Rise Consulting Group, Inc.

In the most recent consolidated fiscal year, the total sales ratio of the top 10 clients by transaction value accounted for 68.0% of total net sales, and in particular, transactions with NTT DATA accounted for 33.8% of total net sales, indicating a high degree of dependence. If this client's management policies change, its business performance deteriorates, or economic fluctuations cause the contract to be terminated in the short term or the scale of transactions to shrink, this could have a material impact on the Company's financial position and business results. As a countermeasure, the Company is promoting stronger sales capabilities to acquire new customers, but resolving this dependence will take time.

Amid intensifying competition for talent in the consulting industry, if the recruitment, retention, and development of excellent personnel do not proceed as planned, or if outflow of personnel to outside the company occurs, this could lead to a decline in competitiveness, constraints on business scale expansion, and a decline in service levels. As countermeasures, the Company is implementing one-day selection events, strengthening referral-based recruitment, expanding training for mid-career hires, and offering high compensation along with engagement improvement measures; however, industry-wide competition for talent remains a continuous risk factor.

The Group's consulting services business is highly likely to compete with major consulting firms, and if it is unable to sufficiently appeal its competitive advantages to clients, this could have a significant impact on business results, such as a decline in sales. As countermeasures, the Company is organizationally promoting the securing of excellent personnel through highly selective recruitment and strengthening its specialized expertise through practice activities (DX, GX, healthcare, etc.), but the competitive environment against major firms remains severe.

The personal computers and mobile devices used by all employees are constantly exposed to the risk of virus infection and unauthorized access, and if devices become unusable, information is leaked, or the work environment collapses, this could cause serious disruption to business operations and also affect business results due to damage to the Company's credibility. As countermeasures, the Company has implemented security software on all devices, centralized management, and restrictions on access from personal devices, in addition to establishing information security regulations compliant with ISO27001 and conducting employee training.

Because the Company handles highly confidential information and personal information of clients in providing consulting services, if an external leak occurs, this could result in damage to social credibility and the incurrence of response costs, among other impacts on business performance. As a countermeasure, the Company provides guidance and training on managing personal information and confidential information to officers and employees at the time of joining and on a regular basis; however, due to the nature of consulting operations, the risk of information leakage is a constant presence.

Regarding the goodwill recorded when the Company acquired a majority stake in the former Rise Consulting Group Co., Ltd. on December 25, 2020, if profitability declines, the recognition of an impairment loss may become necessary, which could affect the Company's financial position and business results. Under Japanese GAAP, goodwill is amortized over the period in which its effects are expected to be realized, and the Company strives to improve profitability through regular monitoring of business results, recruitment and development of excellent personnel, and expansion into new business areas; however, if targets are not achieved, impairment risk could materialize.

If unforeseen troubles arise in contracts with clients, there is a risk of being subject to claims for damages or litigation, and depending on the content and outcome, this could affect the Company's social credibility, financial position, and business results. As countermeasures, the Company manages this risk by determining the allocation of responsibilities in advance at the time of contract conclusion, and seeks to reduce the risk of large-scale damages claims by taking out professional liability insurance and similar coverage.

Because business locations are concentrated in Minato-ku, Tokyo, if a large-scale disaster such as a major earthquake directly beneath the Tokyo metropolitan area or a Nankai Trough earthquake occurs, the Company could be affected by business suspension due to head office damage, disruption of social infrastructure, and clients being affected by the disaster, among other impacts. As a countermeasure, the Company strives to formulate BCP (Business Continuity Plan) guidelines and build a related organizational structure; however, the structural vulnerability of concentrated locations remains, and if an unforeseen event occurs, this could affect business results and financial condition.

The Company has granted stock options (subscription rights to shares) to directors and employees, and if these rights are exercised, the value of shares held by existing shareholders may be diluted. As of April 30, 2025, the number of potential shares from subscription rights to shares was 386,950 shares, equivalent to 1.57% of the total number of issued shares of 24,682,040 shares. The purpose of the grant is to enhance motivation toward improving financial position and business results, and while there is rationale as an incentive design, the dilutive impact on existing shareholders continues to exist.