Sportsfield Co., Ltd.

Due to the declining birthrate and the decrease in the number of university athletic club members, the pool of sports human resources that forms the foundation of the Company's business is itself shrinking, creating a risk that the number of registered personnel will fall short of plan. Since the number of registered personnel is a key indicator for both new graduate and job changer businesses, a decline in this pool directly leads to a loss of sales opportunities. As countermeasures, the Company is working on increasing sales personnel, securing new inflow channels, verifying the cost-effectiveness of advertising expenses, and enhancing added value through the use of assessment tools.

The Group's earnings are heavily dependent on client companies' recruitment plans, and if corporate hiring appetite declines significantly due to an economic downturn, this would directly affect overall operating results. Because the recruitment placement, event, and sporting goods businesses are all linked to trends in the recruitment market, multiple businesses could be impacted simultaneously during an economic downturn. The Company strives to ensure appropriate proposal timing through reviews of customer information management, business workflows, and its sales personnel structure.

The Group holds personal information on a large number of sports human resources as well as confidential information of client companies, which is stored on the servers of media such as "Sponavi 20XX" and "Sponavi Career" and its EC sites. It is explicitly stated that if information leakage occurs due to unauthorized access or internal misconduct, this could not only damage the Company's social credibility but, in the worst case, could also affect the continuity of its business. While measures such as employee-specific ID and access rights settings, firewalls, data encryption, and periodic backups have been implemented, unforeseen incidents cannot be completely eliminated.

As the Company was established in 2010 and has a short history while still being in a growth stage, building a governance framework has become an urgent task alongside the increase in group companies through M&A. If the organization fails to respond in a timely and appropriate manner to business expansion and personnel increases, this could hinder business development and affect operating results. While the Company intends to continuously enhance its compliance and internal control systems, aligning this with the pace of group expansion remains a challenge.

If a major earthquake, typhoon, fire, or other natural disaster, or an infectious disease outbreak, occurs at the head office (Shinjuku-ku, Tokyo), other business locations, or the logistics bases of consolidated subsidiaries, this could disrupt business activities through the cancellation or scaling-down of recruitment events or the suspension of employee operations. In particular, the events business for new graduates is highly dependent on hosted events, and an infectious disease outbreak is expected to have a short- to medium-term impact on sales. While the Company has established a service provision structure supporting online work and remote work, there are limits to its ability to respond in situations involving severe restrictions on social activity.

While the Company plans to pursue business alliances and M&A to expand its business going forward, it is difficult to reliably predict the impact that the business conditions of investee companies will have on the Group, and if the expected effects are not realized, this could lead to a deterioration in financial condition. Although the Company intends to conduct prior assessments of risk and recoverability, M&A also entails risks such as goodwill impairment and integration costs. Establishing a governance framework in step with the increase in group companies is also required in parallel.

If referral-based hiring and AI-driven recruitment methods spread rapidly, there is a risk that the Company's three existing businesses (events, new graduate placement, and job changer placement) could be substituted. The diversification of non-face-to-face methods, such as joint online briefing sessions and video interviews, is already underway, and while the Company is working to create new services, its ability to keep pace with the speed of technological innovation could affect operating results. In particular, the spread of automated matching using AI could pose a threat to the Company's business model, which relies on the strength of face-to-face, personalized relationship-building.

The Group holds licenses for paid employment placement business (license number: 13-Yu-306448, valid until March 31, 2027) and worker dispatching business (license number: Haken 13-306720, valid until July 31, 2029), and if these licenses were revoked, this would severely disrupt business activities. While no matters constituting grounds for disqualification or revocation have arisen at present, if amendments to or violations of laws such as the Employment Security Act or the Worker Dispatching Act occur, this could affect operating results and financial condition through business suspension or license revocation. The Company's policy is to renew these licenses as appropriate.

In the Sporting Goods Planning & Sales Business, the Company procures goods in foreign currency from overseas partner factories and manufacturers in China, the United States, and elsewhere, creating a risk that procurement costs will rise as the yen depreciates. In addition, rising transportation costs associated with higher raw material and crude oil prices directly lead to increased costs, and if these costs cannot be sufficiently passed on through pricing, this could affect operating results. Specific countermeasures such as foreign exchange hedging are not disclosed in the securities report.

In the Sporting Goods Planning & Sales Business, a certain level of inventory is held to enable prompt product delivery, but if sales do not proceed as planned due to changes in customer needs, intensifying competition, weather conditions, or other factors, there is a risk of inventory stagnation, valuation losses on merchandise, and disposal losses. In addition, if warehouse capacity becomes insufficient or logistics costs rise sharply, this could also affect financial condition and operating results. This entails inventory management risks distinct from those of the human resources services business, adding to the complexity of risk management across the Group as a whole.