Internal control system

Internal control system

The Group, consisting of the Company and its subsidiaries, recognizes that internal controls are an important factor for strengthening corporate governance, and is developing and operating an internal control system in accordance with the basic policies set by the Board of Directors of the Company.

1. A structure to ensure that the execution of duties by Directors and employees complies with laws and regulations and the Articles of Incorporation

Basic policy

  • We shall formulate the "Moriroku Group Conduct Guidelines" regarding compliance with laws and regulations, internal rules, corporate ethics, etc. as conduct guidelines to be applied to officers and employees of the Group, and shall ensure thorough dissemination.
  • We shall establish and operate a "Compliance Consultation Desk" independent from the business execution line as a contact point for reporting and consultation regarding compliance with laws and regulations, internal rules, corporate ethics, etc. in the Moriroku Group.
  • We shall monitor the status of compliance with laws and regulations, internal rules, corporate ethics, etc. in the Group, and shall take the necessary corrective measures for any problems identified as a result of such monitoring.
  • Regarding the Group’s internal control system, our Internal Auditing Division shall conduct internal audits on the status of development and operation of the system, and Audit & Supervisory Board Members shall monitor and verify the content of resolutions of the Board of Directors and the status of development and operation by Directors.

Summary of development and operation status

  • We have formulated the "Moriroku Group Conduct Guidelines" to be applied to officers and employees of the Group, and have prepared and distributed a booklet on the Conduct Guidelines to ensure thorough dissemination.
  • The Company and its subsidiaries conduct compliance training on a regular basis to raise compliance awareness.
  • As a contact point for reporting and consultation regarding compliance with laws and regulations, etc. in the Group, we have set up the "Moriroku Group Internal Whistleblower Hotline" both internally and externally, and regularly disseminate information on its establishment and take action on matters reported or consulted.
  • The Internal Auditing Division and Legal & Intellectual Property Division conduct audits or monitor the status of compliance with laws and regulations, etc. in the Group, and take the necessary corrective measures for any problems identified as a result of such audits or monitoring.
  • Regarding the Group's internal control system, the Internal Auditing Division audits the status of internal control promotion operations by the divisions in charge of internal controls, and Audit & Supervisory Board Members verify the content of resolutions of the Board of Directors and the status of development and operation of the internal control system.

2. A structure for storage and management of information related to the execution of duties by Directors

Basic policy

  • Information related to the execution of duties by Directors shall be prepared, stored and managed in the form of documents or electromagnetic records in accordance with the "Board of Directors Regulations" and other internal rules related to document and information management, and a structure shall be established and operated to enable Directors and Audit & Supervisory Board Members to view such information as necessary.

Summary of development and operation status

  • In accordance with the "Board of Directors Regulations" and other internal rules related to document and information management, information related to the execution of duties by Directors is appropriately stored and managed by each department in charge, and is available for inspection by Directors and Audit & Supervisory Board Members as necessary.

3. Regulations and other systems for managing risk of loss

Basic policy

  • We shall establish and operate rules and systems to manage risks related to the Group’s business activities.
  • We shall establish and operate a system to respond quickly and appropriately to accidents and disasters that may have a significant impact on the Company or its subsidiaries.
  • In response to changes in the internal and external business environment, we shall assess risks and review the systems and operations for risk management and accident/disaster response.

Summary of development and operation status

  • We have established the "Moriroku Group Risk Management Basic Policy" and "Moriroku Group Risk Management Regulations," and each company identifies, assesses and responds to risks, periodically reviews risk assessment and priority risks, and periodically confirms the status of response to priority risks at each company accordingly.
  • In order to respond quickly and accurately to accidents and disasters, we have established the "Domestic Crisis Management Regulations," "Overseas Crisis Management Regulations," and other internal regulations and guidelines for crisis management, and responds to accidents and disasters accordingly. In addition, safety confirmation drills are conducted on a regular basis every year.

4. A structure to ensure efficient execution of duties by Directors, etc.

Basic policy

  • We shall establish and operate rules and systems concerning the division of duties, authority, and decision-making for appropriate and efficient business execution in the Group.
  • We shall formulate policies concerning business operations, including management policies, medium-term plans, and annual plans for the Company and the Group, and ensure that these policies are thoroughly communicated.

