The Group will establish effective governance frameworks to ensure the transparency, objectivity, and fairness of the management of the companies and earn society’s trust everywhere it operates.

Internal Control

We have established the basic policy of the internal control system based on the provisions of the Companies Act and disclose it in our business reports and financial results.

Basic policy on internal control systems

The Company, through the realization of the Mission, Vision, Value, and Way, which
is the management philosophy of the Company and the corporate group comprising
of the subsidiaries of the Company (hereinafter referred to as “Group”), aims for the
sustainable growth of the Group and the maximization of shareholder value in the
medium to long term, and in addition, continually assesses the situation of the
establishment and operation of an internal control system based on this policy, takes
the necessary improvement measures, conducts ongoing reviews on this policy in
accordance with changes in the management environment, etc., and endeavors to
establish and operate an internal control system that is even more effective.
In the FY2019 Financial Results, the basic policy of the internal control system is disclosed regarding the following items.

  1. System for ensuring that the execution of the duties of Executive Officers is performed effectively (governance and business management)
  2. System for the management of the risk of loss at the Company (risk management)
  3. System for ensuring that the execution of duties of Executive Officers and employees is in line with laws and ordinances and the Articles of Incorporation (compliance)
  4. System for the preservation and management of information about the execution of duties by Executive Officers (information management)
  5. System to ensure proper business operations in the Group (Group system)
  6. Matters relating to organizations that should assist with the duties of the Audit Committee
  7. System for reporting to the Audit Committee
  8. Other systems to ensure the effectiveness of audits conducted by the Audit Committee

Basic policy on internal control systems

Operation status of internal control system

The operational status of the internal control system is reported to shareholders as "Operational status of the system necessary to ensure the properness of operations."

Operational status of the system necessary to ensure the properness of operations (business report in the 195th Ordinary General Meeting of Shareholders)

1) Execution of duties of directors
The Board of Directors of the Company receives regular reports on the progress of the execution of business based on the business plan and exercises instruction and supervision toward the achievement of business objectives. It consists of five executive directors, six non-executive directors (including five independent directors), and five auditors (including three independent auditors) to ensure that its deliberations are enhanced from professional and diversified perspectives. Moreover, the Designation Advisory Committee and the Compensation Advisory Committee have been established to strengthen the independence and objectivity of the functions of the Board of Directors and its accountability. Each committee is chaired by an independent director, and the majority of its committee members is composed of independent directors. The nomination of candidates for director and executive officer positions and the remuneration of directors and executive officers are deliberated by the relevant committee, and the results are reported to the Board of Directors. In addition, the Governance Advisory Committee was newly established as an advisory committee of the Board of Directors in this fiscal year. It has been engaged in deliberations and discussions toward the reform of the Group’s management structure. In this fiscal year as well, the Company provided training for Group executives (under the theme of global audit) to foster a better understanding of the enhancement of the global audit system, thus working to further ensure the appropriate execution of duties of directors.

2) Group management
After careful deliberation by the Governance Advisory Committee and the Board of Directors, the Company decided and announced that it would transition from a Company with a Board of Corporate Auditors to a Company with Three Committees (Audit, Remuneration and Nomination), based on the approval of the general meeting of shareholders to be held on March 26, 2020. The main goal in this transition was to enhance the transparency, objectivity, and fairness of corporate management, separate management supervision from business execution, and strengthen audit and executive systems. It also decided and announced that the Tokyo Headquarters with a global headquarters function would be established as of April 1, 2020 to enhance the control of overall business and promote its growth strategy on a global scale. Moreover, with the aim of further disseminating the Group’s management philosophy of “Mission,” “Vision,” “Value,” and “Way,” it created foreign language versions of videos to introduce the management philosophy to overseas Group companies, held workshops targeting all executives and employees at domestic Group companies, and conducted surveys to confirm the dissemination status of the management philosophy in this fiscal year. It has also continued to dispatch directors to important affiliated companies in Japan and overseas to thoroughly communicate its management policy and to operate a system where the Board of Directors or President of the Company decides important matters at subsidiaries, including overseas joint companies.

3) Compliance initiatives
The Company has regularly held Compliance Committee meetings to set compliance themes that the Group should work on. Under the themes, it conducts improvement activities, thereby working to reduce corporate risks. It held the meeting in every quarter in this fiscal year as well and worked on the promotion of appropriate management of working hours based on the enforcement of the Work Style Reform Related Law, the prevention of harassment, and the improvement of quality management and information management systems. It also conducted a comprehension test for the Compliance Guidebook, targeting all employees at domestic Group companies, to disseminate the guidebook. To further disseminate an internal reporting system and promote its use while paying close attention to the privacy protection of an informant, it disclosed the internal reporting results in the previous fiscal year internally and externally (described them in its Integrated Report for external persons). In addition, it conducted compliance activities at domestic Group companies under themes set according to the business category of each company. The progress and results of these activities were reported to the Compliance Committee, which deliberated on and discussed the measures to be taken.

4) Audit system
The Company regularly holds a “three-way audit meeting,” which is attended by auditors, the accounting auditor, and members of the Corporate Audit Department, a “consultation meeting between the accounting auditor and auditors,” and a “regular meeting between the Representative Director of the Board and auditors.” It also holds liaison and consultation meetings with auditors of important domestic subsidiaries on a regular basis. Through these meetings, it shares information and exchanges views regarding issues identified through audits.
In FY2020, it became a Company with Three Committees (Nomination, Audit and Remuneration) and established the Audit Committee, whose majority members are independent directors, in terms of risk management associated with global business expansion and an expansion of delegation of authority. Taking into account that the global audit system is planned to be reinforced, it advanced efforts to help to strengthen the global audit system, including enhancing the functions of internal audit departments, in this fiscal year.

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