1. System to ensure the appropriateness of business operations

The Company has established and promoted corporate ethics through the establishment of its Code of Conduct, and the following basic policy regarding the development of internal control systems has been resolved by the Board of Directors.

a. Systems to ensure that the execution of duties by directors and employees complies with laws and regulations and the Articles of Incorporation

  • Directors shall comply with the Group's Code of Conduct, take the initiative in the proper execution of their duties in accordance with laws and regulations, the Articles of Incorporation, the rules of the Board of Directors, and other internal regulations, and ensure that all employees are fully aware of the Code of Conduct.
  • The risk management officers of each Group company, appointed by the Chair of the Risk Management Committee, deliberate on and review significant risks and corresponding countermeasures at meetings of the Risk Management Committee and periodically report on the overall status of the Group's risk management to the Board of Directors.
  • The compliance officers of each Group company, appointed by the Chair of the Compliance Committee, deliberate on and review the status of compliance and responses to key issues at meetings of the Compliance Committee and report the results to the Board of Directors.
  • The Company shall establish and operate an internal whistle-blowing system, with outside attorneys and (a) director(s) who are (a) member(s) of the Audit Committee as contact person(s), to report violations of laws and ordinances and other legally questionable acts.
  • The Audit Committee Members shall audit the execution of duties by directors by attending meetings of the Board of Directors and other important meetings and by examining the status of business execution, etc., in accordance with the audit policy determined by the Audit Committee.

b. System for the storage and management of information related to the execution of duties by directors

  • The information relating to the execution of duties by directors shall be properly stored and managed in accordance with laws and regulations, the rules of the Board of Directors, document management rules, and other related rules.

c. Regulations and other systems for managing risk of loss

  • The Company will implement rolling forecast management in a cycle appropriate to the business environment, monitoring the progress of business performance and maintaining thorough control of expenses, thereby properly managing operations and funds while preventing risks.
  • The Company will establish a Risk Management Committee, led by the Group CRO (Chief Risk-Management Officer), to comprehensively identify and assess key risks across the entire Group. The Committee will also utilize a “Management Crisis List”—which identifies risks that could impact the achievement of the medium-term management plan and the Group’s business foundation—to deliberate on risk response policies and report the results to the Board of Directors.
  • A Compliance Committee will be established to develop the necessary regulations and manuals relating to risks associated with compliance, information assets, and other business activities, and to promote compliance awareness through training and education programs.
  • Establish an Information Security Committee to promote the proper management of information assets, address cybersecurity risks, and strengthen cyber resilience.
  • The Company shall consult with and receive advice and guidance from third parties with expertise, such as lawyers, accounting auditors, and tax accountants, as necessary in the performance of its business.

d. Systems to ensure the efficient execution of duties by directors

  • The Board of Directors holds regular meetings once a month and convenes additional meetings as necessary for decision making and prompt business execution, as well as to supervise the status of important management decisions and business execution by directors.
  • The various meetings and committees, headed by or including directors as members, shall deliberate and make decisions on business execution within the scope of their authority as stipulated in the rules and regulations.
  • A Group Management Meeting will be established, where each CxO will deliberate on important matters related to Group management and report on these matters to the Board of Directors, thereby supporting swift and appropriate management decisions.
  • Promote the decentralization of management through organizational structuring based on management policies and business plans.
  • The term of office of directors who are not members of the Audit Committee shall be one year in order to clarify management responsibility and to respond to changes in the business environment.

e. System to ensure appropriateness of operations of the corporate group (the Company and its subsidiaries)

  • The Company shall support the development and improvement of internal control systems and promote them in cooperation with subsidiaries, while respecting the autonomy of the subsidiaries.
  • The Company shall receive reports on important matters related to the execution of duties by directors and others. Although the boards of directors of the Company's subsidiaries shall decide important matters, approval shall be obtained from the Company with respect to the following three matters: (a) investment, (b) officer personnel, and (c) finance including capital policy, which have a significant impact on the Group.
  • The Company's subsidiaries shall hold regular Board of Directors' meetings once a month as a basic rule and hold Board of Directors' meetings as necessary for decision-making and prompt business execution, and the Company's Group Legal Affairs Office shall confirm the status of the meetings.
  • Employees of the Company's subsidiaries who become aware of any violation of laws, the Articles of Incorporation, the Company's internal rules, or any act contrary to socially accepted norms shall report or consult with the internal whistle-blowing system office.
  • The Compliance Committee shall provide support for legal compliance and other compliance matters of the subsidiaries.
  • Regarding the progress of subsidiary performance and thorough expense management, the Company shall implement rolling forecast management to monitor business performance in cycles appropriate to the business environment in accordance with budget management regulations and strive to prevent risks through appropriate management of operations and funds and reporting to the Company.
  • To ensure the proper conduct of operations at subsidiaries of the Company (100% of voting rights held), the Internal Audit Department conducts regular internal audits and works in collaboration with the Risk Management Committee, the Compliance Committee, and the Information Security Committee to enhance the effectiveness of internal controls across the entire Group.

