FCE Inc.

The flagship product Robo-Pat AI (formerly: RPA Robo-Pat DX) relies on the supply of RPA software licenses under a partner OEM agreement with PKSHA Associates, Inc. If the license supply or the terms of the business alliance with that company were to change for any reason, this could seriously impede the continuity of the DX Promotion Business. While the Group is focused on building a favorable partnership, securing alternative means is not easy.

Since the Group provides services utilizing IT technologies such as RPA and e-learning, there is a risk that an inability to respond to the rapid pace of development of new technologies and new services could lead to a decline in service competitiveness. In fields where AI and automation technologies are evolving particularly rapidly, there are concerns that existing services could become obsolete. The Group is addressing this through employee education on the latest technologies and by strengthening collaboration with partner companies and forming new partnerships.

There are multiple competitors in the DX Promotion Business, and competition with existing operators and new entrants is expected to intensify as the market expands. Should intensified competition lead to customer attrition or increased cost burdens, this could affect the performance of the DX Promotion Business. The Group is seeking to differentiate itself through service improvements achieved in collaboration with partner companies and through the development and enhancement of its customer support structure.

Founder and Representative Director and President Junetsu Ishikawa is a major shareholder holding 34.11% of the Company's shares, and plays a central role in formulating and executing management policy and business strategy. Should he become unable to continue managing the Company, this could have a material impact on the Company's business results and financial position. While the Group is advancing the use of a holding company structure and the development of management executive training and information-sharing systems, the current level of dependence remains high.

Each business manages personal information such as the names and email addresses of customers and prospective customers on information systems, and there is a risk of information leakage due to third-party hacking or intentional or negligent acts by employees. Should a leak occur, it could damage social trust and brand value, potentially affecting the business and its performance. While measures such as external intrusion prevention, internal regulation development, and employee training have been implemented, complete elimination of this risk is difficult.

Both The 7 Habits J® in the education business and The 7 Habits Training® Business Ownership in the training business depend on licenses provided by FranklinCovey Japan Co., Ltd. Should the terms of the license provision or business alliance change for any reason, this could affect the continuity and performance of both businesses. While the Group is focused on building a favorable partnership, the structural risk of license dependence remains.

A tightening of the recruitment environment due to a declining working-age population, or turnover exceeding expectations, could affect the competitiveness of each business. There is also a risk that increased personnel costs required to respond to changes in labor legislation could affect performance. The Group is addressing this through planned recruitment of new graduates and mid-career hires and the development and operation of education and personnel systems that support capability development, though this is recognized as a medium- to long-term challenge.

A decline in the school-age population resulting from the falling birthrate poses a risk of significant contraction across the education industry as a whole. The Group provides proactivity education services to school corporations, and market contraction directly affects the sales and performance of the Education & Training Business. As a response to intensifying competition to secure student numbers, the Group is promoting service development that supports both the realization of educational philosophy and the securing of student enrollment.

In the Education & Training Business, shipments and sales of products are concentrated mainly in the second quarter (January to March) in order to meet demand ahead of April, the start of the new educational year, resulting in a certain degree of seasonal fluctuation in sales and profit. In addition, the Group makes strategic advertising investments in the fourth quarter (July to September) aimed at growth in the following fiscal year, which can cause profit and loss for that quarter to be lower than, or in deficit relative to, other periods. While the Group manages this through forecasting and monitoring of such skewed patterns, fluctuations in quarterly performance may affect investors' judgment.

The Company has adopted a stock option system for directors and employees, and as of the end of the fiscal year under review, the number of potential shares was 1,787,400, equivalent to 7.50% of the total number of shares (including potential shares). Should these stock acquisition rights be exercised, the value per share would be diluted, potentially affecting future stock price formation. While this is a necessary measure as an incentive system, its administration requires consideration of the impact on existing shareholders.