed of technological change remains a challenge.

The Group actively promotes the development of new services, business alliances, investments, and M&A, which may involve substantial capital outlays. If new businesses do not progress as planned, or if previously unrecognized liabilities are discovered after an M&A transaction despite due diligence, business results may be adversely affected through valuation losses on shares of affiliated companies or amortization of goodwill. In addition, there is a risk that changes in financial conditions (such as financial system instability, credit crunches, or reduced liquidity) could prevent the Group from raising necessary funds, which could affect its financial condition.

Since the Group's temporary staff, in addition to its employees, are also enrolled in social insurance, the impact of revisions to social insurance premium rates and calculation methods is structurally greater for the Group compared to other industries. If the company's burden rate or the amount it bears changes significantly due to revisions to the social insurance system, this could directly impact business results. Social insurance premium rates are revised from time to time in response to various conditions and changes in the external environment, making this a risk that requires continuous monitoring.

Because the business is entirely dependent on internet communication networks, if a natural disaster or accident causes a disruption in the communication network or a computer system outage, this could seriously affect the business and business results. There is also a risk of system failures caused by computer viruses or unauthorized access by hackers. As countermeasures, the Group is working to strengthen server equipment, use data centers with backup power generation facilities, and implement appropriate security measures, but risks arising from unforeseeable factors cannot be completely eliminated.

The Group obtains and uses large volumes of personal information, such as job applicants' application details, and is subject to obligations under the Personal Information Protection Act. If information leakage, falsification, or unauthorized use occurs, this could affect the business and business results through the burden of response costs, damage claims, and loss of trust. The Group has taken measures such as establishing basic regulations for personal information protection, developing operational workflows, and thoroughly educating all employees, but recognizes that it is difficult to completely eliminate this risk.

The staffing business is a licensed business under the Worker Dispatching Act and is subject to a wide range of laws and regulations, including labor-related laws such as the Labor Contract Act, the Telecommunications Business Act, and the Unauthorized Computer Access Law. If new laws are enacted or existing laws are amended, the Group may need to respond by changing its services, which could affect its business and business results. Group companies operating convenience store businesses are also required to comply with regulations such as the Food Sanitation Act, the Liquor Tax Act, and the Tobacco Business Act.

In the Group's business fields, there is a possibility that third-party intellectual property rights of which the Group is unaware already exist, or that new copyrights, etc., may newly arise. If the Group is found to have infringed intellectual property rights, it may face claims for damages, injunctions, or royalty payment demands, which could affect its business and business results. Although the Group takes measures to investigate to the extent possible, it remains difficult to eliminate all intellectual property risks in advance.

Mitsuhiro Yoneda, the founder and Representative Director and President, plays a critical role in formulating management policy and determining management strategy, resulting in a high degree of dependence on him. If, for any reason, he becomes unable to carry out his duties, this could affect the business and business results. The Group is working to reduce this dependence by promoting the delegation of authority based on its regulations on job authority and by developing personnel, but at present dependence on him still remains.