DMS INC.

The direct mail business accounts for approximately 80% of total sales, and major changes in client companies' promotional methods could have a significant impact on operating results. While combined use with digital marketing is progressing, there is a structural risk of future contraction in DM demand. The company currently addresses this through integration with digital channels, but its ability to respond to fundamental shifts in demand remains in question.

In each of the direct mail, logistics, sales promotion, and event businesses, there is a risk that unexpected technological innovation or sudden changes in the competitive environment could cause the company's services to lose competitiveness. While the company promotes continuous operational improvement and service/technology development, it may not be able to keep pace with rapid changes in the external environment. Particular attention is needed to the risk that progress in digital alternative technologies could render existing services obsolete.

The direct mail business is founded on the postal system, and changes to service content or rates directly affect business costs and customer demand. Increases in postal rates could raise clients' DM usage costs, potentially leading to a decline in order volume. While the postal system possesses sustainability as infrastructure, the risk of system changes requires ongoing monitoring.

The company procures wrapping film materials, printed matter, packaging materials, and delivery services externally, and exchange rate fluctuations, surges in raw material and fuel prices, rising logistics costs, domestic labor shortages, and geopolitical risk all affect procurement costs and supply stability. If price surges greatly exceed expectations, cost pass-through may become difficult, potentially deteriorating profitability. While the company strives for stable procurement at appropriate prices, there is a structural vulnerability to deterioration in the external environment.

In FY2026 (ending March 2026), a single client company accounted for 12.8% of total sales, and any change in transaction terms with or termination of the relationship with this client would directly impact operating results. While the relationship is currently described as favorable, the risk of losing the transaction due to unforeseen circumstances cannot be ruled out. From the perspective of sales concentration risk, progress in diversifying the customer base is an important management issue.

The marketing support business is highly dependent on human resources, and securing and developing capable talent is key to business continuity. The company implements a next-generation management talent development program, promotion of women's advancement, digital and global talent development, and management training, but if the acquisition and development of necessary personnel does not proceed as planned, it could hinder service quality and business expansion. There is also a risk that intensifying competition in the labor market could exacerbate recruitment difficulties.

The company conducts business by receiving personal information entrusted by client companies, and if an information leak occurs, it could have a significant impact on operating results through damage compensation claims and reputational decline. The company maintains and periodically reviews a strict management system based on the Personal Information Protection Act, Privacy Mark (JISQ15001), and information security standards (JISQ27001), but complete prevention is difficult. Given the nature of a business handling personal information, this risk is fundamental to the business itself.

If system failures, information leaks, or data tampering occur due to virus or ransomware infection or hacker intrusion, this could have a serious impact on business continuity and customer trust. While the company implements organizational measures combining technical countermeasures and employee training, complete defense against increasingly sophisticated cyberattacks year by year is difficult. Given the nature of a business handling large volumes of personal information, the risk of being targeted for attack is relatively high.

If large-scale disasters such as earthquakes, storm and flood damage, or the spread of infectious diseases cause severe damage to the head office, branch offices, mailing centers, or logistics centers, this could lead to paralysis of business site functions or disruption of the postal and delivery network. While the company diversifies risk by establishing sites in both eastern and western Japan, the possibility of multiple sites being simultaneously affected during a wide-area disaster cannot be ruled out. A decline in demand due to a chilling of consumer sentiment is also a concern as a secondary impact.

The company promotes three key priorities: addressing climate change, balancing the protection and utilization of personal information, and ensuring diversity and talent utilization, but strengthened regulations or stakeholder demands could make progress according to plan difficult. If these efforts are evaluated as insufficient, there is a risk of declining trust from client companies and investors. If the pace of change in the external environment exceeds the company's internal response, this could also result in a competitive disadvantage.