Summary of development and operation status

  • The Company has established the "Administrative Authority Regulations," "Table of Administrative Authorities," and "Division of Duties Regulations," and efficient decision-making and execution of duties are conducted accordingly.
  • A three-year medium-term plan for the Group and annual business plan for each Group company have been established, and based on these plans, each company and department have formulated and been executing specific business promotion plans accordingly.

5. A structure to ensure proper operations of the corporate group consisting of the Company and its subsidiaries

Basic policy

  • Regarding the execution of business by our subsidiaries, we shall organize contracts and operate rules and systems that mandate prior approval by and reporting to the Company.
  • We shall establish and operate a reporting system to promptly identify and respond to important issues, compliance problems, etc. in our subsidiaries.

Summary of development and operation status

  • Affiliated companies shall report to the Company as necessary on matters stipulated in the "Affiliated Company Management Regulations" and shall obtain the Company's approval on important matters, thereby establishing a cooperation structure within the Moriroku Group.
  • The Company and its major subsidiaries have adopted an Audit & Supervisory Board system and are working to enhance the effectiveness of the system by having Audit & Supervisory Board Members audit the execution of duties by Directors. Audit & Supervisory Board Members attend meetings of the Board of Directors and other important meetings, and audit the execution of duties by Directors in accordance with the audit policy and audit plan.
  • Our Internal Auditing Division, in accordance with the "Internal Audit Regulations," oversees or conducts audits, including on affiliated companies, and works to establish cross-sectional risk management and compliance systems to ensure proper operations in an integrated manner.
  • In order to identify and respond to important issues and compliance problems at affiliated companies at an early stage, we have established a reporting system in the "Moriroku Group Basic Regulations for Internal Controls" and receive reports from affiliated companies on a regular and timely basis accordingly.

6. A structure to ensure appropriateness and reliability of financial reporting

Basic policy

  • We shall establish basic policies for internal controls over financial reporting in the Group, and develop, operate, and assess the system necessary to ensure appropriateness and reliability of the financial reporting.

Summary of development and operation status

  • We have established the "Moriroku Group Basic Policy for Internal Controls over Financial Reporting" and the "Moriroku Group Basic Regulations for Internal Controls over Financial Reporting," and are developing, operating and assessing the system that is necessary to ensure appropriateness and reliability of the financial reporting accordingly.

7. Matters concerning employees that Audit & Supervisory Board Members request to assist them in their duties

Basic policy

  • When requested by Audit & Supervisory Board Members, the Company shall assign Audit & Supervisory Board Member staff to assist Audit & Supervisory Board Members in their duties.

Summary of development and operation status

  • As the Company has not been requested by Audit & Supervisory Board Members to assign Audit & Supervisory Board Member staff, no Audit & Supervisory Board Member staff is currently assigned, but Audit & Supervisory Board Member staff will be assigned if requested by Audit & Supervisory Board Members.

8. Securing independence of employees who are to assist the duties of Audit & Supervisory Board Members from Directors and ensuring the effectiveness of instructions to such employees

Basic policy

  • Audit & Supervisory Board Member staff who are to assist Audit & Supervisory Board Members in their duties shall perform such assistance work under the direction and orders of Audit & Supervisory Board Members, and shall not be subject to the direction and orders of officers and employees of the Company.
  • Personnel change, evaluation, and disciplinary action regarding Audit & Supervisory Board Member staff shall be determined with the prior consent of Audit & Supervisory Board Members.

Summary of development and operation status

  • Currently, we do not have any Audit & Supervisory Board Member staff, but if such staff is assigned, they will perform their duties under the direction and orders of Audit & Supervisory Board Members, and any personnel change, evaluation, and disciplinary action will be decided with the prior consent of Audit & Supervisory Board Members.

9. Reporting system to Audit & Supervisory Board Members

Basic policy

  • Officers and employees of the Group shall report matters related to the execution of the Group's business operations in accordance with internal rules or at the request of Audit & Supervisory Board Members.
  • We shall ensure that Audit & Supervisory Board Members have the opportunity to attend important meetings and shall grant them the authority to inspect the agenda materials, minutes and other meeting documents.
  • Our Internal Auditing Division shall report the internal audit results of the Company and its subsidiaries to Audit & Supervisory Board Members.
  • We shall establish and operate a system to ensure that those who report to Audit & Supervisory Board Members are not treated disadvantageously for the reason that they made such reports.

