IDEA Consultants,Inc.

Orders from government agencies and public corporations account for more than 80% of net sales, so increases or decreases in public works-related budgets and constraints on budget execution directly affect the amount of orders received and sales. In particular, if budgets related to the Group's relevant technology fields are cut, the impact on business performance would be significant. No explicit diversification measures against this customer base concentration risk are disclosed in the annual securities report.

Among the Company's 14 locations nationwide, including Sapporo, Tokyo, Osaka, and Fukuoka, some are located in regions where the risk of a large-scale earthquake has been identified. In the event of a disaster, damage to major facilities, samples, and data could make business continuity difficult, potentially affecting business performance and financial position. The Company is strengthening its disaster prevention management system, but the response may be limited depending on the scale of the disaster.

If defects (contractual non-conformity) occur in deliverables from consulting services, there is a risk of large damage claims or disqualification from bidding. The Company addresses this through quality control via ISO9001 implementation and periodic reviews, as well as by taking out construction consultant liability insurance, but damages not fully covered by insurance and loss of order opportunities due to bidding disqualification could affect business performance.

The Company is subject to various laws and regulations, including the Antimonopoly Act, the Act on the Promotion of Subcontracting Small and Medium-sized Enterprises' Frozen Assets Transactions, and the Personal Information Protection Act. A violation could damage social credibility and affect business performance. Additionally, if permits and licenses such as the construction consultant registration (valid until September 30, 2029) or measurement certification business registration were revoked or unable to be renewed, this would significantly constrain business operations. The Company has established a compliance system through a standing Compliance Committee and internal regulations.

Given the highly public nature of its business, the Company handles a wide range of confidential information, including personal information. If an information leakage incident occurs, it could damage social credibility and reputation, thereby affecting business performance. The Company has established a company-wide information management system through the establishment of the 'Information Management Regulations' and the 'Information Management Committee,' but it is difficult to completely eliminate risks such as cyberattacks and internal misconduct.

Competition for hiring and retaining highly specialized and talented personnel in technical departments is intensifying, and a shortage of personnel could reduce technical capabilities and productivity, potentially affecting business performance and financial position. In addition, if specialized personnel move to competitors, there is a risk that the Group's knowledge and know-how could leak out, relatively weakening its competitiveness. The annual securities report explicitly states that the recruitment, training, and retention of personnel form the foundation of the Group's business competitiveness.

If a pandemic of a scale exceeding expectations occurs, there is a risk that national and local government budget formulation could involve changes in the allocation of public works spending or a reduction in scale. Additionally, requests from administrative agencies to temporarily suspend business activities could make it difficult to carry out operations, potentially affecting business performance and financial position. Given the business structure in which more than 80% of net sales depend on the public sector, fluctuations in public budgets have a particularly significant impact.