Japan Process Development Co.,Ltd.

The top two clients account for 42.6% of net sales, resulting in high dependence on specific customers. Changes in customers' business operations or development plans due to shifts in economic conditions or other factors could have a material impact on business performance. The Company is working to mitigate this risk by acquiring new business areas from existing clients and developing new clients.

In lump-sum contract system development, there is a risk that projects may become unprofitable if development costs exceed estimated man-hours, or due to unforeseen circumstances such as changes in customer requirements. This risk is managed through prior review and approval by the Order Review Committee, monthly progress monitoring by the Project Review Committee, and thorough quality control through ISO9001 certification.

As of the end of the fiscal year under review, the Company held securities of ¥1,149 million and investment securities of ¥1,587 million, and fluctuations in market prices or valuations could impact business performance. These holdings mainly consist of held-to-maturity bonds and shares related to business and capital alliances with client companies, and are managed through regular monitoring of market values and financial conditions as well as continuous review of holdings.

In the course of business operations, the Company handles clients' confidential information, and if an information leak occurs due to cyberattacks or other causes, this could lead to claims for damages or loss of trust, impacting business performance. The Company addresses this through thorough regulation development and employee training led by the Information Systems and Security Management Committee, the introduction of security enhancement services, and the establishment and operation of a personal information protection management system through Privacy Mark certification.

Acts causing economic loss by employees, reputation-damaging acts via the internet, and claims for damages due to serious errors at client sites could impact business performance. The Company works to prevent misconduct and illegal acts in advance through the cultivation of highly ethical personnel via the dissemination of its management philosophy and code of conduct, strengthening of internal controls, and internal audits by the Management Audit Office.

System development, particularly control and embedded system development, which is the Company's core business, requires securing excellent personnel, and failure to meet recruitment plans, mass employee turnover, or inadequate cooperation with partner companies could impact business performance. The Company seeks to mitigate this risk through planned recruitment and training, active investment in a comfortable working environment and systems, development of partner companies, and offshore development utilizing its local subsidiary in China.

Given the nature of the business, which centers on information and communication-related technologies, the speed and breadth of technological evolution are extremely rapid, and if time and cost are required to respond to the emergence of innovative technologies or changes in development methods, this could impact business performance. The Company continuously works to select and acquire the necessary technologies through research and investigation activities.

The local subsidiary in China conducts business operations, and country risks such as political instability, changes in economic conditions, or changes in laws and tax systems could impact business strategy and performance. The Company has established a system for rapid response by having its directors also serve as officers of the local subsidiary, thereby maintaining close communication.

As business offices are concentrated in the Kanto region, primarily Tokyo, the occurrence of a large-scale earthquake or pandemic could impact business performance due to suspension or reduction of operations. The Company addresses this through the establishment of a business continuity plan (BCP) system via distributed server management and the introduction of a work-from-home system, the introduction of a safety confirmation system, and the establishment of an emergency response headquarters headed by the President and Representative Director.