SQUARE ENIX HOLDINGS CO.,LTD.

As platforms become more sophisticated and feature-rich, customer expectations for content experiences continue to rise, and game development costs are expected to keep increasing. While the Group strives to maintain appropriate cost levels by tightening development and profitability management for each title, if unit sales fall short of expectations and development costs cannot be sufficiently recovered, this could materially affect business performance.

Content delivery formats and business models are diversifying, and the industrial structure of digital entertainment is undergoing significant change. If the Group fails to respond to these changes in a timely and appropriate manner, it could lose competitiveness and adversely affect the Group's business performance.

Securing excellent talent is essential to executing the growth strategy centered on creating new content and services and expanding overseas. If the recruitment and development of personnel capable of responding to rapid changes in the business environment fails to keep pace, the execution of the growth strategy may become difficult, potentially affecting business performance.

The Group is pursuing international business operations in North America, Europe, Asia, and elsewhere, and changes in market trends, political and economic conditions, laws and regulations, and social conditions in each country may affect business performance. The Group's structure exposes it simultaneously to a wide range of geopolitical and regulatory risks.

A significant economic downturn that reduces consumer demand could dampen consumption of products and services in the entertainment sector. This could cause an overall decline in sales in the Group's core businesses, such as games and amusement.

The Group has overseas consolidated subsidiaries in North America, Europe, and Asia, and since local-currency-denominated sales, expenses, and assets must be translated into yen when preparing consolidated financial statements, significant fluctuations in exchange rates may affect business performance. While the Group seeks to substantially mitigate foreign exchange risk by allocating local currency to local settlements and investments, fluctuations exceeding expectations may not be fully addressed.

There is a risk that system failures or operational errors could disrupt business operations, resulting in lost opportunities and additional costs. Additionally, if a security incident such as a cyberattack, unauthorized access, or computer virus infection occurs, it could disrupt business operations and lead to the leakage of customers' and employees' personal information or trade secrets, potentially damaging the Group's social credibility. While robust preventive and protective measures have been established and are in operation, complete prevention cannot be guaranteed.

The Group has established a rigorous internal management system and provides education and training for officers and employees in response to the Act on the Protection of Personal Information and the EU General Data Protection Regulation (GDPR). However, if personal information is leaked outside the company due to a security incident, this could result in legal sanctions, additional costs, and an impact on the Group's business performance.

The Amusement Facility Operations business is subject to regulation under the Act on Control and Improvement of Amusement Business, etc., which governs licensing, business hours, age restrictions for entry, permitted store locations, and facility structure. If regulations under this law are tightened, restrictions on store operations may increase, potentially affecting the Group's business performance.

In the event of a large-scale natural disaster such as an earthquake, fire, power outage, terrorism, or an outbreak of infectious disease, there is a risk of impacts on demand for content, delays in the development schedules of new titles, and declines in sales at amusement facilities. While the Group implements measures such as regular disaster prevention inspections and evacuation drills, the impact on business performance cannot be completely avoided in the event of a severe accident or disaster.