Japaniace Co., Ltd.

The core Advanced Engineering Business (Single Segment) is subject to regulations including the Worker Dispatching Act (license number: Dispatch 14-300005, valid until March 31, 2027), as well as the Employment Security Act, the Labor Standards Act, and other laws. Changes in laws or their interpretation could necessitate changes to business operations or create new burdens. If grounds for license revocation arise, this would disrupt core business activities and significantly impact business results and financial condition. As a countermeasure, the Administration Division works with retained legal counsel to continuously monitor regulatory developments.

The Company's business activities are highly dependent on human resources, and the acquisition, retention, and development of excellent talent form the foundation of business continuity. If recruitment and development plans do not proceed as planned, or if excellent talent leaves for outside opportunities, this could reduce service delivery capability and impact business results. The Yuho Report assesses the likelihood of materialization as low and the impact as medium.

If a financial crisis, large-scale natural disaster, or deterioration in the economic environment worsens the business performance of client companies, this could lead to reduced orders through cost-cutting measures and shifts in personnel policy, thereby impacting the Company's business results. The Company has not recorded a loss since its founding and has continued to achieve revenue growth since its 12th fiscal period, but structural vulnerability to sudden changes in the external environment remains. The Yuho Report assesses the likelihood of materialization as medium and the impact as low.

Approximately 90% of engineers are stationed on-site at client companies and participate in design and development projects, creating a risk that long working hours may unavoidably occur due to tight delivery deadlines at client sites. Health issues, workplace accidents, litigation, and declining employee morale caused by overwork could impact business results. The Company has established a preventive labor management system through monthly monitoring of long working hours status and confirmation of expected overtime occurrence. The Yuho Report assesses the likelihood of materialization as low and the impact as low.

Given the business characteristic of handling advanced technologies, a delayed response to technological innovation or changes in customer needs could lead to a decline in competitiveness. In addition, business results could also be impacted if development costs and other expenses exceed expectations in the course of responding to such changes. The Company has built a system for keeping abreast of the latest technology trends through the recruitment and development of excellent engineers and the establishment of a creative work environment. The Yuho Report assesses the likelihood of materialization as low and the impact as low.

In the course of business, the Company handles a large amount of confidential information and personal information. If an information leak occurs due to human error, computer viruses, unauthorized access by third parties, or other causes, this could lead to a loss of social credibility and the occurrence of liability for damages, thereby impacting business results. The Company strives for thorough information management through obtaining ISMS certification and the Privacy Mark. The Yuho Report assesses the likelihood of materialization as low and the impact as low.

If a system failure occurs due to human error, failure of communication network equipment, software malfunction, cyberattack, natural disaster, or other causes, this could disrupt business operations and impact business results. The Company has implemented measures such as regular backups of internal systems, but complete prevention is difficult. The Yuho Report assesses the likelihood of materialization as low and the impact as low.

Saburo Nishikawa, Representative Director, Chairman and President, plays an extremely important role in formulating and implementing management policy and business strategy, and he and related parties and his asset management company (Westriver Co., Ltd.) hold 63.6% of total shares issued (including family members). In addition to the impact on business results if he becomes unable to perform his duties for any reason, a sale of his shareholdings on the market could also affect the share price and the exercise of voting rights. The Company is advancing the expansion and development of management executives and delegation of authority to build an organizational business execution system. The Yuho Report assesses the likelihood of materialization as low and the impact as low.

The Company is proceeding with the planning and consideration of new businesses and new services to expand beyond its single segment (Advanced Engineering Business (Single Segment)), but if unpredictable changes in the external environment prevent the expected results from being achieved, recovering the investment could become difficult, impacting business results. The Yuho Report assesses the likelihood of materialization as low and the impact as low.

If the Company's competitiveness relatively declines due to improvements in competitors' service capabilities or intensifying price competition, this could lead to a decline in profitability and impact business results. The Company is working to strengthen its proposal capabilities and human resources and to provide high-value-added services in order to maintain good business relationships with clients and secure competitive advantage. The Yuho Report assesses the likelihood of materialization as low and the impact as low.