TAKARA & COMPANY LTD.

Given the nature of the business, which involves handling customers' insider information and personal data, an information leak or insider trading incident could have a significant impact on the Company's credibility and business performance. There is also a risk of business disruption due to ransomware infection. As countermeasures, the Company has obtained Privacy Mark and ISMS certifications, strengthened system security through the Information Security Committee established in February 2022, and established insider trading management regulations while thoroughly conducting employee education.

In a business model whose strength lies in a high degree of specialization, if the Company is unable to secure and develop the necessary personnel amid Japan's rapidly declining population, its business performance could be affected. As countermeasures, the Company is promoting employee education and enhanced benefits with an emphasis on well-being based on the materiality item of "Employee Happiness," as well as developing a flexible work environment.

In a business that requires a high degree of specialization, if talent development does not progress, this could lead to stagnation in new product and system development, resulting in reduced competitiveness and a decline in advisory quality, which could undermine customer trust. As countermeasures, the Company is enhancing on-the-job training and making educational programs more visible, utilizing knowledge-sharing systems, promoting DX for routine tasks, implementing measures to improve ICT literacy, and actively rotating personnel to promote talent development.

If a natural disaster such as a large-scale earthquake, tsunami, typhoon, or flood, or an unforeseen event such as infrastructure outage, political instability, or man-made disaster occurs, business performance could be adversely affected due to supply shortages from affected suppliers, disruptions to transportation and distribution, power and water outages, reduced demand, or harm to employees. The Company states that it will continue to pay attention to the manifestation of natural disaster risks due to climate change as well as geopolitical and economic security risks.

Since disclosure-related documents based on the Financial Instruments and Exchange Act and the Companies Act form the foundation of the business, amendments to laws or changes in accounting standards (including IFRS convergence) could result in increases or decreases in the number of pages and print volumes of ordered documents, as well as require large-scale system modifications, potentially affecting sales. As countermeasures, the Company continuously collects and analyzes information on the disclosure system and accounting standards, shares such information with relevant internal departments, and is considering expanding its capability to gather information on international sustainability disclosure trends.

There is a risk that translation needs could decline due to advances in AI and automatic translation, in addition to a possible decrease in interpretation needs resulting from a decline in international exhibitions and conferences caused by the global spread of infectious diseases. As countermeasures, the Company is developing high-quality translation support tools and enhancing the functionality and operation of systems that enable simultaneous interpretation from remote locations.

For the Group, whose value proposition is based on a high degree of specialization and expertise, the rapid advancement of AI could render the Group's accumulated expertise ineffective or obsolete. As countermeasures, the Company has established a system to promptly grasp changes in AI technology across both the Disclosure-Related Business and the Interpretation & Translation Business, and is working to swiftly incorporate AI technology into its products and services to secure a competitive advantage.

A decline in the number of newly listed companies, the number of listed companies, or the number of financing transactions directly leads to a decrease in orders for irregular disclosure documents and a decrease in the number of customers, which could significantly affect sales and profit. As countermeasures, the Company is stabilizing its business performance by expanding continuous disclosure services, increasing orders for interpretation and translation projects by leveraging Group synergies, and expanding new services targeting unlisted companies.

In M&A transactions, investments, and alliances aimed at enhancing corporate value, if the expected synergies between Group companies are not realized, business performance could be adversely affected by the discovery of significant problems after an acquisition, integration failure due to differences in corporate culture, difficulty in applying internal control systems, and the resulting occurrence of impairment losses on goodwill, among other factors. The Company states that it conducts thorough investigation, analysis, and consideration when carrying out M&A transactions.

In the Disclosure-Related Business, because customers' fiscal year-ends are concentrated in March, sales tend to be concentrated in the first and fourth quarters, resulting in seasonal fluctuations that could lead to stagnation in business performance. As countermeasures, the Company is working to diversify its business performance by expanding the Interpretation & Translation Business, which has different peak performance periods, by creating and expanding new business areas within the Disclosure-Related Business, and by improving the in-house production ratio through the utilization of machine and human resources within the Group.