Business and Other Risks

The following are the risks with the potential to have a significant impact on the business (business results and financial condition) of the TIS INTEC Group. All forward-looking statements in this document are based on information available to the company as of June 28, 2017.

1. Price Competition, Intensified Competition

Competition among businesses is intense in the information services industry. In addition to competition from new entrants from other industries, clients are restraining their IT investments. As a result, price competition may intensify. The Group is offering higher value-added information services and taking other measures to differentiate itself from competitors, while raising productivity. If price competition intensifies more than expected, however, it may impact the Group's business results.

2. Legal Systems, Compliance

The Group conducts its various business activities in compliance with laws and regulations in and outside Japan. In conducting these activities, the Group has established a compliance structure on the basis of the TIS INTEC Group's Basic Direction on CSR and thoroughly complies with all laws. If the Group were to contravene the law, or a new law or regulation were introduced, it may impact the Group's business results.

3. Overseas Business

As part of its growth strategy, the Group is pursuing growth in overseas markets, with a focus on ASEAN. The overseas business may be impacted by various factors, including global economic and foreign exchange trends, legal regulations on investment and competition, business practices, and labor-related issues. If one of these risks were to manifest, it may impact the Group's business results.

4. System Development

The Group performs development and outsourced development of various client company information systems. In recent years, projects have become larger and development schedules have shortened. If planned quality levels cannot be met or the projects are not completed within the development schedule, larger-than-expected costs may be incurred. Furthermore, in developing systems, parts of projects are typically outsourced to many different companies in order to ensure production capacity, raise productivity, utilize technical capabilities and for other reasons. There is the possibility, however, that productivity and quality fail to meet expectations. In this event, the Group's business results may be impacted.

5. System Operation

The Group uses large-scale IT facilities such as data centers to provide outsourcing 24 hours a day, 365 days a year, cloud services, and other services. The Group expends a large amount of capital to operate these businesses, from initial capital investments to ongoing capital investments to ensure stable facility maintenance and operation. If the operational status of these facilities declines significantly due to a decline in demand, it may negatively impact the Group's business results. Furthermore, in the system operation business, if losses were to result from problems or failures to client systems, the Group's business results may be impacted as a result of a decline in the Group's social trust and brand, claims for damages, or other reasons.

6. Information Security

From system development to operation, the Group is in a position to learn of various types of confidential information in the conduct of its business, including personal information held by clients and clients' technological system information. Although the Group strives to manage information appropriately based on the TIS INTEC Group Information Security Policy, in the event that confidential information were leaked or manipulated due to a computer virus, unauthorized access, or other reason, the Group's business results may be impacted by claims for damages from client companies or the loss of trust.

7. Human Resources

The Group's business relies heavily on human resources and is greatly affected by its ability to secure and develop superior human resources who can offer specialized, high added value to clients. The Group's business results may be impacted in the event the Group cannot secure and develop superior human resources according to its plans.

8. Technological Innovation

In the information services industry, companies must rapidly respond to progress in information technologies and the accompanying changes in market needs. The Group continually conducts research into information technologies and production as well as development technologies, and is strengthening its ability to conduct this research. The Group's business results may be impacted, however, in the event the Group is unable to appropriately respond to rapid progress in innovation over a broad realm of technologies.

9. Intellectual Property

To execute its business, the Group applies for and acquires patents for necessary technologies and business models as well as registers various trademarks in and outside Japan. The Group continually takes precautions to ensure that it does not infringe the intellectual property rights of third parties during the execution of its business activities. The Group may, however, be subject to claims for damages in the event that it infringes the intellectual property rights of another company. In any circumstance in which the Group infringes the rights of a third party, the Group's business and business results may be impacted considerably.

10. Natural Disasters and Accidents

The Group uses data centers and other large-scale IT facilities to perform its outsourcing business and provide cloud services. The data centers use various kinds of equipment to deal with disasters and accidents. Despite these measures, a longer-than-expected power blackout, large-scale natural disaster, international conflict, act of terrorism or major crime, or other such events that impede the smooth operation of the data centers may affect the Group's business results.

11. Owned Securities

The Group owns shares as a way to build long and stable relations with business partners and to promote sales activities, while also owning bonds as part of its fund operations. The Group adequately confirms the reliability of these securities by determining the issuers' financial condition, business results, credit rating and using other indicators. In the event of significant fluctuations in stock markets, however, the Group's financial condition and business results may be impacted from the recognition of losses.

Update : July 27, 2017, 12:40

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