Risk Factors

1. Management of personal information
   The JAC Group is engaged in the recruitment industry and job advertising industry and, as such, we hold personal information on a large number of people who register for our services (including placement candidates and those applying for job offers). Claims for damages and loss of credibility in the community arising from the leak of personal information to outside parties as a result of non-compliance with the relevant regulations or unforeseen circumstances, etc., would not only cause a severe impediment to the Group's business operations, but could also have a significant impact on our business results and financial condition. 
   
   To handle these risks, the Group has created a policy on the protection of personal information ("Privacy Statement") based on relevant laws and regulations to fulfill our responsibility as a company involved in a human resource-related business. The Privacy Statement is disseminated extensively among officers and staff, and the Group takes all reasonable preventive and corrective measures to protect information in terms of technical and organizational initiatives. In 2006, JAC Recruitment was granted the right to display the PrivacyMark based on the "JIS Q15001 Personal Information Protection Management Systems — Requirements" standard, which has since been reviewed and updated every two years. JAC Recruitment's Compliance Office also plays a core role in providing regular training and guidance to all company personnel and in implementing required measures, and our Internal Audit Office checks and audits management status as needed.
    
2. Relationship with the Tazaki Foundation and JAC Environmental & Animal Protection Foundation
   The following is a list of transactions conducted with the Tazaki Foundation, a public-interest, incorporated foundation whose Founder and President, Tadayoshi Tazaki, is Chief Advisor at JAC Recruitment, and JAC Environmental & Animal Protection Foundation, a public-interest, incorporated foundation whose Founder and President, Hiromi Tazaki, is CEO at JAC Recruitment. 
   · Transactions between companies that submit figures for the consolidated financial reports and the Tazaki Foundation / JAC Environmental & Animal Protection Foundation.
   Consolidated fiscal year (1/1/2023 to 12/31/2023) 

3. Reliance on specific persons and the impact on shareholders and directors
   Tadayoshi Tazaki is Chief Advisor to JAC Recruitment and the Founder of the Group, and Hiromi Tazaki is Chairman and CEO of the company and has served as the Chief Operating Officer of the Group's core business, recruitment, for many years. Both still play important roles in determining management policy and business strategy, and in executing policy and strategy. Furthermore, as of the end of FY2023, they held a combined 34.10% of the total voting rights in the company's shares, and they have significant influence on matters that require the approval of a general meeting of shareholders, such as the appointment and dismissal of company directors, and decisions on dividends. Consequently, were Tadayoshi and Hiromi Tazaki unable to carry out their duties in the JAC Group for some reason, this may prove a major impediment to the Group's business operations. 
   
   To address this risk, the company has been promoting training of members of the executive management team, as well as the sharing of information with, and the delegation of authority to, these members.  Furthermore, as of 24 March 2022, JAC Recruitment has changed to become a company with an Audit & Supervisory Committee. With the aim of further enhance governance, the Board of Directors in FY2023 comprised 8 directors who are not members of the Audit & Supervisory Committee, including 4 independent directors as prescribed by the Tokyo Stock Exchange, and 3 directors who are all independent directors and members of the Audit and Supervisory Committee.
    
4. JAC's overseas expansion
   As of 27 March 2024, JAC Recruitment International Ltd (JRI), which is predominantly a fee-based recruitment business, has consolidated subsidiary companies in 10 countries — mainly in Asia. However, various factors in individual countries and regions mean that we may not be able to carry out future planned business operations, which may have a significant impact on the Group's performance; these factors include political and economic situations, as well as changes in legal regulations, foreign investment controls and tax systems. Furthermore, the Group's earnings are primarily affected by price fluctuations in the foreign exchange market between the Japanese yen and the currencies of the countries in which the Group's companies operate. As the Group's consolidated financial reports are presented in Japanese yen, they are affected by exchange rate fluctuations in the form of conversion risk. 
   
   To address this risk, JAC Recruitment has established a system that allows us to quickly review and implement the downsizing or withdrawal of businesses in each country to ensure the company's safety and profitability. 
   
   The main business activities of our overseas consolidated subsidiary companies are as listed below.

 
As of December 31, 2023

Annotation: JAC Recruitment Hong Kong Co., Ltd, JAC Recruitment China (HK) Ltd, Shanghai Talent Resources Co., Ltd., are going into liquidation.

