The Group’s business performance is affected by economic fluctuations and other economic, social, and geopolitical conditions. In particular, the business of the Group’s core HR Tech segment has characteristics that make it susceptible to trends such as economic fluctuations and the employment situation. In this regard, the employment situation is affected by corporate performance, government employment policies, and other factors. In addition, businesses in the Incubation segment may not be able to achieve the expected level of growth, due to worsening economic conditions. Furthermore, economic conditions and other factors may increase pressure to lower prices for the services provided by the Group. By providing services in a wide range of recruiting fields, the Group aims to build a revenue structure that is less susceptible to changes in the business environment. However, if, for some reason, corporate demand for personnel hiring declines, or if changes in the economic conditions cause a decline in demand for the Group’s services or a drop in profitability, the Group’s business performance could be affected. 

In the markets in which the Group operates, there are already many competitors in each area, and we recognize that there is a certain level of competition. 

In the Group’s core BizReach business, we have disseminated a new system called direct recruiting into the market for recruiting business professionals. We believe that we have already established a certain competitive advantage in the market, by promptly launching a platform to implement this system, and increasing the number of platform users through effective advertising activities. We will continue to strive to strengthen the competitive advantage of our services. However, in addition to competition from traditional recruiting firms and others, competition from other recruiting platforms may intensify in the event that domestic recruiting firms, job information service providers, or other companies expand their online services and recruiting platform services, or if overseas competitors with global online recruiting platforms further enhance their services in the Japanese market. 

The emergence of competitors with superior business models for recruitment platforms and other factors may affect the Group’s business performance, due to intensified competition. Although the Group’s policy is to continue effective advertising activities, there is no guarantee that such activities will result in an increase in the number of platform users in the future, and there is the possibility that the Group’s business performance will be affected by a lack of increase in platform users. 

As for the HRMOS business, the HR tech cloud market is relatively new in Japan. If a new competitor enters the market in Japan, if the Company further expands its HRMOS business services, or if an existing competitor expands its own business, the Group’s business performance may be affected due to intensified competition. 

In addition, in the Incubation segment, the Group has been conducting, and will continue to conduct new business in areas where the Group strategically believes that there is market potential for digital transformation. However, we may face competition in these areas, as well as competition from other companies that adopt similar strategies. 

Furthermore, the market in which the Group operates is subject to rapid innovation in technology. In particular, generative AI technology and AI agents are advancing day by day. The Group continually investigates the latest technologies and market trends, while incorporating these technologies into its service products and actively investing in patent activities. However, if the Group is unable to respond swiftly to new technologies or the competitiveness of its services declines due to factors such as a competitor’s acquisition of patents for important technologies, this could have an impact on the Group’s business performance. 

The BizReach business is positioned as the Group’s core business. In the current fiscal year, the ratio of net sales from this business (¥80,126 million) to consolidated net sales (¥99,300 million) was 80.7%, indicating a high dependence on this business. Although we assume that the market for recruitment support for professionals will continue to expand, changes in social awareness and business practices that accept job changes and mid-career hiring may not proceed as rapidly as the Group expects. In addition, since the online recruitment support market in Japan is not as mature as the traditional recruitment support market, there is no guarantee that the use of online recruitment support services will increase in accordance with the Group’s expectations. For this reason, changes in the business environment or a decline in the competitiveness of our services may have an impact on the Group’s business performance. 

In addition, the BizReach business generates revenue by receiving compensation from direct employers, headhunters, and job seekers, and acquiring and retaining these customers is important for the continued growth of the business. If the ability of our services to attract customers declines, or if our sales and marketing activities to these customers are unsuccessful, it may have an impact on the Group’s business performance.

Currently, the majority of the Group’s revenue is generated from the BizReach business. In order to expand the scale of its business and diversify its sources of revenue over the medium to long term, the Group’s policy is to proactively create new businesses that utilize the Group’s management know-how within the amount of the profits generated by the BizReach business. In the process of developing new businesses, the Group collects necessary information and carries out studies in order to reduce risks. However, many such new businesses have not yet become profitable. If the expansion and growth of new businesses do not proceed as initially projected, we may not be able to recover the investment funds, which may affect the Group’s business performance. In addition, our ability to invest in new businesses may be limited if we are unable to generate sufficient revenue from the BizReach business, due to various factors described in “3. Business Risks” in our Annual Securities Report for the 7th Fiscal Year. Furthermore, if the launch of a new business costs more than expected, or if the realization of revenue from a new business is delayed, the Group may decide to withdraw from the planned investment or business expansion. If such a strategic withdrawal results in large expenses, the Group’s business performance may be affected.

