Matters Related to the Internal Control System, etc.
1. Basic philosophy about the internal control system and its development status
DaikyoNishikawa has its internal control system in place based on the belief that the Company is a process carried out by all people concerned in the business basically to achieve four corporate objectives (effectiveness and efficiency of operations, reliability of financial reporting, compliance with laws and regulations related to business activities, and protection of assets).
At its meeting held on April 14, 2015, the Board of Directors passed a resolution to revise the basic policy of the internal control system—a system to ensure the appropriateness of operations—as outlined below.
a. A system to ensure that the execution of duties by Directors and employees of the Company and its subsidiaries conforms to laws, regulations, and the Articles of Incorporation
The Company and its subsidiaries promote a compliance system based on established action guidelines and other guidelines in order to comply with laws, regulations, the Articles of Incorporation, and social norms regarding the execution of duties by Directors, Executive Officers, and employees.
Moreover, the Company's Corporate Management Division shall summarize the compliance efforts of the Company and its subsidiaries and report to the Company’s Board of Directors and Auditors in every six months.
In addition, we have established a whistleblowing system and are enhancing it to optimize the system.
b. Matters related to storage and management of information on the execution of duties by Directors
The Company has established regulations concerning recording methods, storage periods, management methods, and the like of information related to the execution of duties by Directors and Executive Officers. The Directors and Auditors are allowed to view these documents at all times. The establishment or revision of the regulations shall be approved by the Board of Directors.
c. Regulations and other systems for managing the risk of loss incurred by the Company or its subsidiaries
As an organization concerned with risk management, the Company has established the Risk Management Committee to monitor the establishment and improvement of the risk management systems of the Company and its subsidiaries and to report the progress of risk management to the Board of Directors in every six months.
The Board of Directors of the Company reviews and discovers risks associated with the execution of the company’s business and passes a resolution for countermeasures.
d. A system to ensure that the Directors of the Company and its subsidiaries perform their duties efficiently
The Boards of Directors of the Company and its subsidiaries each establish goals shared by their respective Directors, Executive Officers, and employees.
To achieve the goals, Executive Directors and Executive Officers of the Company and its subsidiaries set specific targets and implement efficient measures and action plans for each department.
At the Company, Executive Directors and Executive Officers review the progress on a regular basis. Regarding the subsidiaries, Directors of the subsidiaries periodically submit progress reports to the Company for review. In this way, we increase work efficiency with the aim of solving problems and enabling continuous improvement.
e. A system to ensure the appropriateness of operations in the corporate group consisting of the Company and its subsidiaries
The Director or Executive Officer appointed for compliance and risk management of the Company and its subsidiaries manages subsidiaries and regularly report the results to the Board of Directors.
f. A system for reporting to the Company matters related to execution of duties by Directors of subsidiaries
The Company receives management reports from its subsidiaries at regular debriefing sessions.
In addition, the Board of Directors of the Company deliberates on important matters of subsidiaries based on reports from them.
g. Matters related to employees in the cases where Auditors request to assign employees to assist them in their duties and matters related to the independence of such employees from Directors
Auditors are allowed to request to the Directors if they need an employee to assist with audit work.
The employee who has received orders necessary for audit work from an Auditor shall, in relation to such orders, not be subject to instructions or orders from Directors or the manager of his or her department.
h. Matters related to ensuring the effectiveness of instructions given to employees who assist the duties of Auditors
At the Company, the employees who are to assist the duties of Auditors are required to follow the instructions and orders of the Auditors; if they do not follow the instructions and orders, they will be subject to internal disciplinary action.
i. A system for Directors and employees to report to Auditors and other systems for reporting to Auditors
Directors monitor the execution of duties by other Directors. When Directors, Executive Officers and/or employees discover a serious fact or the possibility of violating any of laws, regulations, the Articles of Incorporation and social norms—including those impacting on the Company and its subsidiaries—in the execution of their duties, they shall notify the Board of Directors and Auditors.
j. A system for Directors and employees of subsidiaries, or people who receive reports from them, to report to the Company’s Auditors
In the case of whistleblowing to the Company from an Officer, Executive Officer or employee of a subsidiary, or a person who has received a report from them, the department serving as the whistleblowing contact point shall report the information to the Auditors through the Compliance Committee.
k. A system to ensure that people who report to the Auditors of the Company are not treated unfavorably due to such reporting
We use a whistleblowing system for Officers, Executive Officers and employees of the Company and its subsidiaries to indirectly report to the Auditors of the Company.
For the operation of the whistleblowing system, it is stipulated that whistleblowers shall not be treated unfavorably.
l. Matters related to policies regarding prepayment or reimbursement procedures for expenses arising from the execution of duties by Auditors and regarding other processing of expenses or debts arising from the execution of duties by Auditors
Regarding the expenses required for the execution of duties by Auditors, the Company shall pay money uniformly if the formal requirements stipulated in the regulations are met.
m. Other systems to ensure that audits by the Auditors are conducted effectively and practically
Regular meetings are held to exchange opinions among the Auditors, the Representative Director, and the accounting auditor.
n. A system to ensure the reliability of financial reporting
The Company and its subsidiaries have established effective and appropriate internal control and built a system for its implementation in accordance with the Financial Instruments and Exchange Act and strive to operate the system appropriately. The system is continuously evaluated to ensure its proper functioning, and the Company takes necessary corrective action.
2. Basic approach to eliminating antisocial forces and framework development status for that purpose
a. Basic approach to eliminating antisocial forces
Based on the basic policy adopted at the Board of Directors meeting on October 20, 2008, the Company has established the Guidelines for Dealing with Antisocial Forces with the aim of clarifying internal measures and procedures for severing relationships with antisocial forces.
b. Framework development status for eliminating antisocial forces
The Company has established regulations including the Guidelines for Dealing with Antisocial Forces to provide action guidelines for the elimination of antisocial forces and will strive to thoroughly implement them. For this end, we will prepare an internal framework as outlined below.
- The General Affairs Department is the point of contact for unreasonable demands from antisocial forces. The General Affairs Department in cooperation with departments related to the incident will take the lead in dealing with any incident. Moreover, in dealing with it, we will work to strengthen cooperation, such as by receiving guidance from our corporate lawyers.
- We collect information by proactively participating in lectures and seminars for those who are responsible for avoiding unreasonable demands. Furthermore, we will ensure information sharing, such as by reporting the learned content to the parties concerned within the Company.
- We will search and accumulate (record) data related to antisocial forces at the start of business transactions and will regularly check once a year for such information suspected of the involvement of antisocial forces.