NSD CO.,LTD.

Performance may fluctuate due to a wide range of factors, including changes in social and economic conditions, trends in system investment, competitive conditions including overseas companies, the success or failure of winning large-scale contracts, and the profitability of individual projects. In particular, losing large-scale contracts or failures in project management directly affect earnings. As a countermeasure, the Company is thoroughly implementing risk management, including project management.

If the Company falls behind in responding to the DX and AI fields, performance may be affected by lost order opportunities. Against the backdrop of accelerating technological innovation in the IT industry, there is a risk that the technology gap with competitors will widen. As a countermeasure, the Company is promoting the accumulation of technology and know-how, research and development, and the securing and development of talented personnel, centered on the "Innovation Business Headquarters," the "AI Solutions Business Headquarters," and "NSD AI Technology Corporation."

If the recruitment and development of talented employees and the timely and appropriate provision of personnel from partner companies do not proceed as expected, performance may be affected by decreased productivity and increased costs. Amid the continued tightness in supply and demand for IT personnel, intensifying competition for recruitment is a concern. As a countermeasure, the Company is developing its personnel systems and work environment, enhancing support for obtaining qualifications and training programs, and building favorable relationships with partner companies.

Given the nature of the information services business, the Company frequently has access to personal information and confidential information entrusted by customers. If information assets were to leak or if there were unauthorized intrusion by viruses from outside, this could lead to loss of social trust, litigation, and claims for damages. As a countermeasure, the Company thoroughly implements guidance and education by the Information Security Committee and the Compliance Committee, as well as security measures to prevent information leakage and unauthorized access.

In the course of conducting the information services business, if the Company infringes upon the intellectual property rights of a third party, legal risks such as litigation and claims for damages may arise. This is a significant risk that could also lead to a loss of social trust. As a countermeasure, the Company conducts guidance and education through the Compliance Committee and promotes company-wide initiatives.

If a major earthquake, large typhoon, or other natural disaster causes catastrophic damage to key business locations, or if a large number of employees are affected, substantial costs may be required for repair and response, potentially affecting performance. As a countermeasure, the Company conducts safety confirmation drills and continuously improves its business continuity plan.

There is a possibility that global infectious disease outbreaks, including COVID-19, may occur again in the future, posing a risk to employees' continued work and business operations. As a countermeasure, the Company is improving its business continuity plan, thoroughly implementing infection prevention standards, and introducing and improving flexible working arrangements such as telework and satellite offices.

Amid intensifying competition with other companies in the industry, including overseas companies, losing in order competition or declining profitability due to price competition may affect performance. In particular, in the DX and AI fields, the number of new entrants is increasing, and the competitive environment is changing. As a countermeasure, the Company is strengthening its competitiveness through thorough project management and the accumulation of technology and know-how.

If the Company is unable to secure the timely and appropriate provision of personnel from partner companies, this may result in reduced project execution capability, delivery delays, and increased costs, which may affect performance. There is a risk that partner companies themselves will find it difficult to secure personnel due to the tightness of the IT personnel market. As a countermeasure, the Company strives to build favorable relationships with partner companies while maintaining sufficient communication.

Deterioration in the progress of individual projects or the occurrence of unforeseen costs may reduce profitability and result in losses. For large-scale projects, the amount of loss could have a significant impact on overall performance. As a countermeasure, the Company aims for early detection and response to problems through thorough risk management, including project management.