Among the matters disclosed in the securities report regarding the business and financial conditions, the primary risks recognized by management as having the potential to materially affect the Company’s financial position, operating results, and cash flows are as follows.
Please note that the forward-looking statements contained herein are based on judgments made by the Group as of the end of the current consolidated fiscal year and do not encompass all potential risks that may arise in the future.
(1)Risk Management System of the Group
The Group has established a Risk Assessment Committee, chaired by the Representative Director and composed mainly of directors, with the aim of systematically and strategically preventing the occurrence of risks and minimizing losses through appropriate responses.
(2) Implementation of the Risk Management System
The Risk Assessment Committee holds regular meetings at least quarterly and convenes ad hoc meetings as necessary. Its responsibilities include investigating risks, comprehensively identifying and analyzing their significance, examining and determining countermeasures, overseeing implementation status, and reviewing preventive measures.
(3) Risks Related to the Business Environment
(i) Market Environment
The Group provides services primarily to domestic startup companies and related stakeholders. Accordingly, its operations are susceptible to trends in the startup ecosystem and hiring demand in Japan. Notably, Human Capital, the Group’s core service, may be significantly affected by startup hiring needs. Deterioration in domestic or global economic conditions, geopolitical risks, or fluctuations in financial and capital markets could result in a sharp decline in the number of startups or funding for startups, thereby affecting the Group’s financial condition and performance.
To address such risks, the Group works to expand its client base and diversify positions to avoid overreliance on specific customer segments.
(ii) Competition
Human Capital is categorized under the “fee-charging employment placement business,” which is regulated but has low entry barriers, resulting in numerous competitors across various sectors. According to the Ministry of Health, Labour and Welfare, the number of private employment agencies continues to increase. While the Group focuses on startups and growth-stage companies—distinct from generalist or industry-specific recruiting firms—it may still face intensified competition as other firms launch similar services, which could impact its financial results.
To mitigate this, the Group builds close relationships with client companies and works to increase market share within the startup and growth sectors.
(4)Risks Related to Business Operations
(i) Candidate-Initiated Resignations
Human Capital provides services under agreements requiring partial refunds of success fees if candidates voluntarily resign within a certain period after joining. A future increase in such early resignations could negatively impact revenue and profitability.
To address this, the Group strives to reduce mismatches by thoroughly explaining job details and company culture to candidates.
(ii) Dependency on External Job Media Operators
Human Capital operates under a scouting model using third-party media to source candidates rather than relying on its own registration-based platform. Any changes in relationships or policies by job database operators could affect the Group’s performance.
To mitigate this, the Group maintains good relationships with media operators, promotes staff training on platform usage, leverages multiple platforms, and strengthens marketing to increase direct applicant acquisition.
(iii) Legal Regulations
Human Capital is licensed by the Minister of Health, Labour and Welfare under the Employment Security Act. This license must be renewed every five years and is subject to disqualifying factors under Article 32-9. Although the Group currently complies with these regulations, future violations could lead to license revocation, suspension, or improvement orders, impacting its operations.
To address this, the Group provides regular compliance training and maintains a monitoring system led by the auditing committee and internal audit office.
(iv) Personal Information Protection
Human Capital handles a large volume of personal information and is therefore subject to obligations under Japan’s Act on the Protection of Personal Information. The Group has established internal rules, acquired the PrivacyMark certification, and provides employee training. Nonetheless, any data leak due to unauthorized access or employee error could damage the brand and lead to legal claims.
To mitigate this, the Group maintains stringent management protocols, renews PrivacyMark certification biannually, and carries insurance to cover damages in the event of data leaks.
(v) Valuation Risks of Shares Held by Funds
The Group conducts venture capital operations. Delays in investee exits or significant gaps between plans and actual performance may lead to impairment of fund-held shares, affecting financial outcomes.
To manage this, the Group targets unlisted companies with strong business models and markets aligned with Human Capital services and performs regular post-investment monitoring.
(vi) Business Expansion through New Ventures and M&A
The Group intends to evolve into a growth-industry support platform through active engagement in new businesses. This could lead to temporary losses due to increased personnel, IT, and marketing investments. New ventures also carry inherent risks, and M&A may fall short of expected synergies or involve unforeseen legal and business risks.
To address these issues, the Group thoroughly evaluates synergies and risks before entering into new businesses or partnerships.
(5) Organizational Risks
(i) Recruitment and Talent Development
Securing and developing talent is essential for business growth and value creation. Particularly in Human Capital, recruitment is indispensable, and new hires require a training period before contributing fully. The Group is committed to company-wide efforts to hire and train employees, but inability to secure the right talent in a timely manner may affect performance.
To mitigate this, the Group enhances its recruitment system and aims to create a work environment that fosters motivation and well-being.
(ii) Internal Controls
The Group acknowledges the need for robust internal control systems to support continued value creation. However, current systems are still developing. Failure to scale internal controls with business growth may pose operational and financial risks.
The Group is continuously working to strengthen and appropriately operate its internal control systems.
(iii) Dependency on Key Management
President and CEO Yuichiro Shimizu has played a key role since the Company’s origin and continues to shape its business strategy and branding. Any inability for Mr. Shimizu to execute duties could impact the Group’s operations.
To reduce reliance, the Group is strengthening its management structure by enhancing staffing and delegation of authority.
(6) Other Risks
(i) Litigation
Should the Group face lawsuits due to service deficiencies, data leaks, or contractual breaches, it could suffer brand damage or reputational harm, affecting its financial results.
To mitigate this, the Group provides compliance training and has a monitoring system led by its audit committee and internal audit office.
(ii) Information Systems
The Group extensively uses networked IT systems and stores data on the cloud. Disasters, outages, or cyberattacks could disrupt operations and negatively impact the business.
To mitigate this, the Group employs antivirus software, provides security training, and maintains redundant network infrastructure.
(iii) Dividend Policy
Currently in a growth phase, the Group prioritizes strengthening its financial base and building internal reserves, and has not paid dividends since incorporation. However, recognizing the importance of shareholder returns, it began acquiring treasury shares in September 2024.
Going forward, the Group plans to balance internal reserves and shareholder returns while strengthening profitability and its business foundation. Internal reserves will be used to enhance financial health and future competitiveness.