Risk Factors

Although the Company was established in October 2023 through a single share transfer, it is assumed that the risks of the businesses of NISSO CORPORATION, the core of the Group, may become risks, etc., arising from the businesses of the Company. Among the matters related to the Business Overview and Financial Information described in the Annual Securities Report of NISSO CORPORATION, the following are the risks of Company's business, etc., based on the major risks that management recognizes as having the potential to affect the financial position, results of operations, and cash flow statuses of the consolidated companies. In addition, we actively disclose matters that do not necessarily fall under the scope of business risk factors, from the viewpoint of disclosing information to investors on matters that are considered to be important for investment decisions.

The manufacturing-related human resources services, which are the main services of the General Human Resources Services Business, accounted for 94.2% of net sales in the consolidated fiscal year under review. With the authorization of the Minister of Health, Labour and Welfare, manufacturing dispatching is conducted in accordance with the "Act for Securing the Proper Operation of Worker Dispatching Undertakings and Improved Workings of Dispatched Workers", and paid employment placement is conducted in accordance with the Employment Security Act. In addition, in manufacturing contracting, the business is operated in accordance with "Ministry of Health, Labour and Welfare Notification No. 518 (formerly Ministry of Labour Notification No. 37)", which specifies its difference in classification with manufacturing dispatching. In addition to the above, we also operate our businesses in accordance with a wide range of laws, including the Labor Standards Act, the Industrial Safety and Health Act, the Workers' Accident Compensation Insurance Act (also referred to as the “Industrial Accident Compensation Insurance Act”), the Health Insurance Act, and the Personal Information Protection Act.

The Nisso Group regards legal compliance as the most important management issue, and strives to thoroughly comply with laws and regulations by making efforts to strengthen the education, guidance, management, and supervision structures of relevant laws and regulations, and although we recognize that there are no facts that conflict with the above laws and regulations, in the unlikely event that matters or acts of misconduct occur that violate relevant laws and regulations, there is a possibility of punishment by competent supervisory authorities and the loss of social credibility, and the business performance of the Nisso Group may be affected.

In addition, such laws and regulations are being reviewed in response to changes in the state of affairs, and in the event that such laws are revised, depending on the content of the revisions, they may affect the business performance of the Nisso Group by causing restrictions on business operations, and time required to establish structures to respond to any such revisions.

Status of Licenses・Notifications of the Nisso Group

With regard to the above licenses and notifications, the reasons for suspension of business, revocation of licenses, and abolition/closure of business are stipulated in Articles 14 and 21 of the Worker Dispatching Act (also referred to as the "Worker Dispatch Law") and Article 32 of the Employment Security Act. As of June 30, 2022, although there are no facts that fall under the categories of suspension of business, revocation of licenses, or abolition/closure of business affecting the Nisso Group, in the event that such facts become applicable, the business performance of the Nisso Group may be affected.

As part of its growth strategy, the Nisso Group may continue to engage in organizational restructuring (corporate acquisitions, capital alliances, and business alliances). In the event that the Nisso Group is unable to generate the effects initially anticipated due to changes in the business environment and other factors, the business performance and the financial condition of the Nisso Group may be affected.

Manufacturing-related human resources services account for the majority of the Nisso Group's net sales, and when looking at the composition ratio of net sales by transaction industry, the automobiles-related industry is the highest, followed by the electronic devices-related industry. Although the Nisso Group is making efforts to ensure that there are no significant biases in business development by company, industry, etc., in the event that the business conditions of highly dependent industries become sluggish, or if companies with which we conduct large-scaled business with undergo major and rapid fluctuations, and/or if their positions toward conducting transactions with the Company change, the business performance of the Nisso Group may be affected.

In the human resources services industry, to which the Nisso Group belongs, there have been developments of an industry reorganization against the backdrop of legal reform and labor shortages. Hereafter, competition is expected to intensify as the number of competitors with high recruitment capabilities and price competitiveness increases. The Nisso Group grasps the needs of clients, recruits human resources to meet those needs, and responds to clients accurately and promptly in order to increase client satisfaction and to differentiate ourselves from our competitors. However, in the event that there is excessive competition to win orders which results in the lowering of order prices and/or increases in recruitment costs to secure human resources, and/or if the necessary number of personnel cannot be secured and there is a decline in net sales and deterioration of profitability due to the loss of sales opportunities, the business performance of the Nisso Group may be affected.

Although the Nisso Group is promoting the active utilization of indefinite-term employees (skilled staff), in the event that contracts with clients are reduced or terminated due to sudden changes in the economic environment, etc., employment maintenance expenses may be incurred, and the business performance of the Nisso Group may be affected.

In manufacturing contracting conducted by the Nisso Group, where we undertake the manufacturing operations on the premises of factories, we assume responsibility for labor management and areas such as production volume, delivery deadlines, quality, equipment, and inventory management of client company products, and in doing so, the Company has been able to provide high value-added manufacturing services to our client companies. Through these long-standing efforts, the Nisso Group has been certified as a "Superior Manufacturing Contractor" by the Manufacturing Contracting Business Improvement Promotion Council (commissioned by the Ministry of Health, Labour and Welfare). However, since manufacturing contractors must take responsibility for the occurrence of defective products and any damages to the equipment of client companies, in the event that such matters occur, the business performance of the Nisso Group may be affected.

Employees of the Nisso Group may come in contact with highly confidential information of our client companies related to production plans, and the development/manufacturing of new products. Regarding the handling of such confidential information, it is stated in work contracting agreements, basic dispatching contracts, etc., that client information acquired through the course of work must not be disclosed or leaked to third parties, and the Nisso Group conducts appropriate operation management, such as educating employees on the handling of client information. However, if this information is leaked due to an unexpected situation, as a result of claims for damages to the Nisso Group or a decline in social credibility, the business performance of the Nisso Group may be affected.

