PCA CORPORATION

Price competition is rapidly intensifying not only in core business areas but also in peripheral business areas, and operators that provide integrated offerings spanning peripheral to core operations are emerging. Combined with the appearance of new competitors driven by digital technology innovation, there is a risk that profits from products sold may come under pressure. The Group is working to address this by strengthening the competitiveness of its products and services, but the ongoing shift toward a price-destructive competitive environment remains a continuous threat.

If a prolonged service outage occurs in SaaS services due to trouble, there is a risk of loss of user trust. The Company works to mitigate this risk through data center distribution, checks by external security specialist firms, and the introduction of an abnormality notification system, but complete elimination is difficult. In addition, there is a risk of customer attrition if competitors leverage new technologies or M&A to offer functionality equivalent to PCA Cloud at significantly lower prices.

There is a risk of information leakage or system outages due to increasingly sophisticated and advanced cyberattacks such as ransomware or targeted attacks, unauthorized access, computer virus infection, or human error. If personal information or important information belonging to customer companies is leaked, the resulting costs from damages claims and the decline in social credibility could affect business results. The Company is implementing measures such as introducing firewalls and intrusion detection systems, utilizing advice from security specialist firms, and strengthening internal management systems.

Due to the declining birthrate and aggressive recruitment of IT engineers by prominent companies, hiring difficulties have become particularly pronounced at subsidiaries, making it difficult to secure and retain high-quality talent. In addition to the risk that staffing shortages could make it difficult to maintain product and service levels, there is also a risk that business performance could deteriorate if the increase in fixed personnel costs associated with headcount growth exceeds the increase in sales. The Company is taking measures such as raising its profile and enhancing education and welfare benefits, but this remains an ongoing structural challenge.

In operations requiring increasingly specialized expertise, such as advanced product and service development or the acquisition of security certifications, dependence on specific individuals has become high in some areas. If such personnel were to leave the Company, this could affect the smooth continuation of operations and business management. The Company is taking measures such as having multiple people cover operations, sharing knowledge, and conducting internal training, but has not been able to completely eliminate this risk.

In a market undergoing rapid technological innovation, product responses to Fintech and AI (including Generative AI) are required. If the Company fails to secure the necessary personnel, experiences delays in research activities, or fails to form partnerships with operators possessing relevant know-how and patents, there is a risk that the market competitiveness of the Company's products could decline. If other companies develop products utilizing superior technology and services ahead of the Company, this could adversely affect the Company's business and results.

The development and service provision environment for the Company's products, as well as the environment used by customers, depend on other companies' products, technologies, and services. There is a risk that business results could be affected if the Company's response to changes such as updates to these is delayed or becomes impossible. External factors such as specification changes or discontinuation of provision by the entities the Company depends on could make it difficult to continue providing the Company's products and services.

The introduction and revision of new accounting standards and tax systems are closely related to the Company's business results, and there is a risk that business plans and annual results could fluctuate significantly due to the suspension or postponement of tax system reforms, etc. It is difficult to predict the impact of changes in accounting standards and tax system reforms, and additional financial resources may be required to respond to such changes and reforms.

In the event of a large-scale natural disaster, there is a risk that business continuity could become difficult due to failures in communication infrastructure or the simultaneous damage to multiple locations. The Company has established a business continuity framework through the distribution of development and support locations, migration of key servers to the cloud, storage of data backups at separate locations, and utilization of laptop PCs, but there are limits to the response capability for simultaneous, widespread large-scale disasters.

There is a risk that in the future, third parties could file lawsuits alleging infringement of intellectual property rights such as patents, copyrights, or trademarks related to software products, or that business partners could file damages lawsuits alleging breach of contract due to negligence attributable to the Group. As of the end of the current consolidated fiscal year, there are no significant litigation matters, but this is recognized as a potential future risk as the business expands.