（as of November 8, 2019）
IV. Matters Related to the Internal Control System
1．Basic Views on Internal Control System and the Progress of System Development
By maintaining and promoting the Guidelines on the Development of an Internal Control System, which were passed by the Board of Directors, the Company works to establish comprehensive reach for its auditing and supervisory functions and to ensure that its operations are executed in accordance with laws and regulations as well as its Articles of Incorporation.
Guidelines on the Development of an Internal Control System
1. System for ensuring that the duties of directors and employees of the Company and of the employees, directors, etc. of its subsidiaries are executed in accordance with laws and regulations as well as the Company's Articles of Incorporation
- (1) In order to put into action the Corporate Philosophy of the Company and its subsidiaries (hereinafter "Subsidiaries;" the Company and Subsidiaries will collectively be referred to hereinafter as the "Group"), the Company creates the Code of Conduct as the guideline to complying with laws and regulations, the Articles of Incorporation, social norms, corporate ethics, etc., and familiarizes its executive officers and employees with it.
- (2) The Company and the primary Subsidiaries establish an Internal Control Committee to provide oversight of legal and regulatory compliance as well as risk management. The Company's Internal Control Committee provides cross-cut oversight of initiatives within the Group aimed at legal and regulatory compliance as well as risk management.
- (3) The Company and the primary Subsidiaries establish Internal Audit Departments independent of operational execution organizations in order to implement internal audits in coordination with the legal departments and other functions.
- (4) The Company and the primary Subsidiaries establish whistle-blowing systems in order to enable the early discovery, reporting, and prevention of improper activities.
2. System for storing and managing information related to the execution of the duties of the Company's directors
- (1) The Company sets forth Document Management Rules, Trade Secret Management Rules, and Basic Rules on Information Systems in order to ensure the proper storage and management of the minutes of Board of Director and other meetings, approval requests, and other documents related to the execution of duties (including electronic records).
- (2) The Company's directors can access such information as necessary.
3. Rules and other systems regarding the management of risk of losses at the Company and Subsidiaries
- (1) The Company sets forth Crisis Management Rules in order to enact comprehensive risk management focused on the prevention of crises at the Group, while also clarifying how information would be communicated and the system by which a crisis would be dealt with in the unlikely event that one should arise.
- (2) The company's Internal Audit Department assesses the implementation of risk management at the Company and primary Subsidiaries and reports the results to the Company's Internal Control Committee.
4. System for ensuring that the duties of the Company's directors and those of the directors, etc. of Subsidiaries are executed efficiently
- (1) In order to establish a clear division between management and execution, the Company concentrates operational execution authority in the Representative Director based on the criteria defined in the Delegation of Authority Rules. By so doing, the Company enables both appropriate management decision-making and efficient operational execution.
- (2) The Company's Board of Directors are to focus on managing the Company and on its functions of managing and supervising Subsidiaries. From the perspective of enabling the more efficient and timely management of Subsidiaries, the Company's Board of Directors delegates to the Boards of Directors of Subsidiaries a certain amount of authority regarding decision-making concerning operational execution. The decision-making authority to be delegated is clearly defined in the Delegation of Authority Rules.
- (3) The Company establishes an Information Systems Operations Committee to control information systems on the whole. The Company also sets forth the Basic Rules on Information Systems, which clearly define the methods by which information systems are managed and operated in the Group in order to ensure the efficiency of duties executed using information systems.
5. System for reporting to the Company on matters related to the execution of the duties of the directors, etc. of Group companies and other systems for ensuring appropriate operations within the corporate group comprising the Company and its Subsidiaries
- (1) The Company sets forth the Affiliate Company Management Rules and engages in the management and supervision of Subsidiaries in a manner befitting the scale of said companies and their importance to the Group.
- (2) Based on the aforementioned rules, the Company requests reports regarding the running of Subsidiaries and other important information, and by employing methods such as holding monthly and ad-hoc briefings, the primary Subsidiaries make it possible for the Company to assess the status of the running of Subsidiaries in a timely fashion as well as to take necessary measures in a timely and accurate fashion.
6. Matters related to employees who should assist with the Audit & Supervisory Committee duties
The Company designates those persons belonging to the Internal Audit Department as the employees that should assist with Audit & Supervisory Committee duties.
7. Matters concerning the ensuring of the independence of the employees mentioned in 6 above from the Company's directors who are not Audit & Supervisory Committee Members and the enforcement of the Company's Audit & Supervisory Committee's instructions to the aforementioned employees
- (1) Those persons belonging to the Internal Audit Department shall follow only the directions and orders of the Audit & Supervisory Committee when assisting with the Audit & Supervisory Committee' duties.
- (2) Decisions on personnel matters concerning the head of the Internal Audit Department, including but not limited to the appointment, transfer, and disciplining thereof, shall require the consent of the Audit & Supervisory Committee.
8. System concerning reporting to the Company's Audit & Supervisory Committee
- (1) If requested by the Company's Audit & Supervisory Committee to report on the status of the execution of operations, the Group's executive officers and employees shall report to the Company's Audit & Supervisory Committee without delay. Moreover, if the same persons should discover facts that have resulted in significant damage to the Group or facts that risk resulting in the same, the aforementioned persons shall immediately make a report to the Audit & Supervisory Committee.
- (2) The Company's Internal Audit Department shall report to the company's Audit & Supervisory Committee in a timely fashion on the results of audits of the Company and primary Subsidiaries.
- (3) The Company establishes a whistle-blowing system for which the point of contact is either the Standing Audit & Supervisory Committee Member, the Internal Audit Department or an external law office in order to ensure that the executive officers and employees of the Group have the opportunity to report directly to the Standing Audit & Supervisory Committee Member. Whistle-blowing information will be conveyed in a timely manner to the Audit & Supervisory Committee.
- (4) The Company will not unfairly treat Group executive officers or employees that have engaged in such whistle-blowing on the grounds that they have made such reports.
9. Other systems for ensuring that the audits of the Audit & Supervisory Committee are conducted effectively
- (1) The Company ensures that the Standing Audit & Supervisory Committee Member has regular opportunities to exchange views with the directors and employees by attending meetings of the Board of Directors and other important meetings.
- (2) The Company establishes a system by which the Audit & Supervisory Committee Members can access the minutes of important meetings, contracts, approval requests, accounting information, etc. as needed.
- (3) When an Audit & Supervisory Committee Member has requested that the Company in advance or in the form of a reimbursement bear expenses related to the execution of the Audit & Supervisory Committee Member's duties, the Company shall bear the costs or debts except in such cases where the costs or debts have been determined to be unnecessary to the execution of the relevant Audit & Supervisory Committee Member's duties.
2．Basic Views on Eliminating Anti-social Forces
The Company has always designated a department responsible for dealing with antisocial forces and has as an organization taken a resolute stance in dealing with the same and eliminating any and all relations with the same. In order to ensure the independence of its business partners, the Company includes in its contracts with business partners a clause requiring the relevant business partner to vow to have no relations with antisocial forces.