JACCS CO., LTD.

If a large-scale natural disaster or accident, such as a major earthquake directly beneath the Tokyo metropolitan area, occurs and causes serious damage to human and physical assets, this may make business continuity difficult and adversely affect business performance and financial condition. This risk has been newly added as a top risk this period, reflecting its growing importance. This is addressed by establishing the "Basic Crisis Management Regulations" and "Business Continuity Plan (BCP)," building an alternative operations framework centered on the Kinki area, and conducting regular BCP drills.

If unauthorized external access, virus infection, or similar incidents result in the leakage of personal information or system outages, this may lead to business suspension, damages claims, and impairment of social credibility. While internet-based services are increasing, cyberattack methods are becoming more sophisticated and elaborate day by day, and the risk is intensifying. As countermeasures, the Company has established an IT Security Management Committee, implemented multi-layered defense, conducts vulnerability diagnostics by external specialist organizations, and promotes joint initiatives with Mitsubishi UFJ Financial Group.

Due to the nature of the consumer credit business, which requires substantial fundraising, changes in financial markets or a rating downgrade leading to higher funding interest rates may increase financial expenses, directly and adversely affecting business performance and financial condition. If reviewing transaction terms such as fees and lending rates for new business takes time, there is a risk that pressure on earnings may become prolonged. This is addressed through duration management by the ALM Steering Committee, hedging transactions using derivatives, and expansion of variable-rate products handled, among other measures.

A decline in credit screening accuracy, an increase in fraudulent applications, an increase in personal bankruptcies due to economic deterioration, and bankruptcies of member merchants may increase delinquent receivables, adversely affecting business performance and financial condition through additions to the allowance for doubtful accounts. Deterioration in member merchants' business conditions may cause suspension of continuous service provision or non-delivery of goods, which could also develop into litigation risk. This is addressed by holding the Credit Risk Management Committee monthly, cross-departmental monitoring of delinquency trends, ongoing improvement of the automated credit screening system, and strengthened collection of early-stage delinquent receivables.

The Company is subject to numerous laws and regulations, including the Installment Sales Act, the Money Lending Business Act, and the Payment Services Act, and if officers or employees commit legal violations or misconduct, this could result in administrative sanctions such as business improvement orders, business suspension orders, or revocation of registration. This could also seriously affect business performance and financial condition through loss of stakeholder trust and reputational damage, and it has newly been selected as a top risk. This is addressed by establishing internal control departments for each business, regularly convening the Compliance Committee, providing ongoing education to officers and employees, and developing and operating an internal whistleblowing system.

If a serious failure occurs in computer systems or communication networks due to natural disasters, cyber incidents, equipment failure, or similar causes, this may lead to business suspension, disruption of service provision to customers and member merchants, and a decline in credibility due to data leakage, tampering, or destruction. As much of system development and operation is outsourced, failures caused by outsourcing partners could also adversely affect business performance and financial condition. This is addressed through seismic reinforcement and power supply redundancy at information processing centers, system redundancy, 24/7/365 continuous monitoring, and strengthened management of outsourcing partners.

Due to the nature of its business, the Company Group acquires, holds, and uses large volumes of personal information, and if personal information is leaked, lost, or improperly used by the Company Group or its outsourcing partners, this may lead to a decline in credibility, damages claims, and administrative sanctions. The risk of information leakage is increasing due to the rapid spread of generative AI tools and the growing complexity of supply chains. This is addressed by holding the Personal Information Protection Committee semiannually, maintaining Privacy Mark certification, risk-based management of outsourcing partners, and ongoing employee training.

While the Company raises funds through bank borrowings, corporate bonds, commercial paper, and receivables securitization, deterioration in market conditions or in the Company's financial condition may make it difficult to secure necessary funds, or may force fundraising at significantly higher interest rates. Fundraising from financial markets is highly susceptible to financial market conditions and could seriously affect business activities and performance. This is addressed through monitoring by the ALM Steering Committee, diversification of fundraising methods, establishment of liquidity backup lines, and management of on-hand liquidity.

The Company Group conducts business in five countries—Vietnam, Indonesia, the Philippines, Cambodia, and Malaysia—and is newly expanding into Singapore, but political instability, geopolitical risk, and deterioration of economic conditions in each country may make normal business operations difficult. There is a risk of increased delinquent receivables due to deteriorating economic conditions, as well as risk to the safety of overseas expatriates and local officers and employees. The Company builds a support structure by gathering information on political conditions and regulatory trends in each country, continuously monitoring key indicators of group companies, and having risk-responsible departments provide support.

A decline in personal consumption due to a global economic slowdown, rising prices, and rising interest rates directly affects the Company Group's business performance. In addition, intensifying competition from the entry of fintech companies and a decline in competitiveness due to delays in promoting DX may adversely affect business performance and financial condition. The competitive environment in consumer credit is changing rapidly not only due to competition among industry peers but also due to entry from other industries. This is addressed through the initiatives of the medium-term management plan "Do next!," including appropriate allocation of management resources through business portfolio management, investment in growth areas, and productivity improvement through web-based operations and automation.