In the Nisso Group's business, net sales and profits are expected to decrease in May, August, and January of each year due to the decrease in the number of working days as a result of consecutive holidays, etc. In the event that client manufacturers set up longer consecutive holidays, etc., the profit and loss of the Nisso Group may be affected.

Since the main workplaces of the Company's dispatched/contracted staff are at client factories nationwide, in the event that natural disasters such as large-scale earthquakes or wind and flood damages occur in such areas, or if such factories suffer damages, or if there are disruptions in supply chains due to damages at product suppliers, and production activities are suspended or restricted, the business performance of the Nisso Group may be affected. In addition, even if such disasters occur in areas other than at our client companies, in the event that the domestic economic situation deteriorates due to the occurrence of such disasters, the business performance of the Nisso Group may be affected.

Nursing care services provided by the Nisso Group are required to be provided by qualified personnel. Depending on the content of the services provided, these qualified personnel are required to have appropriate qualifications since personnel and equipment standards are stipulated by an ordinance of the Ministry of Health, Labour and Welfare. Although the Nisso Group is actively engaged in the acquisition and training of human resources that meet personnel standards, in the future, in the event that the securing of qualified personnel does not proceed as planned and results in vacancies, or if it becomes difficult to meet personnel standards due to the inability to secure personnel even if it becomes necessary to replenish human resources as a result of changes in standards, etc., the establishment of new facilities and the provision of services currently provided may be disrupted, and the business performance of the Nisso Group may be affected.

Since the enforcement of the nursing care insurance system, the number of users of nursing care services has been increasing. As the aging of the population continues to progress hereafter, the nursing-care related business market is expected to expand, and non-profit corporations such as medical and social welfare corporations, as well as profit-making corporations such as joint-stock corporations, are also entering the market. Although the Nisso Group strives to improve the quality of the services we provide, differentiate ourselves from other companies, expand the number of our users, and continue the use of our services, the business performance of the Nisso Group may be affected in the event of further intensification of competition within the industry as a result of new entrants.

Nursing care and welfare businesses (facility・home nursing care) are largely dependent on the trust/confidence of users and their families. Therefore, in the event that negative rumors, etc., about the Nisso Group and facilities are incurred and spread, and market participants such as users and their families understand and recognize the Nisso Group and facilities differently from the facts, it may be difficult to acquire new users and maintain facility utilization rates, and as a result, the operation, business performance, etc., of the Nisso Group may be affected.

Since many of the Nisso Group's services are for the elderly, there is a possibility that the deterioration of customers' physical conditions, falls, etc., may lead to serious accidents. The Nisso Group is taking the utmost care and paying close attention to the safety and health management of our users, such as conducting in-house and hands-on training based on our long-term achievements, as well as implementing health checks. However, in the unlikely event that an accident, etc., occurs and the liability of the Nisso Group is questioned, the credibility of the Nisso Group may decline, as well as the Nisso Group being subject to lawsuits or other claims for damages, and the business performance of the Nisso Group, including the continuity of our business, may be affected.

In the event of large-scale natural disasters such as earthquakes or tsunamis, or the spread of infectious diseases such as the new-type influenza, etc., there is a risk that nursing care staff and facilities may become inoperable. Although the Nisso Group strives to strengthen our crisis management system that places the highest priority on customer/client safety, in the event that it becomes impossible to provide services due to the occurrence of these disasters, or if the liability of the Nisso Group is questioned as a result of these disasters, the trust/confidence in the Nisso Group may decline, and the business performance of the Nisso Group may be affected.

The Nisso Group possesses a large amount of personal information, including that of job seekers (applicants for job offer items, applicants for employment placements, etc.), and believes that this personal information and all information related to personal information are the most important assets for our business operations. In addition to complying with the Act on the Protection of Personal Information that was enforced in April 2005, the Company has acquired the "PrivacyMark", established our own Personal Information Protection Philosophy and Privacy Policy, and, in accordance with the Basic Personal Information Protection Regulations, we take heed to the strict management of personal information, including the maintenance of an internal operational structure, regular training, and thorough strengthening of information management. However, in the event of intentional or negligent leakage or unauthorized use of personal information, the Company/Group may be pursued for legal liability, including damages, which may worsen our social credibility, and the business performance of the Nisso Group may be affected.

Although the Nisso Group possesses fixed assets such as land and buildings, etc., for business-use and applies accounting standards for impairment of fixed assets, depending on future trends of land prices and the profitability of the business of the targeted fixed assets, the recording of impairment losses may be required, and the business performance and financial position of the Nisso Group may be affected.

At present, the Nisso Group is not in any way the subject of a claim or lawsuit seeking damages from us. Since the Nisso Group thoroughly complies with laws and regulations by providing educational opportunities, etc., as deemed necessary, we believe that the possibility of litigation and disputes are very unlikely. However, in the event of litigation or disputes related to the Nisso Group arising as a result of unforeseen circumstances, if the Nisso Group fails to respond appropriately, the occurrence of expenses due to lawsuits, damages, etc., a decline in social credibility, and a decline in the Nisso Group's brand image may result in a decrease in orders from clients and a decrease in the number of job seekers, and the business performance of the Nisso Group may be affected.

The Nisso Group is engaged in the General Human Resources Services Business and Other Businesses (nursing care and welfare businesses), both of which are based on people. In the event that an infectious disease such as COVID-19 spreads at our clients, workplaces, or our nursing care facilities, the business performance of the Nisso Group may be affected.