Among the matters related to the state of our business and accounting, those that may become risk factors and that may have a significant impact on the decisions of other investors are described.
The following forward-looking statements are based on our judgment as of the filing date of this Annual Securities Report (June 28, 2024).Detail of these, please refer to IR-Library - Securities Report.

We consider M&A and capital and business alliances with other companies in the same industry and with other companies that can complement our group's businesses to be important management issues as a means of expanding our market share and business scale.
In conducting mergers and acquisitions, the Group conducts detailed due diligence on its financial, tax, legal, business, and other matters with the aim of reducing various risks. However, after conducting due diligence, if an event that could not be confirmed or anticipated by these investigations is discovered or occurred, the Group's performance and financial position may be adversely affected. In addition, M&A does not necessarily progress smoothly as we anticipate. Even if M&A is implemented, there is no guarantee that synergies in the business or business efficiency will occur, and there is a possibility that synergies will occur, such as changes in the profit structure of our group.
In addition, the Group holds shares in affiliated companies and business partners through M&A and capital and business alliances. The Group generally recognizes changes in the fair value of these securities. Therefore, declines in the value of such securities could have an adverse effect on our group's financial condition.

As a result of the promotion of the stock-type business, the seasonality in which net sales are biased toward a specific period is diminishing. However, due to the timing of budget execution by client companies and the timing of system development, there is a tendency for the completion of services and recording of net sales to be concentrated in some areas at the full fiscal year (end of March). In particular, the situation tends to be conspicuous in March, when the end of a customer's fiscal year is concentrated. Therefore, if the completion of the provision of services and the posting of sales are delayed beyond the end of the fiscal year due to the concentration of engineers' work or unforeseen circumstances, our Group's performance and financial position may be affected.

The contracted development that the Group performs in its application services business may become unprofitable due to errors in project estimates, delays in work progress, or the fulfillment of contractual non-conformance responsibilities, which may result in the Group incurring its own excess expenses and worsening the profitability of the project. In such cases, the Group's performance and financial position may be affected.

Our group is engaged in a wide range of businesses and may handle personal information, confidential information, and other information held by client companies. Leakage or falsification of such information due to computer viruses, unauthorized access, or other unforeseen circumstances, such as natural disasters, could result in claims for damages from client companies, etc., or deterioration of business relationships due to loss of trust in our Group, which could affect our Group's performance and financial position. This could affect the Group's business performance and financial position.
To this end, we have established internal rules for information security management and personal information protection in line with the basic policy of our internal control system. we have acquired the international standard "ISO/IEC 27001" and the domestic standard "JISQ27001" through an audit by an external certification body in November 2006, and since the acquisition Since then, we have undergone regular audits or renewal audits every year.
As an internal structure, the Information Security Committee, headed by the top management, is composed of the Information Security Committee, which meets quarterly to share the implementation status of the PDCA cycle related to information security management and to discuss internal issues(Reinforcement of security measures, etc.).(Secretariat meetings, led by Corporate Division employees, are held monthly.)
Evaluation of the operational status is conducted annually through internal and external audits. In addition, the Company has established a system that enables prompt resolution of security incidents and minimization of damage. In addition, security training for all employees is conducted on a regular basis every year, and the department where the incident occurred conducts refresher training and takes other measures to prevent recurrence.
In addition, a CSIRT(Comtuter Security Incident Response team）was established as an organization to handle security incident response. By strengthening predictive signs and monitoring from logs, developing response procedures for each incident level, and conducting training, an organization capable of handling everything from detection to recovery has been realized. We will continue to strengthen cooperation with related internal and external organizations.We will continue to strengthen cooperation with related internal and external organizations.

Of the products handled by the Group, the majority of products purchased from overseas are contracted in U.S. dollars. However, the Group is not necessarily able to hedge all risks, and sharp fluctuations in foreign exchange rates may affect the Group's business, performance, and financial position. However, we are not necessarily able to hedge all risks, and sharp fluctuations in foreign exchange rates may affect our business, performance, and financial position.

Recently, the cyber security field has been shifting to cloud services, and the trend is toward larger ongoing business contracts with customers, such as multi-year subscription contracts. In such cases, the collection of funds from customers is made every single fiscal year, while in some cases, payment to overseas vendors is made in advance in a lump sum. In such cases, the Company incurs a cash management burden, so it is necessary to watch the gap between the collection cycle and the advance payment burden and pay attention to the cash management plan.

The occurrence of a pandemic (a worldwide pandemic of infectious or contagious diseases), natural disaster, or other natural disaster that affects the business activities of our Group's employees or business partners could have a significant impact on the continuation of our business. In addition, if the disruption spills over into disruptions in economic activities, such as disruptions in supply chains, it could also affect investment trends in the products, maintenance, and various IT services provided by the Group. Furthermore, such an event could have an impact on the Group's performance and financial position.

If stable procurement of semiconductors and components becomes difficult due to any unforeseen circumstances, such as the outbreak of war, turmoil in world affairs due to increased geopolitical risks, the occurrence of pandemics or natural disasters, or economic security procurement and supply restrictions, there is a risk that the Group will experience delivery delays for the products it provides. In such cases, the Group's business performance and financial position may be affected.