CELM,Inc.

If client companies reduce their talent development budgets due to a domestic or global economic slowdown, this could have a material impact on the performance of the Organization & Talent Development Business. As countermeasures, the Company diversifies its client portfolio and regularly reviews individual clients' budget conditions.

If the Company is unable to secure talent essential to enhancing corporate value as planned, or if excellent personnel leave the Company, this could have a material impact on business activities and performance. Delays in employee development pose a similar risk. The Company addresses this by improving compensation and working conditions and expanding its training programs.

The Company holds personal information of program participants and confidential information of client companies. If information leakage or deletion occurs due to malicious intent or negligence, this could result in damage claims and loss of social credibility, having a material impact on performance and business activities. The Company has established information security education, improved business processes, thorough information management, and an internal audit check system.

If a natural disaster such as a major earthquake, typhoon, or tsunami, or an emergency such as terrorism or international conflict occurs, providing services may become difficult due to the cancellation or postponement of training programs, which could have a material impact on performance. The Company has established a business continuity framework through the formation of a response headquarters and regular updates to disaster countermeasures.

The Company has recorded goodwill of ¥1,035,253 thousand related to CELM Group Holdings shares acquired through an MBO, goodwill of ¥44,705 thousand related to the acquisition of Human Strategies Japan Co., Ltd., and goodwill of ¥2,063,955 thousand related to the acquisition of KYT Co., Ltd. If the profitability of each business declines, an impairment loss may be recognized. In particular, the KYT goodwill would require impairment recognition if future cash flows decline by 26.6%. The Company aims to strengthen its earnings base by promoting a group synergy strategy.

Amid growing interest in human capital management, entry by management consulting firms and talent development-related service companies is increasing, potentially intensifying competition. If the superiority of the Company's partnership model with professional talent—the source of its competitiveness—declines, this could affect performance. The Company addresses this by strengthening client partnerships and continuously monitoring competitor trends.

In the Corporate Venture Capital (CVC) Business conducted through the HR Tech Investment Limited Partnership, unforeseen events occurring after an investment is made, or a significant decline in the equity value of an investee, could affect performance and business activities. The Company continuously monitors the status of investees through reporting to and monitoring by regular Board of Directors meetings.

In business development in Asian countries such as China and Singapore, the Company may be unable to carry out business as planned due to political and economic conditions, laws and regulations, tax systems, cultural and customary differences, and deterioration in relations with Japan. The Company strives for early identification of such risks by gathering local information overseas.

Training for new employees is concentrated in April and May, initiatives for executives and middle management are concentrated in autumn, and the KYT subsidiary's response to foreign-affiliated clients is also weighted toward autumn. As a result, sales and profit tend to concentrate in the second and third quarters, with lower results in the first and fourth quarters. The Company addresses this by forecasting and monitoring the concentration patterns.

The Company holds a paid employment placement business license under the Employment Security Act (valid until September 30, 2028). If the license is revoked, its renewal is denied, or related laws and regulations are amended or abolished in the future, business activities could be restricted, affecting performance. At present, no grounds for license revocation have arisen, and the Company addresses this risk by promptly gathering information on legal amendments.