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Risk Factors

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Risk Factors

(1) Risk Management Structure

The Nisso Group (hereinafter, the "Group") has established "Risk Management Regulations" for risks that affect business objectives (hereinafter, "risks"), and has established a "Corporate Value Enhancement Committee" in order to maintain a structure that can appropriately respond to risks, and has established a "Risk Management Council" under this committee to discuss risk management. In addition, the Risk Management Council identifies, analyzes and evaluates specific risks in accordance with the Risk Management Regulations, establishes policies to respond to such risks, and conducts reports to the Board of Directors of NISSO HOLDINGS Co., Ltd. (hereinafter, the “Company”) on a regular basis.


Furthermore, as of June 26, 2025 (hereinafter, "as of the Document Submission Date"), in order to enhance the effectiveness of the "Corporate Value Enhancement Committee" structure Company has divided it into 2 committees, the "Risk Management Committee" and the "Sustainability Committee", and changed the structure so that it can monitor risks and issues common to the Group, such as the prevention of corporate scandals, the strengthening of a multifaceted corporate structure, and the realization of sustainable business. In addition, the 2 committees are chaired by Directors of the Company, and deliberations are conducted in a manner that is more closely linked to the Company's business and are regularly submitted to the Board of Directors of the Company.

(2) Risk Management Process

The Group defines risks as all internal and external events that may hinder the achievement of the business objectives of each Nisso Group company with respect to management strategies, social credibility, relationships of trust with clients, personal information of applicable parties, intellectual property, facilities and other assets. In addition, the Group recognizes that an accurate understanding of risks and the implementation of appropriate management are important management issues, as they lead to the sustainable maintenance and enhancement of corporate value.
Furthermore, based on the "Risk Management Regulations", the Group holds discussions on the following items and shares them with each division and its affiliated companies every year through resolutions of the Board of Directors.
・Identify, analyze, and evaluate the impact of risks, and create and update "risk maps"
・In the event of an urgent need, take appropriate control measures
・In the event that contents need to be disclosed internally or externally, promptly disclose such information

In the current consolidated fiscal year, the Group focused on reviewing the risks that could affect its business, etc., and identified 4 "particularly significant risks" in terms of the probability of occurrence and the degree of impact on management. In addition, the Group has identified 5 items as management risks and 13 items as service-specific risks, and are working to reduce and avoid each of these risks.

(3) Particularly Significant Risks and Countermeasures

Item
Probability of occurrence
(Note) 1.
Degree of influence
(Note) 2.
Main countermeasure
Difficulty in securing personnel and increased costs due to rising wage rates
Large
Large
 Securing diverse employment opportunities, realizing diverse work-styles, and conducting unit-cost negotiations
Lack of improvements in working environments due to increase of foreign workers
Large
Large
 Create working environments where people can continue to work
Maintenance of employment of employees due to termination or reduction of contracts with large business partners
Small
Large
 Reskilling to increase the probability of employment outside the current workplaces, expansion of new business partners
Reputation risks
Small
Large
 Continued maintenance of manuals, thorough education, and continuous monitoring of information

(Note)
1. "Probability of occurrence" is classified as follows: Large: occurs at least once a year, Medium: occurs once every few years, and Small: occurs infrequently.
2. "Degree of influence" is classified as follows: Large: Significant impact on consolidated business results (30% decrease in consolidated operating profit or 10% decrease in consolidated net sales), Medium: Impact on achievement of management plans, and Small: Minor impact on management.

Difficulty in Securing Personnel and Increased Costs due to Rising Wage Rates
The Group is a "people" company, and with any increase in the cost of securing personnel and maintenance costs, the business performance, etc., of the Group may be affected. In order to respond to such risks, the Group will continue to secure a variety of workplaces and realize diverse work-styles through changes to the salary structure and reviews of the personnel system. In addition, the Group will conduct appropriate unit-cost negotiations regarding recruitment costs and wage rate increases.

Lack of Improvements in Working Environments due to Increase of Foreign Workers
In accordance with its business plan, opportunities for the utilization of foreign human resources are increasing. However, due to the lack of an environment for foreign workers, an increase in the number of retirees, violations of laws and regulations, and the risk of class-action lawsuits, the operations and business performance, etc., of the Group may be affected. In order to respond to such risks, the Group will always comply with laws and regulations, establish specialized departments and utilize professional services to respond to legal revisions and improve the environment for people from countries with diverse cultures.