Because the Group’s business uses the internet, there is the possibility that natural disasters, accidents, unauthorized access, or other events could cause system failures such as communication network disconnections, or the inoperability of servers and other network equipment. The Group has taken measures to prevent system failures, such as the regular monitoring of operational status and clarification of methods to respond to abnormalities. However, despite these measures, a large-scale system failure could affect the Group’s business performance. 

The Group also relies on external service providers in key areas of its business. In particular, most cloud-based services are provided using external cloud servers (services provided by Amazon Web Services, Inc. (hereinafter referred to as “AWS”)). Therefore, in order to avoid system failures that may interfere with the provision of services to customers or system downtime due to cyber-attacks, we ensure redundancy through the use of multiple geographical regions (Note 1) and availability zones (Note 2), take security measures through regular vulnerability assessments and various unauthorized access measures, and monitor system operation status. However, in spite of such measures, if system failures of AWS, etc. occur due to natural disasters, accidents, unauthorized access, etc., or if the use of AWS, etc. cannot be continued due to the cancellation of contracts with external service providers, etc., the Group’s business performance may be affected.

 (Notes) 
1. This refers to geographically independent server installation areas. 
2. This refers to the names of the individual independent data centers within a region.

It is considered to be impossible to completely eliminate the occurrence of defects in advanced software, and various defects may occur in the Group’s applications, software, and systems. 

We will continue to build and maintain a highly reliable development system. However, if a fatal defect is discovered that interferes with the operation of the Group’s business and we are unable to properly resolve the problem, the Group’s business performance may be affected.

Through its business activities, the Group may obtain the personal information and confidential information of customers and business partners, and also possesses confidential business information. Against the backdrop of recent international developments, the global threat of cyberattacks has continued to grow, and attack techniques, including the malicious use of AI, are becoming increasingly advanced and sophisticated. If the Group is unable to fully prevent cyberattacks, hacking, computer virus infections, including ransomware, and other forms of unauthorized access and internal misconduct, the disruptions of services, the leakage, falsification, or loss of information, or other information security incidents may occur. In accordance with the Group’s common “Information Security Basic Rules,” the Group has granted the authority to oversee information management for the entire Group to the Group Chief Information Security Officer. Under the supervision of the Group Chief Information Security Officer, we have established an information management system that complies with Group standards, and are strengthening information security by developing and enhancing rules and regulations regarding the handling of information, etc., as well as ensuring that all employees, etc. are aware of these rules and regulations. However, in the event of the aforementioned incidents, the Group’s credibility or reputation could be diminished or its business operations could be disrupted. In addition, its business performance could be affected by monetary losses or additional costs incurred to respond to these incidents.

The Company’s Representative Director and CEO, Soichiro Minami, has been deeply involved in the Group’s business since its founding. His extensive experience and knowledge of internet-related business plays an extremely important role in establishing and implementing management strategies. The Group is working to strengthen its management system, which is not dependent on any specific person, and is developing a system to ensure that it is not overly dependent on him. However, if it becomes difficult for him to perform his duties for the Group for some reason, the Group’s business performance may be affected.

In order to operate its business, the Group needs human resources with expertise in each business field and function, and it is essential to continue hiring and training human resources in line with business expansion. The Group plans to embody the concept of direct recruiting and use a variety of recruiting methods to acquire excellent human resources. However, if in the future it becomes difficult to acquire excellent human resources, if the development of human resources does not proceed as planned, or if current human resources leave the Group, the Group’s business performance may be affected.

We recognize that the proper functioning of corporate governance is essential for the continued growth of the Group. Under the supervision of the Director and CFO, the Company will ensure the appropriateness of operations and the reliability of financial reporting, as well as thorough compliance with internal rules, laws, and regulations. However, if corporate governance fails to function effectively due to the rapid expansion and diversification of our business, we may not be able to conduct appropriate business operations, which may affect the Group’s business performance.

The Group recognizes the importance of compliance in order to achieve a sustainable expansion of corporate value. For this purpose, the Group holds the Group Risk Compliance Committee, chaired by the Company’s Representative Director and CEO once per quarter in principle, and requests reports from each subsidiary regarding compliance-related matters. In addition, we have established compliance regulations and the Visional Group Code of Conduct, which are clearly posted on the intranet, and conduct regular internal training. However, in spite of these efforts, the Group’s brand image and business performance may be affected in the event of a violation of laws and regulations.