5. Legal regulations
   1. Licenses required for business operations
      As an operator providing fee-based recruitment services in Japan, the Group has obtained licenses from the Ministry of Health, Labor and Welfare for each of the following companies: JAC Recruitment Co., Ltd., JAC International Co., Ltd., C.C. Consulting Co., Ltd., and Vantage Point Co., Ltd. These licenses expire as follows, after which time each company will need to renew its license once every five years: JAC Recruitment Co., Ltd. expires on September 30, 2025; JAC International Co., Ltd. expires on July 31, 2024; C.C. Consulting Co., Ltd. expires on June 30, 2026; and Vantage Point Co., Ltd. expires on May 31, 2025. With regard to the cancellation of licenses for operators providing fee-based recruitment services in Japan, such as those held by the JAC Group, matters that will disqualify an operator are stipulated in Article 32-9 of the Employment Security Act. As far as we are currently aware, none of the reasons for disqualification stipulated under the law apply to the JAC Group (such reasons include being a corporation with officers who have been sentenced to imprisonment or worse; who are adult wards, or persons prescribed as being unable to properly carry out paid employment due to a mental or physical disorder; or who are subject to bankruptcy proceedings and have not been discharged from bankruptcy). However, should our licenses be revoked in the future, for whatever reason, this would not only constitute a major impediment to the Group's business operations, but it would also have a significant impact on our business performance and financial condition. 
      
      To address this risk, we are working to raise awareness among executive officers and employees through various compliance training programs, which are predominantly planned and operated by our Compliance Office and the team in charge of employee training. Furthermore, as of the date this report was submitted, JAC Recruitment is now a company with an Audit & Supervisory Committee, and we have developed a system that constantly monitors any legal violations that may occur in the course of duties conducted by executive officers and employees. The Audit & Supervisory Committee and the Internal Audit Office play a central role in this system.
       
   2. Changes to legal regulations
      In Japan, the Group complies with the Employment Security Act and provides fee-based recruitment services. Any tightening of legal regulations in the future as a result of revisions to the law, may impose restrictions on the Group's business. 
      
      To address this risk, we strive to collect the latest information through the Japan Executive Search and Recruitment Association, an industry body, and the law firm that acts as our legal advisor.
       
6. Securing the number of registrants
   In the recruitment and job advertising industry, it is extremely important to secure registrants due to the nature of the business, and for this reason the Group invites people to register through advertisements on-line and in newspapers, etc., and we also take referrals from people who are already registered with us. However, even with such initiatives, a decrease in the future working population as a result of the declining birthrate, the aging population in Japan, changes in the labor market, and other challenges may mean that it is not possible to secure enough human resources to satisfy the staffing demands from companies. In this event, the Group's business performance may be affected by a fall in the number of deals closed. 
   
   To address this risk, we have set up a department dedicated to getting people to register with us, and we are taking all possible measure to improve rate at which we attract them.
    
7. Placement fees
   Our work in recruitment involves the placement of people registered with us with companies looking to hire staff. We charge a commission and record the amount as a sale when employment begins. Before placing registrants with the hiring company, we use a contract or an application to arrange fee rates and the amount of any refunds due in the event that new hires resigns voluntarily. If intensifying competition between companies in the recruitment industry causes major changes in these fee rates and refunds for voluntary resignation, this may cause our billing amounts to vary and affect the Group's performance. 
   
   To address this risk, the Group's domestic recruitment is focused on areas with medium-to-high annual incomes that are less susceptible to the risk of billing variations.
    
8. Voluntary resignation by a new hire
   In the recruitment industry, the consulting fee is partially refunded if a new hire resigns voluntarily soon after joining a company. If changes in the future employment situation, etc., result in an increase in the rate of new hires voluntarily retiring early, then an increase in the amount of money refunded may affect the Group's performance. 
   
   To address this risk, our recruitment activities are committed to ensuring that new hires are satisfied with their work by only placing people registered with in positions where they want to work and by fully explaining details of the job offers and conditions at the places of employment, etc.
    
9. Economic changes
   The jobs market is affected by changes in hiring trends that accompany changes in the economy. If the economy declines more than expected, it may have a negative impact on the Group's performance due to companies being less inclined to hire, resulting in a decrease in the number of deals closed. 
   
   To address this risk, the Group's domestic recruitment is focused on areas with medium-to-high annual incomes that are less susceptible to risk from economic changes.
    
