BUSINESS BRAIN SHOWAOTA INC.

If information leakage occurs due to unauthorized external access to information systems handling confidential customer information and personal data, or due to improper operations by employees, there is a risk of reputational damage and delays or inability to fulfill outsourced business operations. As countermeasures, the Group has established internal regulations on confidentiality management, thoroughly conducts employee training, and implements various cybersecurity measures, while also purchasing cybersecurity insurance to reduce the financial burden.

The Consulting & System Development business is highly dependent on capital investment trends of client companies, and during economic downturns, there is a possibility of decreased revenue, reduced profit margins, and extended collection periods. Since the impact of economic fluctuations spreads across the entire business, it is recognized as a risk that could adversely affect operating results and financial position.

Price competition with other companies in the same industry is intensifying in the SI/system development and BPO businesses, and there is a possibility that price pressure and reduced competitiveness leading to customer attrition could adversely affect operating results. As countermeasures, the SI field is developing productivity improvement tools and strengthening project management capabilities, while the BPO field is pursuing differentiation through expansion into specialized, advanced areas as "High Value BPO"; however, the risk of reduced profitability and customer attrition remains for some services.

Since contract agreements are concluded for large-scale SI services, if software defects, significant rework, or delivery delays occur, there is a risk that project profitability will deteriorate and adversely affect operating results. In the BPO business as well, there is a risk that long-term unprofitable contracts may be concluded due to insufficient accuracy in estimating outsourced work volume or failure in business improvement.

The Group positions "employees as its greatest management resource," and the growth and development of its businesses depend heavily on human resources. If the Group is unable to sufficiently secure and develop professional key personnel, this may adversely affect operating results and financial position; the Group addresses this through the development of personnel systems and enhancement of employee training.

The IT industry is characterized by rapid technological innovation, with new technologies and services being continuously created, creating a risk that the Group may be unable to respond if significant environmental changes beyond its expectations occur. The Group itself recognizes that it is not responding to all technological innovations, and delays in response may adversely affect operating results and financial position through reduced competitiveness.

The worker dispatch business conducted within the Management Services (BPO) Business segment is based on permits and notifications from the Ministry of Health, Labour and Welfare, and if business permits are revoked or business suspension is ordered due to legal violations, significant obstacles to business execution will arise. In addition, future important legal amendments and the Group's responses to them may significantly impact business execution; the Group addresses this through thorough employee training and legal compliance.

The Consulting & System Development business has a characteristic of generating temporary demand due to changes in the external environment resulting from legal amendments, primarily in the accounting field. At the time such demand arises and after it subsides, sharp fluctuations in demand may occur, potentially affecting operating results and financial position.

If BPO centers located in Sapporo, Hamamatsu, Niigata, Kumamoto, Nago, and other cities are struck by large-scale disasters exceeding expectations, this may result in delays or inability to fulfill outsourced business operations, adversely affecting operating results and financial position. Each BPO center has formulated business continuity and recovery plans and established a system for early recovery, but there are limits to responding to situations requiring long-term recovery.