KSK CO.,LTD

While IT demand is expected to remain solid due to expanding demand for IoT, cloud, generative AI, and cybersecurity, uncertainty over the global economy is increasing due to geopolitical risks and U.S. tariff measures. If the timing and scale of customers' IT investments fluctuate sharply, or if price competition intensifies, this could adversely affect the Group's sales and profit margins. Domestically, declining real wages due to rising prices are suppressing personal consumption, and there is a risk that changes in the external environment could hinder business results and business development.

The Company positions securing personnel well-versed in advanced technologies such as software development, embedded software, LSI design, and networking as the top management priority; however, the declining working population due to the falling birthrate and aging population is making it increasingly difficult to secure technical personnel. As technological innovations such as DX, generative AI, and robotics raise the required skill levels, if the securing and development of personnel does not proceed as planned, there is a risk of missed order opportunities. Although the Company continues recruiting activities for both new graduates and mid-career hires, a mid-to-long-term shortage of personnel poses a risk of adversely affecting the Group's business results and business development.

In development projects under contract-based agreements, requirement understanding, estimation accuracy, the skill level of assigned engineers, scheduling, quality, and testing effectiveness significantly affect project success and profitability. There is a risk that specification changes or troubles could cause costs to significantly exceed the planned budget, or result in penalties due to delivery delays, with the quality of project management directly affecting business results. Such cost overruns and penalty payments could adversely affect the Group's business results and business development.

Cyberattacks are becoming increasingly active worldwide, presenting risks such as information leakage due to malware infection from targeted attacks, and network encryption or system unavailability caused by ransomware. As countermeasures, the Company has implemented monitoring systems and security education such as monthly email drills, and has also taken out cyber insurance; however, there is a possibility that damage claims exceeding the insurance payout could arise. Damage resulting from cyberattacks poses a risk of significantly impacting business continuity and financial condition.

The Group has opportunities to handle personal information, specific personal information, and customers' confidential information, and if an information leak occurs, there are concerns about adverse effects on management such as decreased sales due to loss of trust. The Company is strengthening information management through obtaining Privacy Mark and ISMS certifications, establishing information security regulations, and employee education and training, and has also taken out personal information protection insurance. However, depending on the circumstances, damage claims exceeding the insurance payout could arise, potentially having a significant impact on business results and business development.

The Company has established standards for building a sound workplace environment and conducting sincere corporate activities as a code of conduct for employees, and is working to strengthen compliance through education and system revisions related to labor management, health promotion, and harassment prevention, as well as the establishment of an internal reporting system. If these mutual checks do not function sufficiently, misconduct or inappropriate acts could occur, potentially leading to a decline in social credibility and damage claims. Compliance violations pose a risk of significantly affecting the Group's financial condition and business results.

The Company periodically reviews its BCP (Business Continuity Plan) with the aim of ensuring employee safety and protecting facilities and information systems, in anticipation of natural disasters such as earthquakes, tsunamis, and volcanic activity, as well as pandemics and man-made events such as foreign armed attacks or terrorism. However, if the damage is severe, there is a risk that business activities could be temporarily suspended, potentially having a significant impact on business results and future business development. While the Company is improving its response capabilities through BCP development, there are limits to its ability to respond to events that exceed expectations.