SOUGOU SHOUKEN CO.,LTD.

The Group has a high degree of sales dependence on major distribution/retail companies and the Japan Post Group, and a decline in orders due to deterioration in these customers' business performance could materially affect operating results. In addition, an accelerating shift from paper to digital media could be a significant factor in fluctuations in transaction volume. As a countermeasure, the Group is working to reduce dependence on specific customers by developing new customers and new businesses.

If prices of key materials such as printing paper and ink rise significantly due to exchange rate fluctuations arising from changes in the global situation, surging crude oil prices, or an imbalance in the supply-demand balance of the paper market, this could materially affect business performance. The Group strives to maintain stable procurement and optimal pricing through diversifying procurement across multiple domestic manufacturers and negotiating price pass-through with customers.

If the business performance of business partners deteriorates more than expected due to changes in economic conditions or industry/demand structures, losses due to bad debts may occur. The Group aims to reduce dependence on specific business partners and thoroughly manage credit, and has a policy of taking measures such as suspending transactions as necessary.

Regarding held assets such as real estate and securities, fluctuations in market value may adversely affect business performance and lead to a decline in the equity ratio. Investment securities are managed through regular reporting to the Board of Directors and the Audit and Supervisory Committee, and for holdings for which the rationale for holding is no longer recognized, sale negotiations will be initiated with consideration given to market impact.

Assets are grouped primarily on the basis of business areas, and for asset groups whose profitability has significantly declined, the book value of fixed assets is written down to the recoverable amount and an impairment loss is recognized. Changes in the assumptions underlying business plans and the management environment may necessitate the recognition of additional impairment losses.

The Group handles a large amount of personal and confidential information in dealings with business partners, and if a system failure or information leakage by employees or business partners occurs, loss of trust could result in the loss of business partners and the occurrence of liability for damages, potentially materially affecting business performance. The Group addresses this through maintaining and utilizing its Privacy Mark (obtained June 2005) and ISO27001 certification (New Year's Card Printing business: obtained December 2019; furippa-net business: obtained March 2022), as well as thorough employee training.

If database servers, printing plants, or other facilities suffer significant damage due to disasters such as earthquakes, this could materially affect business performance. In addition, if business operations become difficult due to the occurrence of a pandemic, or if demand fluctuations occur among business partners, this could also materially affect business performance. The Group seeks to minimize risk through the decentralization of plants, use of cloud data services, and enrollment in various types of insurance.

Sales of New Year's Card Printing and orders for Commercial Printing related to the year-end and New Year sales season are concentrated in the first half of the fiscal year, resulting in a significant difference in sales and profit between the first half and second half. If negative factors such as disasters occur in the first half, this could materially affect business performance. The Group is promoting maximum utilization of internal resources during slow periods and the establishment of a system to ensure stable sales throughout the year.

There is a risk that an accelerating shift from paper to digital media will lead to a structural decline in demand for printing-related businesses. This could bring about significant fluctuations in transaction volume, particularly with major customers such as major distribution/retail companies and the Japan Post Group, raising concerns about a material impact on business performance. The Group is addressing this by diversifying its business foundation through the development of new customers and new businesses.