Maintenance of Employment of Employees due to Termination or Reduction of Contracts with Large Business Partners
The business performance, employment retention, etc., of the Group may be affected by the termination of contracts with major business partners. In order to reduce such risks, the Group aims to establish a business management structure that maintains the employment of employees by introducing a system for them to acquire new skills at the Group's educational and training facilities and change jobs, and by expanding new business partners to create a structure that is not dependent on specific business partners.

Reputation Risks
The Group utilizes various social networking services to promote sales and recruitment activities for its General Human Resources Services, as well as to expand the number of users of its Nursing Care・Welfare Services. On the other hand, if utilized incorrectly, there is a risk that negative reputation and rumors about the company will be spread.
To reduce such risks, the Group continues to develop manuals, provides thorough education, and continuously monitors information.

(4）The Group's Overall Management

Risks of Organizational Restructuring (Corporate Acquisitions, Capital Alliances, Business Alliances, Etc.)
As part of its growth strategy, the Group may continue to engage in organizational restructuring (corporate acquisitions, capital alliances, and business alliances). In the event that the 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 Group may be affected.

Protection of Personal Information
The 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 its business operations. In addition to complying with the Act on the Protection of Personal Information that was enforced in April 2005, the Group has established its own Personal Information Protection Philosophy and Privacy Policy (Personal Information Protection Policy), and, in accordance with the Basic Rules for the Protection of Personal Information, the Group takes 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 Group may be pursued for legal liability, including damages, which may worsen its social credibility, and the business performance of the Group may be affected.

Impairment of Fixed (Non-current) Assets
Although the 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 condition of the Group may be affected.

Litigation
Since the Group thoroughly complies with laws and regulations by providing educational opportunities, etc., as deemed necessary, it believes that the possibility of litigation and disputes are very unlikely. However, in the event of litigation or disputes related to the Group arising as a result of unforeseen circumstances, if the Group fails to respond appropriately, the occurrence of expenses due to lawsuits, damages, etc., a decline in social credibility, and a decline in the 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 Group may be affected.

Climate Change
The Group has identified risks and opportunities based on a scenario of a 2℃ temperature increase in the second half of the 21 century, towards an early transition to a decarbonized society.

(5）Other Risks by Service in Business, etc.

(General Human Resources Services)
Legal Regulations
Net sales of the General Human Resources Services in the current consolidated fiscal year accounted for 97.0% of consolidated net sales. The worker dispatching business, which is the core of the Group's services, is conducted in accordance with the "Act on Ensuring the Proper Operation of Worker Dispatching Services and Protecting Dispatched Workers", and the paid employment placement business is conducted in accordance with the "Employment Security Act". In addition, the manufacturing contracting 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, it also operates its businesses in accordance with a wide range of laws, including the Labor Standards Act, the Industrial Safety and Health Act, the Industrial Accident Compensation Insurance Act, the Health Insurance Act, and the Act on the Protection of Personal Information.
The 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 it recognizes 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 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 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 Group (As of March 31, 2025)

Company name
License name
Supervisory authority
Registered License no.
Date of obtainment
Expiration date
NISSO CORPORATION Temporary Staffing Business
Employment Placement Business		 MHLW*
MHLW*		 派14-150048
14-ユ-150026		 Oct. 2002
Aug. 2002		 Dec. 31, 2026
Dec. 31, 2026
Nisso Brain Co., Ltd. Temporary Staffing Business
Employment Placement Business		 MHLW*
MHLW*		 派14-020001
14-ユ-020011		 Jul. 1986
Aug. 2000		 Jan. 31, 2029
Jul. 31, 2028
Vector Shinwa Co., Ltd. Temporary Staffing Business
Employment Placement Business		 MHLW*
MHLW*		 派23-300331
23-ユ-300581		 Sep. 2005
Jul. 2008		 Aug. 31, 2028
Jun. 01, 2026
Nikon Nisso Prime Corporation Temporary Staffing Business
Employment Placement Business		 MHLW*
MHLW*		 派14-303092
14-ユ-301602		 Feb. 2004
Oct. 2007		 Jan. 31, 2027
Sep. 30, 2025
EYE'S Co., Ltd. General Worker Dispatching Undertakings
Employment Placement Business		 MHLW*
MHLW*		 派13-011359
13-ユ-300065		 Oct. 2003
May. 2004		 Sep. 30, 2026
Apr. 30, 2027
Nisso Pure Co., Ltd. Employment Placement Business MHLW* 14-ユ-302260 Aug. 2024 Jul. 30, 2027

MLHW* = Ministry of Labour, Health and Welfare

Furthermore, 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 and Article 32 of the Employment Security Act. As of the Document Submission Date, although there are no facts that fall under the categories of suspension of business, revocation of licenses, or abolition/closure of business affecting the Group, in the event that such facts become applicable, the business performance of the Group may be affected.

