DAIKO XTECH, Ltd.

The mid-sized enterprise market, which constitutes the company's main customer base, is highly susceptible to economic conditions, and a contraction in demand accompanying an economic downturn may affect business performance. Mid-sized enterprises are sensitive to changes in the macroeconomic environment, and there is a risk that curtailed IT investment could lead directly to a decline in sales.

The company competes with numerous companies in the same industry, including computer manufacturers, software package vendors, system integrators, and consulting firms. If the company's competitiveness in terms of products/services offered, operational skills, or technology declines relative to competitors, including new entrants, business performance may be adversely affected.

Technological change is rapid in the information services industry, and if the company falls behind in responding to technological innovation, the competitiveness of its services offered may decline. Delayed response to new technologies such as AI and cloud computing carries the risk of directly leading to customer attrition and loss of order opportunities.

Fujitsu Limited, a major business partner, accounted for 3.2% of net sales and 9.3% of purchases in the fiscal year under review, and the company has entered into a Fujitsu Group sales partner agreement. If this business relationship becomes difficult to continue or encounters obstacles, it may affect business performance in both procurement and sales.

In system construction, discrepancies in understanding with customers, insufficient technical capabilities of suppliers, or system defects may result in significant correction costs. Risks of delivery delays and major complaints or litigation also exist, but the company seeks to minimize losses through the permanent establishment of a quality management department and strengthening quality control systems in on-site departments.

Obsolescence or loss of marketability of in-house developed software products, or the occurrence of unexpected defects, may result in significant repair costs. In the information services industry, where product life cycles are increasingly shortened, maintaining continuous product competitiveness is a challenge.

Although the company actively conducts regular and mid-career recruitment, it may become difficult to continuously secure the necessary personnel in the future. There is strong demand for personnel with specialized knowledge, skills, and qualifications, and a risk of outflow to outside companies exists as well; accordingly, the company positions personnel development as a top management priority and promotes education.

Through its business activities, the company has opportunities to handle confidential and personal information of customers, and if an information leak occurs, there is a risk of loss of social trust and claims for damages. The company addresses this by establishing information management systems, including obtaining Privacy Mark certification, but complete prevention is difficult.

The company applies accounting standards related to impairment of fixed assets, and depending on the future cash flow status derived from held assets, impairment losses may occur, potentially affecting operating results and financial position. Impairment of intangible assets, including goodwill, poses a particularly significant risk to business performance.

The company borrows from financial institutions, but if financial institutions tighten lending or the company's credit rating is downgraded, refinancing or obtaining new loans may become difficult, potentially hindering the procurement of necessary funds. Deterioration in the fundraising environment carries the risk of directly constraining business operations and growth investment.