JAIC Co., Ltd.

There is a risk that demand for recruitment placement services may decline due to economic downturns or reduced hiring appetite among companies. In addition, due to low barriers to entry, the number of competitors has increased, and competition is expected to intensify, particularly with competitors specializing in young people (part-time workers, recent graduates, and university dropouts). The Group differentiates itself through accumulated expertise in education-integrated recruitment placement services provided since 2005; however, if competitors enter the market with similar services, this may affect business results and financial condition.

There is a risk that stable acquisition of job seekers may become difficult due to the continued decline in Japan's young population, changes in the employment environment, and intensifying competition. A certain portion of customer acquisition depends on traffic directed from specific search engines (Yahoo! Japan and Google), and changes in search algorithms may reduce the effectiveness of customer acquisition. In addition, if the effectiveness of internet advertising (search-linked, display, affiliate, SNS advertising, etc.) declines, costs rise, or advertising is restricted by legal regulation, this may affect business results through a decline in matching functionality.

If dissatisfaction with the Group's services is posted on SNS or internet bulletin boards, or if employee misconduct occurs, the Group's reputation may be damaged, leading to the loss of job seekers and clients. The Group targets job seekers with employment potential, such as part-time workers, recent graduates, and university dropouts, and thoroughly implements sincere responses through employee training; however, it is difficult to completely prevent the spread of unfavorable information or rumors. If reputational damage spreads, this may have a material impact on business results and financial condition through a decline in customer acquisition capability.

In providing recruitment placement services to job seekers with employment potential, such as part-time workers, recent graduates, and university dropouts, as well as early support for third-year university students, if the accuracy of matching between clients and job seekers declines, there is a risk of a significant decline in the placement success rate, early resignations, or troubles. The Group strives to improve matching accuracy through hearings and interviews with clients, interviews conducted by employment advisors, and the development of internal know-how videos; however, if these measures are insufficient, this may affect business results and financial condition through a decline in profitability and credibility. In addition, if refunds under the industry practice of refunding fees for voluntary resignations within three months of joining a company exceed expectations, this may also have a financial impact.

The Group holds a paid employment placement business license under the Employment Security Act (valid from August 1, 2023 to July 31, 2028), and if it falls under disqualification or revocation grounds, there is a risk that the Minister of Health, Labour and Welfare may revoke the license or issue a business suspension order. Although no violations have occurred to date, if the Group violates laws and regulations for any reason in the future, this may cause material disruption to business activities. In addition, if new legal regulations on advertising activities are introduced, customer acquisition activities may be restricted, potentially affecting business results.

The Group handles a large volume of personal information of registered job seekers, and if information is leaked, there is a risk of major disruption to business operations due to claims for damages or loss of social credibility. The Group has obtained Privacy Mark certification (compliant with JIS Q15001, obtained in 2009 and renewed every two years), adopted SSL encrypted communications, and established a check system by the Internal Audit Office; however, the risk of leakage due to violations of internal rules or unforeseen circumstances cannot be completely eliminated. In addition, if a material compliance violation or trouble with job seekers or business partners occurs, this may affect business results and financial condition through litigation or loss of trust.

There is a risk that securing excellent personnel may become difficult due to changes in the employment environment and intensifying competition for talent, or that internal personnel may leave for outside opportunities. In particular, if officers and executive employees possessing specialized knowledge, skills, and experience, including the Representative Director, resign or retire, appropriate personnel allocation may become difficult, potentially constraining competitiveness and business expansion. The Group promotes recruitment activities utilizing agents and employee referrals, continuous training, and appropriate personnel allocation through organizational diagnostic programs; however, if these measures do not succeed, this may affect business results and financial condition.

Transactions with the National Federation of University Co-operative Associations have continued for over 20 years, and the degree of dependence is extremely high as an indispensable transaction for the Group's operations. Although the transaction is currently continuing smoothly, if it were to be discontinued due to unforeseen circumstances, this may have a material impact on the Group's business results and financial condition. High dependence on a specific business partner is explicitly noted as a risk factor regarding the stability of earnings that investors should be aware of.

The Group's business is based on licensed content such as "The 7 Habits®," "Harada Method®," and "Dale Carnegie Training," and if a license agreement is terminated or discontinued, this may cause material disruption to business operations. In particular, the exclusive franchise agreement with DALE CARNEGIE & ASSOCIATES, INC. includes a clause requiring the Group to either discontinue providing "The 7 Habits®" training to companies or establish a wholly owned subsidiary by the earlier of the time of acquiring the franchise rights for Tokyo and Kanagawa Prefecture or the third anniversary of the effective date. In addition, if the Group infringes on the intellectual property rights of a third party of which it is unaware, this may result in claims for damages, injunctions against use, or demands for royalty payments, potentially affecting business results and financial condition.

The Group's business activities are heavily dependent on computer systems and networks, and it holds a large volume of personal information of job seekers and client company information in a cloud-based customer information management database. If a system failure occurs due to human error or a natural disaster, this may result in lost business opportunities, decreased credibility, and complaints, potentially affecting business results and financial condition. Although the Group has implemented risk mitigation measures such as installing backup servers at a separate location, if a prolonged failure occurs, the impact on business operations may become severe.