OPEN Group, Inc.

The Intelligent Automation Business and the Ad Automation Business assume growth premised on rising client-company investment sentiment toward IT investment, advertising investment, and marketing investment. If client investment sentiment declines due to deterioration in domestic and overseas economic conditions or business trends, this will directly affect the sales of both businesses. The Group conducts overall management of business risk through the Risk Management Committee, but it is difficult to completely control fluctuations in the external environment.

Some of the technology comprising the core product "BizRobo!" depends on licensing granted under a reseller agreement with Tungsten Automation Japan K.K. (valid until December 31, 2027). If the supply of the software license is suspended or terminated due to a change in that company's business policy or other reasons, it could have a material impact on the performance of the Intelligent Automation Business. With the contract term set to end at the end of 2027, the outcome of renewal negotiations is key to business continuity.

The Group is pursuing aggressive strategic investment in the procurement of licenses for automation technologies such as RPA and AI, as well as in the development of new businesses and services, but if these investments fail to achieve the results originally planned, this could affect the Group's financial position and operating results. Prior to executing investments, the Group conducts preliminary research into the demand and competitive environment of the businesses and services being entered, as well as scrutiny of investment plans, and monitors progress through management meetings and other means, but there is no guarantee of certain results.

The Group has a policy of continuously carrying out M&A and capital and business alliances for the purpose of business expansion and securing personnel, and conducts detailed due diligence covering finance, tax, legal, and business aspects, but it may be difficult to accurately predict the impact that the business conditions of investees will have on the Group. If amounts invested or loaned become uncollectible or impairment processing becomes necessary, this could adversely affect the Group's financial position and operating results.

In the RPA and hyperautomation industry, the number of entrants is increasing along with the expansion of the domestic market, and intensifying competition and increased costs for countermeasures are anticipated. Multiple competitors also exist in the Ad Automation Business. Deterioration of the competitive environment could affect the Group's profitability and market share.

In the RPA and hyperautomation industry, new technology development and the introduction of new services occur frequently, and change is rapid. The Group continuously promotes the acquisition of new technical skills among its engineers, but if for some reason its response to technological innovation is delayed, there is a risk that the competitiveness of the services provided will decline. In addition, if investment in unplanned technical elements becomes necessary, this could affect the Group's financial position and operating results.

The Group holds fixed assets such as tangible fixed assets, software, and goodwill, and if the recovery of invested amounts becomes unlikely due to a decline in profitability resulting from changes in the business environment or other factors, impairment losses may arise, affecting the Group's financial position and operating results. Under a policy of actively pursuing M&A, the goodwill balance tends to accumulate, and the risk of impairment is relatively high in phases of deteriorating performance.

If the Group is unable to secure sufficient engineers to handle implementation support, consulting, and engineering for "BizRobo!", timely responses to clients may become difficult, potentially resulting in lost opportunities such as transaction cancellations. Demand for engineers in the RPA and AI fields is rising across the industry as a whole, and there is a risk that intensifying competition for recruitment will make securing personnel even more difficult.

If a system outage, virus intrusion, unauthorized access, or similar event occurs, there is a risk of information system downtime or the loss, leakage, or alteration of internal information, including customer information. The Group also has occasion to handle clients' confidential and personal information, and any information leakage resulting from an unforeseen event could lead to a loss of public trust. The Group has implemented measures such as access authorization settings and password management, but it is difficult to completely eliminate unpredictable threats.

Representative Director Tomomichi Takahashi plays an important role in the Group's business development through formulating business strategy and leveraging his industry network, while Director Nobuyuki Osumi plays an important role through his knowledge and experience in the Intelligent Automation Business and his creation of new business models; the Group recognizes that its current dependence on both individuals is high. If, for any reason, either individual becomes unable to continue performing their duties, this could have a material impact on business development. The Group is working to reduce this dependence by strengthening its management structure and developing executive personnel, but building a system of successors remains a work in progress.