Bewith, Inc.

Tokyo Electric Power Company Energy Partner accounts for 15.0% of net sales and Pasona Inc. accounts for 10.3%, with the top five customers together comprising approximately 37.0% of total net sales. Changes in these customers' management policies or deterioration in their business performance would directly affect the Group's operating results. Given the nature of outsourcing, there is always a risk of significant fluctuation in the volume of outsourced operations due to intensifying competition or tightened regulations in customer industries. As countermeasures, the Group is promoting the expansion of new business partners, the expansion of transaction areas with existing customers through DX solution proposals and cross-selling, and the provision of new solutions utilizing Omnia LINK.

The receipt of sudden large-scale spot projects triggered by changes in social conditions or national-level institutional changes temporarily boosts net sales and profitability significantly, but after the project ends, the utilization rate reverts to normal levels, causing profitability to decline in the following fiscal year, resulting in performance volatility. The occurrence of spot projects is extremely difficult to predict and may impair the continuity of stable performance. The Group establishes standards regarding the ratio of spot project sales when making order acceptance decisions, and works to control volatility by promoting new mid- to long-term contract acquisitions and securing the profitability of existing operations.

Demand for highly skilled personnel proficient in DX and new service development is tight both domestically and internationally, and there is no guarantee that the necessary personnel can be secured at the necessary time. In addition, the declining working population due to the falling birthrate and aging population, price increases due to inflationary trends, wage revision pressure driven by labor shortages, and the enforcement of work-style reform related laws are combining to potentially cause continuous increases in personnel costs, including the cost of securing operators, which may affect business activities. As countermeasures, the Group is utilizing diverse recruitment methods, developing work-from-home systems, and implementing measures to improve retention rates through internal qualification systems and commendation systems.

Given the nature of the business, which involves handling customer companies' confidential business and technical information as well as end users' personal information, an information leak, if it occurs, could lead to the termination of business relationships, claims for damages from customer companies and end users, and loss of social credibility. Responding to cyber risks, which are becoming more sophisticated and elaborate year by year, is positioned as an important management issue. As countermeasures, the Group has established security policies and privacy policies, maintains ISMS certification (obtained in 2004) and Privacy Mark certification (obtained in 2009), implements personnel, physical, and technical management measures, and has taken out cybersecurity insurance.

The in-house developed cloud-based PBX "Omnia LINK" (Cloud PBX) is utilized both in the Group's own contact center operations and in license sales to customer companies. If it fails to operate normally on a continuing basis due to a failure, malfunction, serious defect, or network failure in external communications infrastructure, this would cause serious disruption to the execution of contact center operations and give rise to a risk of claims for damages from customer companies. As countermeasures, the Group has set contractual limits on damages, implements quality assurance reviews during system development, conducts system inspections before and after operation, and has established an early recovery framework through clarified failure reporting flows.

Contact Center & BPO Services are premised on tailor-made operational design, and discrepancies between the difficulty and workload estimated at the operational design stage and the actual conditions, or sudden changes in operational requirements by customer companies during operation, may result in billing errors or deteriorating profitability. If changes or additions to KPIs or a reassessment of operational objectives require a response exceeding the scope of the originally allocated management resources, there is a risk of declining productivity, discontinuation of outsourced operations, or claims for damages. As a countermeasure, when changes occur, the Group conducts close consultations and condition negotiations with customer companies to reduce such risks.

The Group is subject to a wide range of laws and regulations, including the Personal Information Protection Act, consumer protection-related laws, various labor-related laws, tax laws, and the Act on Specified Commercial Transactions, and any violation could have a material adverse effect on business operations, operating results, and social credibility. If a business suspension order, fine, or other disposition is imposed due to a violation of the requirements for maintaining licenses or permits, continuation of the relevant business would become impossible, and there is also a risk that delayed responses to future legislative enactments, revisions, or changes in administrative interpretation could lead to lost business opportunities. As countermeasures, the Legal Department continuously collects information on legal and regulatory revisions and conducts expert reviews when revising internal regulations.

The Group employs a large number of fixed-term employees under diverse employment arrangements, including part-time and temporary workers. If employment disputes with such employees or former employees arise, or if legal violations or harassment are found to have occurred, the Group could receive guidance or disciplinary action from regulatory authorities or face litigation, which could affect its social credibility and business operations. As countermeasures, the Group has established harassment prevention regulations, provides regular training for officers and employees, and has established an early-response framework through a head office consultation desk and an external whistleblowing hotline.

In the event of large-scale natural disasters such as earthquakes, tsunamis, storms and floods, or fires, disruption of electricity or communication networks, or a large-scale outbreak of an unknown virus or other infectious disease, business operations, operating results, and financial condition could be affected. As a company supporting the business continuity of its customer companies, business continuity in times of emergency is recognized as an important management issue. As countermeasures, the Group disperses its business locations nationwide, has developed a work-from-home system, has established a Business Continuity Plan (BCP), and has prepared procedural manuals by disaster cause with regular review and drills.

The parent company, Pasona Group Inc., holds 54.6% of the total number of issued shares, giving it significant influence over shareholder meeting resolutions such as the election of officers, organizational restructuring, and amendments to the articles of incorporation. In addition, business competition with a Pasona Group company (Pasona Inc.) exists or may arise in part of the standardized BPO services, giving rise to a risk of conflict of interest with general shareholders. As countermeasures, the Group has established a voluntary Nomination and Compensation Committee composed solely of independent outside directors, conducts transaction reviews and Board of Directors resolutions based on the Related Party Transaction Management Regulations, and has strengthened monitoring through independence audits by the full-time Audit and Supervisory Committee member and the Audit Department.