PORT INC.

In the Contract Support Business, the Company holds important information assets including personal information, and information leakage risk is increasing due to the sophistication of cyberattacks such as ransomware and the expansion of threat areas accompanying the advancement of DX and AI. If a leak occurs, in addition to claims for damages, administrative guidance, and loss of social credibility, it may also have a serious adverse impact on the maintenance of legal licenses and permits such as those for paid employment placement businesses. As countermeasures, the Company has established an Information Security Working Group, maintains Privacy Mark certification, and conducts regular training for all employees.

Amid growing uncertainty in the global economy due to prolonged geopolitical risks, rapid inflation, and fluctuations in exchange rates and interest rates, there is a risk that businesses centered on the human resources and energy fields will be affected by declining hiring appetite and cooling personal consumption resulting from economic deterioration. In addition, there are concerns about impairment risk to goodwill and intangible assets due to a rising discount rate from interest rate increases, as well as damage to the energy business from reverse spreads and bankruptcies among new electric power companies. As countermeasures, the Company operates multiple businesses with differing sensitivities to economic conditions, and has newly established an External Environment Risk Analysis Working Group to build a system for reflecting medium- to long-term macro trends in management.

Due to active M&A, capital alliances, and business investments, goodwill and intangible assets account for a high proportion of the consolidated statement of financial position, creating a risk of recording substantial impairment losses if the profitability of acquired businesses falls short of plans or if the discount rate fluctuates due to rising interest rates. In addition, in acquisitions of unlisted companies, contingent liabilities or legal risks that could not be identified in prior due diligence may surface after the acquisition, and PMI failures could result in organizational culture clashes, departure of key personnel, and delays in system integration. As countermeasures, the Company regularly conducts rigorous impairment testing based on the "PORT Impairment Test and Fair Value Measurement Guidelines" and thoroughly implements multifaceted due diligence.

The Company operates its business relying on various legal licenses and permits, such as those for paid employment placement businesses and real estate transaction business licenses in the human resources field, and the scope of business requiring such licenses is expanding year by year as the business domain expands. If unforeseen new laws or amendments are enacted in the future, or if officers, employees, or outsourcing partners violate laws and regulations, administrative dispositions such as license revocation or business suspension orders could make it difficult to continue the affected business, potentially having a severe impact on operating results and financial position. As countermeasures, the Company continuously monitors legal and regulatory trends through its Compliance Committee, conducts regular compliance training, and performs rigorous legal checks during M&A.

Customer acquisition activities in the human resources and energy fields are highly dependent on major search engines and programmatic web advertising platforms, creating a risk of a sharp decline in access numbers and a surge in user acquisition costs due to major changes in search algorithms or tightening of advertising placement standards. In addition, if the Company fails to respond in a timely manner to fundamental changes in user search behavior driven by the rise of generative AI technology or to the emergence of alternative services, existing business models could become obsolete, potentially having a severe impact on operating results such as revenue. As countermeasures, the Company is promoting multi-channel expansion including SNS and university partnerships, has established an External Environment Risk Analysis Working Group, and is promoting service development and operational efficiency improvements utilizing AI.

The Company utilizes interest-bearing debt from financial institutions to promote M&A, creating a risk of increased interest burden due to a sharp rise in interest rate levels and a risk of breaching financial covenants. In addition, since surplus funds are invested in foreign currency-denominated bonds and other instruments, fluctuations in exchange rates and market interest rates may directly and adversely affect valuation gains and losses, and stock price fluctuations may also pose a risk to the Company's ability to raise funds flexibly. As countermeasures, the Company maintains favorable relationships with financial institutions, conducts rigorous due diligence and financial simulations, and thoroughly manages an appropriate portfolio.

Representative Director Hirofumi Kasuga has extensive knowledge of web marketing and contract support organization management since the Company's founding, and plays an extremely important role in formulating and executing management strategies, including roll-up strategies utilizing M&A. If he becomes unable to perform his duties for an extended period due to unforeseen circumstances, business momentum and agile decision-making could be delayed, potentially having a serious adverse impact on operating results and the achievement of business plans. As countermeasures, the Company operates a management decision-making policy, cultivates next-generation management talent through its Nomination Committee, and has established an emergency response system (with a clearly defined order of authority succession) in preparation for unforeseen circumstances involving the Representative Director.

The Company is subject to a wide range of legal regulations, including marketing-related legal regulations such as those governing internet advertising, content display, and premiums and representations, and may be forced to change its business model due to unforeseen new laws or amendments, or due to its business model becoming subject to regulation. If labor-related issues such as legal violations, inappropriate conduct, or harassment by employees occur, this could lead to business suspension, administrative dispositions, claims for damages, and loss of social credibility, potentially having a serious adverse impact on operating results and financial position. As countermeasures, the Company has established a Business Compliance Working Group, conducts regular training for officers and employees, and is expanding a group-wide common hotline.

With an organizational structure centered on younger employees (average age 29.5 years), amid continued tightness in labor supply and demand due to the declining birthrate and aging population, if the Company is unable to secure necessary personnel at the appropriate time or if the development of young talent does not proceed as planned, this could lead to a decline in organizational capability and delays in business plans. A persistently high turnover rate due to declining employee engagement could become a constraint on competitiveness and business expansion, potentially affecting operating results. As countermeasures, the Company is implementing a large-scale overhaul of its personnel system (revising compensation structures and promoting flexible working arrangements), continuously monitoring through its HR and Labor Working Group, and promoting the development of next-generation leaders.

With the rapid expansion of business and organizational scale through M&A and business investment, if the group-wide internal control system fails to function adequately, or if unforeseen risks or management deficiencies surface at acquired companies, this could lead to compliance violations and a decline in social credibility, potentially having a serious adverse impact on business operations and operating results. As countermeasures, the Company ensures highly effective oversight through its Audit and Supervisory Committee composed of independent outside directors, has established and embedded the operation of multiple voluntary committees, and is expanding its group-wide internal reporting system along with comprehensive group-wide monitoring by the internal audit department.