f. Matters related to employees assisting the duties of Audit Committee Members and matters related to ensuring the effectiveness of instructions to such employees

  • In the event that the Audit Committee requests the Board of Directors to establish a secretariat to assist it in its duties, the secretariat shall be established by appointing appropriate personnel from inside and outside the Company. In the case of employees, they shall be thoroughly informed that they are subject to the directions and orders of the Audit Committee.

g. Systems for reporting to the Audit Committee by Directors and employees who are not Audit Committee Members, and systems for reporting to the Audit Committee by Directors, Corporate Auditors, employees of subsidiaries, or persons who receive reports from these persons.

  • The Audit Committee members may attend meetings of the Board of Directors and other important meetings, inspect documents necessary for auditing, and request explanations from directors and employees.
  • Directors, corporate auditors and employees of the Company and its subsidiaries shall report to the Audit Committee on matters that have a material impact on the Company's operations and performance.
  • The Company shall prohibit any disadvantageous treatment of any person who makes a report to the Audit Committee by reason of the fact that such a report has been made.

h. Other systems to ensure audits by the Audit Committee are conducted effectively

  • The Audit Committee shall meet regularly with the President and Representative Director to exchange views on business execution policies, risks and issues to be addressed, and important auditing issues.
  • The Audit Committee shall regularly exchange opinions with the accounting auditor.
  • In the event that any Audit Committee Member requests advance payment or reimbursement of expenses incurred in the performance of his/her duties, such expenses shall be borne by the Company, except in cases where such payment or reimbursement is found not to be necessary.

i. Basic policy on elimination of antisocial forces

  • With respect to the exclusion of antisocial forces, in addition to the basic policy regarding the internal control system, the Company shall endeavor to develop a system as follows.
  • The Group's Code of Conduct declares the exclusion of antisocial forces and the prohibition of antisocial activities, and the Group receives written pledges from officers and employees every year regarding the Code of Conduct and the management of confidential information.
  • With the General Affairs Department as the responsible division, a person in charge of preventing unjustified demands shall be appointed to cooperate with local police authorities in eliminating antisocial forces. In addition, confirmations regarding antisocial forces shall be conducted for business partners at the time of entering a basic agreement and shall strive to ensure thorough awareness and implementation of antisocial force elimination measures and to strengthen response capabilities.

2. Status of operation of the system to ensure the appropriateness of business operations

With regard to the system to ensure the appropriateness of business operations, the Company has continuously investigated the establishment and operational status of the internal control system since the system was first established and reports the details of the investigation to the Board of Directors. In addition, with regard to problems identified as a result of the investigations, the Group takes corrective measures and strives to establish and operate a more appropriate internal control system. The following is an event of the status of investment management during the current fiscal year.

 

  • The Company has chosen to adopt the Audit Committee structure in order to strengthen the supervisory function of the Board of Directors and to further enhance governance.
  • The Risk Management Committee met regularly to review risks and consider countermeasures in response to the changing business environment across the Group, and the Board of Directors received reports from the Group CRO to ascertain the status of risk management.
  • The Compliance Committee met regularly to promote corporate ethics and compliance. In addition, the Board of Directors received reports from the Group CLO and worked to understand the compliance status.
  • The Information Security Committee met regularly to manage information assets and strengthen information security across the Group. The Board of Directors received reports from the Group CIO and monitored the status of information security management.
  • During the current fiscal year, the Board of Directors held 13 meetings and focused its oversight on reviewing progress under the medium-term management plan, addressing related challenges, and strengthening corporate governance.
  • The Audit Committee members attended meetings of the Board of Directors, the Group Management Meeting, the boards of directors of subsidiaries, and other important meetings, and regularly exchanged opinions with the President and Representative Director and the independent auditors to ensure the effectiveness of the audits.