In the Group’s business, although it is important to maintain and improve customer recognition, our brand image, and the social credibility of the Group and the services provided by the Group, there is no guarantee that the Group’s promotional activities will be successful.

In addition, in the event that a negative rumor about the Group is generated and spread in the mass media or on the internet or social media, or if the Company’s name is reported or announced due to the discovery of an inappropriate event, etc., we have a system in place to respond appropriately, in cooperation with all related parties. However, defects in our services, leaks of personal or confidential information, or rumors about the Group could damage the brand image and social credibility of the Group or the services provided by the Group. As a result, the Group’s business performance could be affected.

1) General legal restrictions

The main laws that regulate the services provided by the Group are the Telecommunications Business Act, the Consumer Contract Act, the Act on Specified Commercial Transactions, the Act on the Limitation of Liability for Damages of Specified Telecommunications Service Providers and the Right to Demand Disclosure of Identification Information of the Senders (Provider Liability Limitation Act), and the Act on Regulation of Transmission of Specified Electronic Mail. 

The Group has been operating its services in compliance with these regulations, and will continue to strengthen its legal compliance system and provide internal training. However, if new laws and regulations are enacted or amended, and the services operated by the Group become subject to the new laws and regulations, the Group’s business performance and financial position may be affected.

2) Protection of personal information

Because the Group acquires and uses personal information such as job applicants’ work histories and application information, it is subject to the obligations of a business operator handling personal information, as stipulated by the Act on the Protection of Personal Information.

The Group considers the management of personal information to be an important matter in the operation of our services, in order to prevent the leakage or falsification of personal information, and has established a personal information protection policy. When acquiring personal information, we clearly state the purpose of use, and utilize it only within the scope of that purpose. In addition, we manage personal information through internal training for officers and employees on the handling of personal information, setting access privileges within the Company, storing access logs, and maintaining regulations on personal information management.

However, in the event of problems, such as unauthorized access from outside the Company, or leakage of personal information due to the intentional or negligent acts of those involved in the Group, there is a possibility that the Group’s business performance and financial position will be affected due to claims for damages or loss of trust in the Group. In addition, if new laws and regulations are enacted or amended, or if existing laws and regulations are reinterpreted to create new regulations, the Group’s business performance and financial position may be affected.

3) Legal restrictions on the HR Tech business

The recruitment platforms operated by the Group, such as BizReach, are obligated to appropriately manage personal information as a business that provides recruitment information, etc., as stipulated in the Employment Security Act.

The Group has been operating its services in compliance with these regulations, and will continue to strengthen its legal compliance system and provide internal training. However, in the event that new laws and regulations are enacted or amended, or existing laws and regulations are reinterpreted, and the services operated by the Group are subject to these new laws and regulations, require the acquisition of additional permits, or are subject to revocation of permits, business suspension orders, or business improvement orders, the Group’s business performance and financial position may be affected.

4) Laws and regulations regarding the transportation business

The Trabox service operated by the Group does not require the Group to be entrusted with transportation, but rather directly matches shippers and transportation companies on the platform, and therefore is not subject to the Consigned Freight Forwarding Business Act and other obligations related to various transportation businesses.

The Group will continue to strengthen its legal compliance system and provide internal training. However, if new laws and regulations are enacted or amended, or if existing laws and regulations are reinterpreted and the services operated by the Company become subject to these new laws and regulations, the Group’s business performance and financial position may be affected.

5) Intellectual property rights

Intellectual property rights such as trademarks, software, and systems related to the services operated by the Group are important to the Group. Although the Group strives to acquire such rights, there is no guarantee that they will not be used improperly.

In addition, we recognize that the trademarks, software, systems, etc. that are used in each service operated by the Group do not infringe upon the intellectual property rights of any third parties, at this time. Going forward, we will continue to work with our legal advisors and patent attorneys to manage copyrights and other issues, in order to prevent infringement. However, there is the possibility that intellectual property rights not recognized by the Company have already been established in the Group’s business domains, or that new intellectual property rights of third parties may be established in the Group’s business domains.

