HIRAYAMA HOLDINGS Co.,Ltd.

Violations of labor-related laws such as the Worker Dispatching Act and the Labor Standards Act may result in corrective recommendations, business improvement orders, business suspension orders, or license revocations from the Ministry of Health, Labour and Welfare and other regulatory authorities. Hirayama Co., Ltd. holds multiple licenses, including its worker dispatching business license (valid until June 30, 2026), and revocation of these licenses could severely impact business continuity. The company addresses this through audits by the Internal Audit Office of branches nationwide and daily monitoring of legal compliance status.

Sales to Terumo Corporation remained highly dependent, at ¥4,852,693 million (13.8% of total sales) in the 58th fiscal year and ¥4,974,616 million (13.7%) in the 59th fiscal year. Changes in the company's production trends, business policy shifts, or deterioration in the business relationship could have a material impact on the Hirayama Group's performance. The group is working to reduce this dependence by offering new high-value-added services and expanding its customer base.

The main client base in the precision equipment field (medical devices, pharmaceuticals, etc.) ships products globally, and frequent production fluctuations and consolidation/reorganization of production sites occur due to economic conditions, exchange rate fluctuations, and cost reduction demands at shipment destinations. Large-scale and sudden production changes at client companies could significantly impact the Hirayama Group's performance. The group is promoting the conversion from dispatch contracts to contracting agreements to build more stable contractual relationships.

In the Insourcing & Staffing Business, securing employees for manufacturing sites is essential; if staffing does not proceed as planned, it may result in lost sales opportunities, increased cost of sales ratio, and higher selling, general and administrative expenses. In addition, under the strategy of increasing the number of indefinite-term employees centered on new graduate full-time employees, a large-scale economic downturn could significantly impact performance. The company strives to secure quality personnel through efficient investment in recruitment advertising and thorough training of recruiting staff.

Manufacturing Contracting (Insourcing) offers higher profit margins than Manufacturing Staffing, but the Hirayama Group bears direct responsibility for defective products and damage to client company equipment. Whereas in Manufacturing Staffing the client company bears responsibility, in Manufacturing Contracting (Insourcing) the Hirayama Group itself is the responsible party, and a serious quality incident or equipment damage could significantly impact performance. Quality control is being promoted through detailed analysis and optimization of production processes by on-site improvement consultants.

In Manufacturing Contracting (Insourcing), the Hirayama Group bears responsibility for occupational accidents occurring within client factories, and if an injured party demands compensation exceeding what is covered by workers' compensation insurance, leading to litigation, this could impact performance. The company implements preventive accident measures through basic policies established under the "Safety and Health Management Regulations" and thorough "risk assessment management." Management training content to be implemented at each group company has also been established, building an organizational safety management system.

The company holds a large amount of confidential information such as client manufacturers' production plans and new product development, as well as personal information and My Number information related to recruitment activities. If a leak or unauthorized use occurs, it could lead to damage claims and loss of social trust, impacting performance. A strict management system has been established through the development of "Customer Information Management Regulations," continuous training for all employees, and obtaining consent forms for personal information handling at the time of hiring.

The Hirayama Group, which employs a large number of workers, is obligated to enroll them in social insurance, and any future increase in social insurance premium rates could impact its business performance and financial condition. This risk is directly linked to the personnel cost structure and its impact may expand particularly as the strategy to increase the number of indefinite-term employees is pursued. The securities report does not describe specific countermeasures.

The company has set forth M&A centered on similar businesses, manufacturing, and consulting, as well as overseas business expansion centered on Asia, as growth strategies, which entail political and legal risks such as large capital requirements, delays in investment recovery, foreign exchange risk, obstacles from local business practices, political instability, and deterioration of labor relations. If investments do not progress as expected and capital cannot be recovered, this could impact performance. The company seeks to reduce risk through a decision-making process involving due diligence by external specialized institutions and thorough discussion at the Board of Directors.

Business activities may be restricted by natural disasters such as earthquakes, typhoons, and floods, climate change, wars, terrorism, cyberattacks, and the spread of infectious diseases, potentially impacting performance. In addition, decreased demand for personnel from client companies due to economic fluctuations or changes in the social environment, and the relocation of client companies' manufacturing sites overseas, could also significantly impact performance. The securities report does not describe specific individual countermeasures for these risks.