KYCOM HOLDINGS CO., LTD.

The Company is a pure holding company, and the majority of its revenue consists of management guidance fees (a certain percentage of subsidiaries' sales and non-operating income) received from consolidated subsidiaries. As a result, deterioration in subsidiaries' performance directly leads to deterioration in the Company's performance. Strengthening the risk management system across the entire group is required.

Subsidiaries receive orders for projects in public-related businesses, telecommunications, electric power, travel, and other sectors, and fluctuations in the performance of client companies significantly affect subsidiaries' performance. Clients themselves face risks such as economic trends, competition, prolonged elevated crude oil prices, exchange rate and interest rate fluctuations, and unforeseen disasters, and if these materialize, they could spread to affect the Group's performance.

Due to the fierce competitive environment in the information services industry, order prices for products and services have continued to decline. While the Group is working on new customer development and cost reduction, if order prices decline beyond expectations, profitability could decrease significantly, adversely affecting performance.

The Group has subsidiaries engaged in engineer dispatch business based on the Worker Dispatching Act, and changes in laws and regulations related to labor conditions and taxation could increase compliance costs and reduce profits. Changes in regulations such as retirement benefit obligations, tariffs, consumption tax, and environmental recycling laws may also affect performance, requiring a response to a wide range of legal and regulatory risks.

The Group has established the "Confidential Information Protection Regulations" and "Personal Information Protection Regulations" to protect confidential and personal information, and has implemented measures such as Privacy Mark (JIS standard) certification and ISO9001 acquisition. However, if information leakage occurs due to unforeseen unauthorized access, it could result in loss of customer trust and damages, significantly affecting performance.

In new businesses and overseas investments, even with organizational and environmental preparation and information gathering, recognition of latent risks may be delayed due to lack of experience. When the investment amount is large, the impact on performance could be significant, and in overseas investments, substantial exchange rate fluctuations could also become a factor in performance deterioration.

To respond to customer needs and develop the Group, the Company may engage in business alliances, joint ventures, and strategic investments with other companies domestically and internationally, but there is a risk that planned outcomes may not be achieved due to misalignment of interests between parties, prolonged negotiations, or difficulty in appropriate personnel allocation. If these risks materialize, they could lead to impairment of investments and deterioration of performance.

If a damages lawsuit is filed on grounds of infringement of third-party rights or interests, it could affect the Group's performance regardless of the Group's awareness or responsibility. In addition, although labor-management relations are currently favorable, if relations were to deteriorate for some reason and develop into litigation, this could also adversely affect performance.

In the information services industry, securing and developing excellent engineers is fundamental to business continuity, and if human resource acquisition and development do not proceed as planned, this could lead to a decline in service quality and loss of order opportunities. Particularly for subsidiaries engaged in engineer dispatch business, securing qualified and excellent engineers is a prerequisite for the business.

If unforeseen events such as product or service defects, natural disasters, terrorism, or strikes occur, they could impede business continuity and affect performance. Subsidiaries operating data center businesses thoroughly implement security and quality control, but such events are difficult to avoid completely, making the development of business continuity plans (BCP) important.