transcosmos inc.

The outsourcing services provided by the Group are constantly exposed to technological innovation, and continuous development and adoption of the latest technologies are essential to maintaining technological superiority and price competitiveness. If the Group fails to respond appropriately to rapid technological innovation, or if its services no longer match market needs, there is a risk that the existing business could shrink or become unviable. In particular, as the advancement of digital technologies including AI accelerates, delays in response would directly lead to a loss of competitiveness.

The Group handles large volumes of personal and confidential information through contact center operations and other services, and has established a management framework through the formulation of an information security policy and ISMS activities based on ISO/IEC 27001. However, if a system failure, or destruction, tampering, or leakage of important data occurs due to virus infection or cyberattacks beyond expectations, it could have a significant impact on business results. Although the Group is working to continuously strengthen its information security management framework, complete defense is difficult given the increasing sophistication and diversification of threats.

The Group handles large volumes of customer data (names, addresses, ages, annual incomes, etc.) of client companies at its contact centers, and strives to thoroughly manage personal information through obtaining Privacy Mark certification, establishing codes of conduct and internal regulations, and conducting education and training. In the event of an unforeseen confidential information leakage incident, the Group could be subject to large damage claims and sanctions such as revocation of Privacy Mark approval or fines imposed by administrative authorities. Such an event carries the risk of a significant impact on overall business activities.

Providing high-value-added outsourcing services requires securing and developing excellent personnel with advanced expertise and experience, and the Group is working to strengthen new graduate and mid-career recruitment, build and promote various development programs, and improve employee engagement. However, if securing and developing personnel does not proceed as planned due to a declining working-age population and intensifying recruitment competition, it could lead to a decline in service quality and constraints on business expansion. Human resources are the foundation of the outsourcing business, and this risk has a direct impact on business results.

The Group has a policy of actively pursuing mergers, acquisitions, and alliances with related companies to expand its business and strengthen its competitiveness, and competitors are also stepping up M&A activity in pursuit of economies of scale. However, if business synergies cannot be realized after an M&A transaction due to various factors, if appropriate control cannot be exercised in terms of personnel or funding, or if the business environment or profit structure changes, this could adversely affect business results. Failed M&A transactions could also lead to increased financial burden and goodwill impairment risk.

The Group makes business development investments aimed at responding to technological innovation and creating business synergies, and its investees include many venture companies as well as companies in developing countries such as those in Southeast Asia and South America. If an investee's business model does not match social and economic needs, or if its management condition deteriorates, there is a risk that invested funds may become unrecoverable, and valuation losses may arise from fluctuations in stock prices or exchange rates. As a countermeasure, the Group appropriately implements impairment of held securities and other measures based on internal regulations that are stricter than general accounting standards, and strives to reflect this appropriately in consolidated results.

Demand for outsourcing services is expected to expand against the backdrop of a declining working-age population, corporate globalization, and advances in digital technology, but changes in the volume of outsourced work due to economic fluctuations and deterioration in client companies' business performance are risk factors. In addition, if a shift from outsourcing to insourcing occurs from the perspective of personal information protection, it could affect the Group's business results. Since fluctuations in the volume of outsourced work directly affect net sales, continuous monitoring of demand trends is important.

The Group is promoting global business expansion centered on Asia, but it is exposed to country risks arising from unforeseen circumstances due to changes in the political, economic, and social conditions of each country and region, as well as the enactment or revision of laws and various regulations. In particular, in business operations in developing countries, sudden changes in the regulatory environment or political instability could impede business continuity. These risks could affect business operations and results, and the absolute magnitude of the risk increases as global expansion grows.

The Group is entrusted with business operations by many client companies both in Japan and overseas, and has formulated BCPs at each center in preparation for unforeseen events such as earthquakes, typhoons, infectious diseases, regional conflicts, and terrorism, and is strengthening countermeasures based on its crisis management policy. However, if a natural disaster or infectious disease outbreak occurs on a scale far exceeding expectations, there is a risk that business could be suspended temporarily or over the medium to long term due to the closure or downsizing of operation centers or a decrease in the volume of outsourced work. In responding to infectious diseases, the Group has established a business continuity policy that prioritizes

If laws and regulations related to the Group's business are enacted that have an adverse effect or whose interpretation is unclear, this could affect business results and the speed of business development. In addition, in software development, if a discrepancy arises between the estimated development costs required to meet client companies' user requirements and the actual development costs incurred, the Group bears the risk of shouldering the excess development costs. These factors can significantly affect the profitability of individual projects.