Impact of Business Conditions on Business Partner Industries
Manufacturing-related human resources services account for the majority of the 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 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 it conducts large-scaled business with undergo major and rapid fluctuations, and/or if their positions toward conducting transactions with the Group change, the business performance of the Group may be affected.


Intensification of Competition within the Industry
In the human resources services industry, to which the 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 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 itself from its 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 Group may be affected.

Manufacturing Contracting
In manufacturing contracting conducted by the Group, where it undertakes the manufacturing operations on the premises of factories, it assumes 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 Group has been able to provide high value-added manufacturing services to its client companies. Through these long-standing efforts, the 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 Group may be affected.

Risks of Occupational Accidents, etc.
With the manufacturing-related human resources services, which are the main services of the Group, it carries out manufacturing dispatching and manufacturing contracting on the premises of business partner manufacturer factories. Manufacturing dispatching is a form of employment in which, by law, human resources are dispatched to business partner manufacturers, and labor management such as direction/orders and instructions of dispatched personnel is entrusted to the dispatch destination (clients). On the other hand, in manufacturing contracting, which is carried out on the premises of business partner manufacturer factories, the Group assumes the responsibility for areas such as production volume, production deadlines, quality, and equipment management when using the equipment of business partner manufacturers, in accordance to work contracting agreements with business partner manufacturers.
In the manufacturing dispatching and manufacturing contracting transaction types, the entities responsible for occupational accidents suffered by employees and manufacturing staff while they are carrying out their duties are different. In the case of manufacturing dispatching, business partner manufacturers assume responsibility for such damages, while the Group is responsible in the case of manufacturing contracting.
Although the Group believes that occupational accidents will basically be resolved within the applicable scope of labor insurance, in the event that an occupational accident caused by the fault/flaw of the Group develops into a matter of legal procedure, such as the victim of such an accident demanding compensation beyond the application of labor insurance, the business performance of the Group may be affected.

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

Handling of Information of Business Partner Companies
Employees of the Group may come in contact with highly confidential information of its business partner 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 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 Group or a decline in social credibility, the business performance of the Group may be affected.

(Nursing Care・Welfare Services)
Legal Regulations
Net sales of the Nursing Care・Welfare Services accounted for 3.1% of total net sales in the current consolidated fiscal year.
In order to provide nursing care services in accordance to the Long-Term Care Insurance Act, service providers are required to receive a designation from a prefectural governor as a relevant place of business. Designated places of business must comply with the number of personnel, equipment, and operational standards of the business set forth for each service, as well as labor regulations (Labor Standards Act, etc.). In the event that such standards and labor regulations are not complied with, or if a false/fraudulent claim is made, the designation may be revoked or suspended.
Although the Group maintains various manuals, conducts training, and strives for appropriate business management by strengthening its management structure, in the unlikely event that its designation is revoked or suspended at its places of business, the business performance of the Group may be affected.


Revision of the Nursing Care Insurance System
Nursing care and welfare businesses (facility・home nursing care) will be affected by the nursing care insurance system because their main business is to provide services subject to the Long-Term Care Insurance Act. In this nursing care insurance system, the Long-Term Care Insurance Act and nursing care compensation are revised every 3 years, and in line with these revisions, the Municipal Long-Term Care Insurance Business Plan, which is one term for 3 years, is being formulated.
Depending on the content of the revisions, the business performance of the Group may be affected by the necessity of reviewing or changing the content of its business.

Securing Human Resources (Qualified Personnel)
Nursing care services provided by the 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 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 Group may be affected.

Intensification of Competition within the Industry
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 Group strives to improve the quality of the services it provides, differentiate itself from other companies, expand the number of its users, and continue the use of its services, the business performance of the Group may be affected in the event of further intensification of competition within the industry as a result of new entrants.

Safety and Health Management
Since many of the 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 Group is taking the utmost care and paying close attention to the safety and health management of its users, such as conducting in-house and hands-on training based on its long-term achievements, as well as implementing health checks. However, in the unlikely event that an accident, etc., occurs and the liability of the Group is questioned, the credibility of the Group may decline, as well as the Group being subject to lawsuits or other claims for damages, and the business performance of the Group, including the continuity of its business, may be affected.

Natural Disasters
In the event of large-scale natural disasters such as earthquakes or tsunamis, there is a risk that nursing care staff and facilities may become inoperable. Although the Group strives to strengthen its 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 Group is questioned as a result of these disasters, the trust/confidence in the Group may decline, and the business performance of the Group may be affected.