Business Risks

Among the Group’s business and other risks, the following are the main risks that could have a significant effect on the decisions of investors. We recognize these risks and will strive to avoid them and respond to them if they do occur. The events in the following text regarding the future are based on the judgment of the Group as of the end of the current consolidated fiscal year, and the likelihood of occurrence is uncertain.

Please note that the following business risks do not cover all business activities or investment decisions.

In recent years, in the commercial package software market, low price competition is rapidly advancing, which can be said to be price destruction, and technological innovation is advancing rapidly, so that the trends of competitors including the entire industry and new entrants is also changing.

Under these circumstances, there is a risk that the profits from products sold by the Group will be squeezed by competition with low-priced products and new services due to intensifying competition.

In SaaS, our cloud business, there is the risk of losing the trust of users due to problems such as prolonged suspension of service due to faults. In order to reduce this risk, we are working to disperse our data centers, perform checking by external security specialists, and introduce a reporting system.

There is also a risk of losing customers if a new entrant offers a significantly lower priced service with similar features.

As of the end of the current consolidated fiscal year, there were no material litigation cases. However, in the future, there is a risk of litigation such as claims for damages. For example, a third party may make a claim if there is infringement of intellectual property rights such as patent rights, copyrights, or trademark rights, etc. in our software products. Or a business partner may make a claim for breach of contract due to negligence of the Group.

We pay close attention to system management, such as taking systematic measures such as firewalls and countermeasures while receiving the advice of third party companies specializing in security, and promote reinforcement of information security measures against access to our servers by third parties. However, it cannot be denied that confidentiality such as leakage of customer information and important information possessed by customers may be threatened by malicious third-party attacks such as by hackers. If such a situation occurs, our image as an IT service company, social reputation, and our business may be adversely affected, and we may be liable for damages.

We have established development and support bases in the Kanto area and other areas, and have distribution bases in the Kanto and Kansai areas. We are taking measures against the stoppage of production, shipment and support of our products due to a large-scale natural disaster. In addition, we have addressed measures to maintain head office functions in the event of a head office disaster in recent years as an important issue. However, a major natural disaster at one of our bases could affect our business results.

Due to the nature of our business, the introduction and revision of new accounting standards and tax systems are deeply related to our business results. There is a risk that our business plan and annual business results will be affected significantly due to the suspension or postponement of tax reforms. Also, it is difficult to predict the effects of changes in accounting standards and tax reforms and such changes or amendments may require additional financial resources.

After listing on the First Section of the Tokyo Stock Exchange, we recognize that it is important for us to secure technicians who can develop our technology, increase profits, and further improve and enhance customer satisfaction and labor productivity to further expand our business. In particular, recruitment difficulties are particularly noticeable at our subsidiaries. We have taken measures to improve our name recognition and enhance employee education and benefits. But if we are unable to secure and retain high-quality human resources due to the declining birthrate, it will be difficult to maintain the level of products and services that we aim for. This may be a limiting factor in maintaining and expanding our business, which may affect our business and performance. In addition, fixed personnel costs, etc. may increase with the increase in personnel, and if sales cannot exceed the increase in fixed costs, our business performance may suffer.

The markets where we offer products are undergoing rapid innovation, and in order to meet customer requirements in a timely and effective manner, our products are required to respond to the latest technologies such as fintech and AI. If we fail to secure human resources or business alliances for such new technologies, and if other companies develop technologies or products superior to ours, the market competitiveness of our products may be reduced.

The environment related to the development and service provision of our products and the usage environment of our customers depend on the products, technologies and services of other companies. We will update our products and services in response to changes such as updates of products, technologies and services of other companies, but if our response is delayed or if it is impossible to respond, our business results may be affected.