NSW Inc.

If changes in IT investment trends due to economic fluctuations, or requests from customers for cost reductions in production, exceed expectations, there is a possibility that utilization rates may decline or it may become difficult to secure profitability. In addition, deterioration in customers' creditworthiness may also affect operating results. The Group addresses this by strengthening relationships of trust with customers and improving productivity and optimizing cost structures.

The proportion of consolidated net sales accounted for by NEC Corporation and its affiliated companies stood at a high level of 11.0% in the fiscal year under review. Although transactions with the NEC group have remained stable for many years based on basic transaction agreements, changes in the business environment or other factors could affect operating results and financial position.

In contracted software design and development, if significant specification changes due to customer circumstances or discrepancies in understanding regarding deliverables occur, there is a risk that the originally planned quality, cost, and delivery schedule cannot be maintained, causing the project to become unprofitable. The Group strives to prevent deterioration in profitability through management by order/estimate review committees and PMOs, but it is difficult to completely eliminate this risk.

If a system failure occurs due to a large-scale natural disaster or man-made disaster exceeding expectations, the provision of services for customer systems may be disrupted, potentially affecting operating results and financial position. The Group addresses this through the adoption of seismic isolation structures, enhanced backup functions, reinforced power supply equipment, and the establishment of continuous operation and monitoring systems, but complete prevention cannot be guaranteed.

If confidential customer information handled in the course of business is leaked, this could give rise to liability for damages or loss of social credibility, potentially having a significant impact on operating results and financial position. The Group has implemented measures such as obtaining ISO/IEC 27001 certification and the Privacy Mark, entering into confidentiality agreements, introducing encryption tools, and providing ongoing education, but it is difficult to completely eliminate this risk.

If a situation arises in which laws and regulations are violated, this could result in claims for damages or loss of social credibility, potentially affecting operating results and financial position. The Group addresses this through the establishment of the "NSW Group Charter of Corporate Ethics" and the "NSW Group Code of Conduct," as well as the development of a compliance promotion structure, but complete avoidance of this risk is difficult.

In investments in and loans to venture companies possessing proprietary technologies or business models, if the business plans of such companies do not progress as originally planned, investment losses may occur, potentially affecting operating results and financial position. The Group strives to avoid this risk by carefully examining the business conditions and plans of investees and conducting careful deliberation prior to making investments.

If a large-scale natural disaster such as an earthquake or flood, or a global pandemic of an infectious disease, occurs in regions where the Group conducts business, it may become difficult to provide services smoothly, potentially affecting business execution and operating results and financial position. The Group has designated swift and appropriate recovery response and business continuity as top priorities, but its ability to respond is limited in the case of disasters of a scale exceeding expectations.