Basic Policy for Internal Financial Control
Established on May 10, 2006
Revised on March 24, 2008
Revised on October 1, 2012
Revised on April 1, 2014
Revised on May 1, 2015
The Company shall, under the Companies Act and the Ordinance for Enforcement of the Companies Act, establish the basic policy concerning the development of the system required to ensure the fair execution of the services provided by the corporate group consisting of the Company and its subsidiaries (hereinafter referred to as the “Group”) as follows:
1. System to ensure that the Group directors and employees perform their respective duties in compliance with applicable laws and regulations and the articles of incorporation
- (1) Under the Corporate Ethics Regulations, the Corporate Ethics Committee chaired by the President will, as the lead organization, strive to familiarize directors and employees with the Company rules such as the Sanki Engineering Group Compliance Declaration, the Sanki Engineering Group Code of Conduct and Action Guidelines and the Sanki Engineering Group Conduct Standards, and perform compliance promotion activities.
- (2) The awareness of compliance shall be increased by conducting training on compliance with laws and regulations.
- (3) The Internal Audit Department and other relevant departments will direct and monitor compliance with applicable legislation, and enhance the compliance consciousness of directors and employees.
- (4) The self-governing mechanism shall be improved by utilizing the notification contacts to prevent misconduct from occurring.
- (5) Anti-social forces that threat the public order and safety shall be resolutely removed.
- (6) If any event in violation of compliance requirements should occur, it shall be strictly dealt with pursuant to the relevant regulations such as the employment regulations.
2. System for the storage and management of information concerning the performance of duties by directors
In accordance with the provisions of applicable laws and regulations and the Company rules (such as the document storage and saving rules and the information security risk management rules), relevant information shall be properly stored and managed, the state of which will be confirmed from time to time.
3. Regulations and other systems to manage the risk of losses within the Group
- (1) The business risk (meaning the risk related to issues such as compliance, information security, quality, profit and loss, environment and disasters) will be managed by establishing the Risk Management Committee to handle such issues across the whole Company in an integrated manner. Subcommittees will be established under the Risk Management Committee to assess and control the risk related to specific issues.
- (2) If necessary to deal with a newly developed risk, the President will promptly appoint the department and Executive Officer responsible for dealing with the risk. Matters requiring important management decisions will be determined by the Management Meeting and the Board of Directors according to the degree of importance.
- (3) In accordance with the Company regulations concerning financial reporting such as the Internal Controls Regulations and the Accounting Regulations, the appropriateness of financial reporting shall be ensured.
4. System to ensure that directors and directors of subsidiaries perform their duties in an efficient manner
- (1) The Company shall ensure that business efficiency is increased and that the decision-making process is speeded up by maintaining the Executive Officer system, developing Company rules, such as Organization Regulations and Segregation of Duties Regulations, as well as holding deliberations and presenting reports at organization meetings, such as the Management Meeting, and to the Board of Executive Officers.
- (2) The Company shall ensure that its subsidiaries establish a system that complies with the Company’s segregation of duties process, chain-of-command structure, decision making process, and other organizational standards.
5. System to ensure that the Group conducts its business appropriately and that subsidiaries report to the Company matters concerning their directors’ performance of duties
- (1) Material matters concerning subsidiaries, such as matters concerning their respective organizations, accounting, business, and financial status, shall be managed by promptly reporting to the responsible Executive Officer and the relevant department in charge of each subsidiary and obtaining the approval thereof, in accordance with the Subsidiary Management Rules.
- (2) In a regular audit conducted by the Internal Audit Department, confirmation about how the system has been implemented shall be made.
6. System to ensure that audits are effectively conducted by the Company Auditors
- (1) The Company Auditors may, when necessary, request the Directors to engage temporary audit staff. In addition, the temporary audit staff shall comply with the instructions of the Company Auditors.
- (2) The Executive Officer in charge of Personnel Affairs shall obtain the prior consent of the relevant Company Auditor when making changes in temporary audit staff.
- (3) The Company Auditors will attend meetings of the Board of Directors, Management Meeting, Corporate Ethics Committee and Board of Executive Officers, and other important meetings.
- (4) The Company Auditors will be presented reports and material documents by the Executive Officers and employees, and internal audit reports by the Internal Audit Department.
- (5) The Directors, Company Auditors, and employees of subsidiaries (hereinafter referred to as “Officers and Employees of Subsidiaries”) shall, when required by the Company Auditors to report matters concerning the performance of duties, report thereon promptly and appropriately.
- (6) The Officers and Employees of Subsidiaries, and any person who has received a report from the Officers and Employees of Subsidiaries may directly or indirectly report to the Company Auditors matters deemed necessary to report to the Company Auditors.
- (7) Directors and employees of the Group who have made a report to the Company Auditors will not be treated unfavorably for making such report.
- (8) If the Company Auditors require advance payment, etc., for the expenses necessary for their performance of duties, the Company shall promptly pay the relevant expenses.
- (9) The Company Auditors will consult with the Internal Audit Department and accounting auditors from time to time, and if necessary, may request the Internal Audit Department to conduct an investigation into specific matters.
- (10) The Company Auditors may request the Group Directors and employees to conduct an investigation or provide an explanation of any necessary matters concerning the performance of duties. Those Group Directors and employees who are requested to do so shall conduct a prompt investigation and provide an appropriate explanation.
- (11) The President will exchange opinions with the Company Auditors on a regular basis.