Summary of development and operation status

  • Officers and employees of the Group report matters related to the execution of business operations in accordance with internal rules or at the request of Audit & Supervisory Board Members.
  • The Company ensures that Audit & Supervisory Board Members have opportunities to attend meetings of the Board of Directors and the Board of Executive Officers, and grants them the authority to inspect the agenda materials, minutes, and other meeting documents.
  • Our Internal Auditing Division reports the internal audit results of the Company and its subsidiaries to Audit & Supervisory Board Members.
  • The Company has established internal regulations to ensure that officers and employees who have made whistle-blowing reports are not treated unfavorably on the basis of such reports, and operates accordingly.

10. Matters concerning treatment policy on expenses and debts arising from execution of duties by Audit & Supervisory Board Members

Basic policy

  • We shall process expenses and debts arising from the execution of duties by Audit & Supervisory Board Members, except in cases where it is recognized that such expenses and debts are not necessary for the execution of Audit & Supervisory Board Members' duties.

Summary of development and operation status

  • Expenses incurred in the execution of duties by Audit & Supervisory Board Members are budgeted in the amount deemed necessary by Audit & Supervisory Board Members, and the Company bears the actual expenses incurred.

11. Other structures to ensure effective audits conducted by Audit & Supervisory Board Members

Basic policy

  • The President and Representative Director and other Directors shall hold meetings with Audit & Supervisory Board Members as necessary to ensure smooth communication.
  • We shall establish and operate a system to ensure mutual cooperation between Audit & Supervisory Board Members, our Internal Auditing Division and Accounting Auditor, such as exchanging information on audit results.

Summary of development and operation status

  • Audit & Supervisory Board Members hold meetings with the President and Representative Director and other Directors as necessary to foster communication.
  • Audit & Supervisory Board Members hold monthly meetings with our Internal Auditing Division and quarterly meetings with the Accounting Auditor to exchange information and promote mutual cooperation.

12. A structure to eliminate antisocial forces

Basic policy

  • In order to cut off all relations with antisocial forces, we shall formulate, develop and operate a basic policy for dealing with antisocial forces in the Group.

Summary of development and operation status

  • The Company have established the "Moriroku Group Basic Policy on Antisocial Forces" as follows:
    • We shall cut off all relations, including transactions, with antisocial forces.
    • We shall not provide any funds or conduct any backroom transactions with antisocial forces.
    • We shall establish a system to deal with antisocial forces, and the entire organization will take action.
    • We shall take appropriate measures against antisocial forces in cooperation with the police and other external specialized organizations.
    • We shall take legal action, both civil and criminal, against unreasonable demands from antisocial forces.
  • The Company has established the "Regulations for Dealing with Antisocial Forces" and takes the following measures:
    • Respond as an organization to unreasonable demands, etc. from antisocial forces, by appointing a Director in charge of administration as a chief officer to supervise the response to antisocial forces, and assigning the general affairs division as the main department in charge of managing the response to antisocial forces, as well as to assign a manager for the prevention of unreasonable demands at each base.
    • Investigate new business partners at the commencement of transactions and ongoing business partners on a regular basis to ensure that they do not fall under the category of antisocial forces, and conclude a contract or memorandum to the same effect that includes a clause to eliminate antisocial forces when concluding a transaction contract.
    • Investigate employees to be hired to ensure that they do not fall under the category of antisocial forces, and obtain a written pledge that includes a clause to eliminate antisocial forces upon joining the company.

Compliance system

The Legal & Intellectual Property Division of Moriroku Holdings is responsible for enforcing compliance within the Moriroku Group. Accordingly, it takes steps to raise awareness of compliance among employees and management, and implements measures for handling cases of misconduct if they occur. In line with the Group's basic policy on internal controls, subsidiaries in and outside Japan make continuous efforts to contribute to and improve the Group's compliance system.

Moriroku Group Conduct Guidelines

The Moriroku Group Conduct Guidelines have been established as standards of business conduct for all officers and employees group-wide. The guidelines are made known to members of all of the Group's workplaces around the world.

Internal whistleblower hotlines

Internal whistleblower hotlines have been set up inside and outside the Moriroku Group to enable its members to obtain advice and report on any misconduct or unethical actions. Employees can contact and report to the hotlines anonymously, and retaliation or other harmful actions against whistleblowers are prohibited.

Compliance training program

The Moriroku Group provides training on legal- and compliance-related issues to all of its members, from employees up to senior managers, in order to ensure that they fully comply with in-house rules and relevant laws and regulations.

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