CRG HOLDINGS CO.,LTD

Call center staffing revenue at the core company, Mirairu Co., Ltd., accounts for over 50% of consolidated net sales, resulting in high dependence on a specific field. If demand in the call center industry contracts significantly, this would have a direct and material impact on the Group's overall operating results. While diversification is being pursued through strengthening sales and office work staffing and expanding into the RPA field, the current level of dependence remains high.

At Protex Co., Ltd., transactions with a single specific manufacturer and its affiliated companies account for the majority of business, creating a client concentration risk. While the relationship with this client is described as favorable, if transactions were to cease for any reason, this would have a material impact on operating results. The company's policy is to reduce dependence over time by expanding into business with other clients.

The worker dispatching business and paid job placement business operate based on licenses granted by the Minister of Health, Labour and Welfare, and the majority of net sales are generated from these businesses. Violations of the Worker Dispatching Act, the Employment Security Act, or other applicable laws, or breaches of license conditions, could result in license revocation, business suspension orders, or business improvement orders. While the Group states there are currently no facts constituting grounds for revocation, it continues to strengthen its compliance measures.

The Labor Standards Act, the Worker Dispatching Act, the Employment Security Act, and other related laws are expected to continue to be amended in line with market conditions. Amendments to these laws could lead to decreased revenue or increased costs, affecting operating results. While the Group monitors trends in legal amendments and responds accordingly, depending on the content of amendments, the impact on the business model could be substantial.

In the staffing and recruitment business, increases in wages paid to dispatched staff and in the burden of social insurance premiums must be passed on to fees charged to clients, but increases and decreases in the two do not necessarily move in tandem. If cases of non-correlation increase sharply or persist over the long term, gross margin could decline, adversely affecting operating results. The Group engages in fee negotiations with clients as needed to maintain an appropriate gross margin.

A large number of dispatched staff are subject to social insurance enrollment, and if system reforms lead to an increase in the company's contribution rate or an expansion of the scope of those required to enroll, the resulting cost increases could affect operating results. While the Group is thorough in ensuring social insurance enrollment, system changes are an external factor that is difficult for the company to control.

The Group holds large volumes of personal information on dispatched staff and job placement applicants, managed in databases on IT systems, creating a risk of information leakage due to cyberattacks or other causes. If an information leak were to occur, it could result in damages claims and loss of social trust, materially affecting business activities and operating results. Measures being implemented include establishing information management regulations, conducting annual training for all officers and employees, and appointing an outside director with expertise in information processing.

Stably securing dispatched staff to meet client demands is a key challenge, and there is a risk that staff recruitment may not proceed as planned due to uncertainty over future employment conditions. While measures such as strengthening internet recruitment and promotional activities, and improving retention rates through regular hearings with staff after they begin work are being implemented, if securing staff does not proceed well due to fluctuations in labor demand, this could affect operating results.

Under a policy of actively utilizing M&A and business alliances, there is a risk of impairment losses on recorded shares and goodwill due to deterioration in the performance of investee companies. While the Group strives to identify risks through rigorous due diligence prior to making investments, accurately forecasting the future of investee companies is difficult, and this could affect the Group's financial position and operating results.

Loan agreements with certain financial institutions include financial covenants, and if these conditions are violated, there is a risk of an increase in borrowing interest rates or loss of the benefit of time on the loan. While the Group's policy is stable fund management, if financial indicators fall below the required conditions due to deteriorating performance or other factors, this could affect cash flow and operating results.