Solekia Limited

Transactions with Fujitsu Limited, Fujitsu Japan Limited, and FS Technologies Corporation account for a substantial proportion of sales and purchases. In the fiscal year under review, purchases from FS Technologies Corporation reached ¥4,043,882 thousand (21.2% of total purchases). While the relationships are said to be stable due to master transaction agreements, changes in policy or deterioration in the business performance of these specific business partners could have a material impact on the Group's business results and financial position. The Group strives to maintain stable business relationships through the conclusion of master transaction agreements.

The Group has a business structure that is affected by foreign exchange fluctuations through overseas procurement and other activities, and exchange rate movements exceeding short-term and medium- to long-term forecasts could affect its business results and financial position. The Group utilizes forward foreign exchange contracts and other hedging measures to minimize the impact of short-term fluctuations, but it cannot completely eliminate the risk of fluctuations exceeding forecasts.

Given the nature of its business handling personal information and confidential information of customers and business partners, there is a risk of information leakage or system outages due to unauthorized external access or computer virus intrusion. If an information leak occurs, it could lead to legal liability or damage to social credibility. The Company has implemented measures such as developing internal regulations, employee training, cybersecurity measures, and formulating manuals for use in the event of an incident, but states that complete avoidance of such risks is difficult.

In software development operations, requests from customers for specification changes, changes in laws and regulations, or format changes may result in delivery delays or defects such as bugs. If an unrecoverable system failure occurs, it could affect business results, and the increasing sophistication, scale, and complexity of the development process is heightening this risk. The Company seeks to reduce this risk by implementing process management based on established company rules.

Compliance risk, which covers not only laws and regulations but also corporate ethics, is increasing. If a serious violation of laws or the Articles of Incorporation occurs, it could significantly impact management through a decline in social credibility or large-scale damage claims. The Company is working to develop its organizational structure and provide employee training through an organization centered on the Compliance Committee.

As software development becomes larger in scale and more complex, opportunities to conclude contracts with business partners are increasing, expanding contractual risk. If litigation related to a contract occurs, it could significantly impact management. The Company manages this risk through a checking system established by administrative departments and by utilizing retained legal counsel.

Inventory may temporarily increase due to holding discontinued products, the policy of overseas procurement of electronic components, and long-term system development, which could affect business results and financial position. The Company implements sound inventory management, including confirming inventory quantities and amounts at the end of each month, controlling total volume through funding limits, and checking trading-company-type transactions.

In business operations primarily targeting the Asian region, if country risks materialize—such as changes in the political and economic situation of target countries, policy changes, or natural disasters—this could affect business results and financial position. At present, there is no specific mention of hedging measures, and monitoring of country risk remains a challenge.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate. If actual results differ from these assumptions or if the assumptions are changed, this could be a factor causing fluctuations in financial position and business results. A further decline in the discount rate could affect financial position and business results. The Company seeks to minimize this impact through measures such as the partial introduction of a defined contribution pension plan, but states that complete elimination of the risk is difficult.

Many of the Company's locations, including its head office departments, are concentrated in the Greater Tokyo area, and if a large-scale natural disaster or infectious disease outbreak occurs, it could have a severe impact on business activities, results, and financial condition. Geographic risk is high due to this concentration of locations, and disclosure regarding specific countermeasures such as a business continuity plan (BCP) in the securities report is limited.