In such cases, it is assumed that a claim for compensation for damages, an injunction against use, or a request for payment of royalties related to said rights may be made due to our infringement of intellectual property rights. If such a situation arises, it may affect the Group’s business performance and financial position.

The Group is making efforts to reduce violations of laws and regulations by its officers and employees, by implementing compliance training and other measures. However, regardless of whether or not the Group, its officers, or employees violate laws and regulations, there is the possibility that unexpected problems or lawsuits may occur with business partners, employees, or other third parties.

It is impossible to predict the likelihood of occurrence of each such dispute, and it is difficult to predict the timing of each dispute. Regardless of the outcome of a lawsuit, etc., there is the possibility that the Group’s business performance and financial position may be affected due to incurring significant litigation response costs, loss of trust and brand image, etc. In addition, the suspension of the Group’s services as a result of lawsuits, etc. may affect the Group’s business performance. 

In order to expand the scale of its business, the Group places management importance on maximizing corporate value by strengthening existing businesses, entering new business areas such as businesses where it can utilize its management know-how, and reinforcing these businesses. As part of its approach, the Group has conducted investment and financing activities, including M&As, and will step up these activities. The Group will conduct a detailed examination of a target company in advance, to the extent possible, and will proceed with an M&A after thoroughly considering the risks involved. However, the Group’s business performance may be affected if, after an acquisition, unrecognized liabilities are discovered, contingent liabilities arise, or other issues arise that were not identified in prior investigations, if the development of business after an acquisition does not proceed as planned, if higher-than-expected costs are incurred in maintaining business after an acquisition, or if a business partner later becomes a competitor and uses the know-how acquired during its alliance with the Group. In addition, when new businesses that the Group has not been engaged in are added through M&As, etc., risk factors specific to those businesses will be added.

As of the end of the current fiscal year, the Group has recorded goodwill of ¥12,036 million and customer relationship of ¥3,646 million arising from business combinations. In the event that these assets do not generate the expected cash flows due to a deviation from the future business plan, etc., the Group’s business performance and financial position may be affected by the recording of an impairment loss.

The Company jointly manages Stanby, Inc. (hereinafter referred to as “Stanby” in this section), a joint venture with Z Holdings Corporation (currently LY Corporation). Stanby operates the Stanby job search engine. The Company holds a 40.0% stake in Stanby (whereas Z Holdings Corporation holds a 60.0% stake). Stanby is an associated company accounted for by the equity method of the Company.

Because the Group, which has expertise in the HR Tech business, needs to play an important role in the launch of Stanby’s business, Soichiro Minami, Representative Director and CEO of the Company, has been appointed as Representative Director and CEO of Stanby. There is the possibility that the business development and operating results of the Group will be affected in the event that unforeseen events occur at Stanby, that Soichiro Minami, Representative Director and CEO of the Company, is held accountable as the representative of Stanby, that the burden of duties as the person in charge of management at the relevant concurrent post becomes excessive beyond expectations, or that there is a change in the investment ratio.

The Group grants share acquisition rights (hereinafter referred to as “stock options”) to officers and employees for the purpose of incentivization. In addition, there is the possibility that the Company will continue to utilize stock option plans in the future. The value of shares held by existing shareholders may be diluted in the event that stock options to be granted in the future are exercised, in addition to those currently granted. As of the end of the month prior to the date of submission of this document, the number of dilutive shares due to stock options is 985,600 shares, which is equivalent to 2.38% (rounded to two decimal places) of the total number of issued shares and dilutive shares of 41,487,500 shares. 

Details of stock options are as presented in “IV. Information about Reporting Company, 1. Company’s Shares, etc., (2) Share Acquisition Rights” in our Annual Securities Report for the 7th Fiscal Year.

Limited business operations in the event of natural disasters such as earthquakes, typhoons, and tsunamis, fires, power outages, infectious disease pandemics, wars, and terrorist attacks, etc., in the event that a large number of employees engaged in the Group’s services or operations, employees of outsourcing partners, or dispatched workers suffer from such disasters or illnesses, or in the event of government measures such as the declaration of a state of emergency and stay-at-home orders, and damage to the Company’s facilities due to earthquakes, etc., could affect the provision of the Group’s services and other business operations, which in turn may have an impact on the Group’s operating results, etc. 

There is also the possibility that the operating results, etc. of the Group will be affected by secondary effects such as interruption or suspension of the Group’s clients’ businesses or job seekers’ job search activities in the event of a large-scale natural disaster, etc.