10. The impact of former employees moving to another job in the same industry or starting up in the same industry
    In the recruitment industry, former employees secretly making contact with the Group's business partners and people registered with us may impede the Group's recruitment services. 
    
    To address this risk, the Group has established a system to prevent resignations from damaging our business by ensuring that we have more than one of the Group's employees in charge of handling companies we deal with and people registered with us, and by ensuring that work is properly handed over when anyone leaves.
     
11. Managing working hours and the work environment
    If the Group were to be subject to administrative guidance as a result of an inspection into the management of working times and the work environment by the Labor Standards Inspection Office or a similar body, this would not only prove a major impediment to the Group's business operations, but it may also have a significant impact on our business performance and financial condition. 
    
    To address this risk, we are working to eliminate excessive working hours and unpaid overtime. This is being undertaken primarily by the Human Resources Team and via health and safety committees that meet at each office on a monthly basis, as well as by operational audits conducted by the Internal Audit Office across the entire Group in Japan as a whole.
     
12. Goodwill
    The Group has recorded goodwill on the accounts as a result of making the following into consolidated subsidiary companies: JRI in March 2018; and Vantage Point Co., Ltd. in January 2020. If profitability falls due to a slump in the economy, or less-than-expected progress in performance, etc., then impairment losses on goodwill may affect the Group's financial condition and operating results. 
    
    To address this risk, directors from JAC Recruitment are also appointed as directors in our consolidated subsidiary companies, where they participate in management. In addition, executive officers from JAC Recruitment also attend board meetings of the consolidated subsidiary companies to develop mutual synergies as much as possible, and to work to secure profits and growth for the Group.
     
13. Information systems
    The Group makes extensive use of information systems and communication networks in its domestic and overseas business operations. Consequently, any problems such as natural disasters, hardware/software systems failure, or unauthorized access by a malicious third party etc., would not only prove a major impediment to the Group's business operations, but may also have a significant impact on performance. Furthermore, the fact that the Group outsources the maintenance of some of its information systems and communications network to outside parties means that we may not be able to deal with any malfunctions that occur on our own. 
    
    To address this risk, the Group is working to ensure redundant configuration and geographical dispersion of its information systems and communication network. In addition, we are enhancing the organization of our Information Systems Department that oversees the entire information system for the Group.
     
14. The declining population in Japan
    The majority of the Group's revenue is currently generated from domestic-related business. Moving forward, the population of Japan is expected to continue to decline and, as a result, the domestic market in which we operate is also expected to shrink. 
    
    To address this risk, we are working to achieve further growth by expanding our overseas business, increasing our market share in related businesses in Japan, and improving profitability.
     
15. Natural disasters, emergencies, and unknown infectious diseases (including COVID-19), etc.
    In the event of a natural disaster such as an earthquake, typhoon, or tsunami, or if there is a fire, power outage, act of terrorism, war, or outbreak of an unknown infectious disease (including COVID-19), then restrictions on leaving home may cause business activities to come to a standstill and may force a shift to employees working entirely from home, which would prove a major impediment to the Group's business operations and may also have a significant impact on performance. 
    
    To respond to these risks, the Group has created a Disaster Relief Manual in preparation for large scale disasters. In addition, we are working to control the geographical distribution of our business assets and have also completed construction of, and are maintaining, information systems necessary for a shift to home working. Moreover, the Board of Directors has confirmed that our first priority in the event of any such situation will be to ensure the health and safety of all the Group's employees, their families, and our customers.
     
16. Climate Change

    In the event of a future climate change worsening of rise in temperature or catastrophic natural disaster, changes in the demand for job offers by client companies and the cost structure of our group could significantly hinder our group's business operations and have a significant impact on our business results.

    In response to this risk, we formulated and implemented the following measures based on the recommendations of The Task Force on Climate-Related Financial Disclosures (TCFD): (a) Establishment of  Governance System, (b) Strategic Planning through Identification and Assessment of Risks and Opportunities, (c) Risk Management, (d) Establishment of Indicators and Targets.
     

17. Generative AI
    The rapid technological innovations brought about by generative AI are also being utilized in the human resources-related industry. Regarding the Recruitment Consulting Services, too, in fields such as large-scale recruitment, where big data can be gathered in the future, we may realize highly accurate referrals for job seekers' wishes.
    
    To respond to this risk,we are focusing on recruitment consultancy services for middle-to-high annual income earners, where the number of recruits per job type is small and direct utilization of generative AI is difficult.