Internal Control System | Governance | Sustainability

Our board of directors has resolved the basic policy for establishing an internal control system.

Notice: This document is a translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail.

Basic Policy for Establishing an Internal Control System

1. System to ensure that the execution of duties by directors and employees complies with laws and regulations and the Articles of Incorporation

（1）We have established “Our Code of Conduct” as a shared guideline for the actions of every executive and employee working at our company, outlining compliance with laws, regulations, and internal rules. By ensuring thorough awareness and understanding of this code, we strive to enhance legal compliance and corporate ethics.
（2）To promote compliance initiatives, the Head of Business Management Division shall be appointed as the “Compliance Officer.” This officer shall establish and operate the “Corporate Governance Committee” and its operational body, the Compliance Subcommittee, to drive the development of a company-wide compliance framework. Additionally, a “Corporate Ethics Improvement Proposal Window” shall be established to receive suggestions regarding compliance or corporate ethics, thereby ensuring the development of a robust compliance framework.
（3）To ensure our business operations comply with laws and regulations as well as our Articles of Incorporation and are conducted soundly, we implement audits by auditors and internal audits of each department by the Internal Audit Office.

2. System for the preservation and management of information related to the execution of directors' duties

Board meeting minutes and other information pertaining to the execution of directors' duties shall be properly stored and managed in accordance with internal regulations such as document management regulations.

3. Regulations and other systems concerning the management of risk of loss

（1）To establish an operational framework capable of appropriately addressing business risks across our entire group, we have appointed the Head of Production as the Risk Management Officer. Through the operation of the Risk Management Subcommittee, a cross-functional organization, we will advance the development of risk management systems and implement various measures.
（2）To respond to company-wide crises such as large-scale disasters, we have established the “Company-Wide Crisis Management Policy,” “Crisis Response Regulations,” and “Crisis-Specific Response Manuals.” For risks requiring departmental response, each department shall strive to implement prevention and countermeasures based on the aforementioned policies, regulations, and manuals, tailored to local conditions.
（3）Important management matters shall be submitted to the Board of Directors, Management Committee, or other relevant bodies for deliberation based on the “Deliberation Standards,” and decisions shall be made after conducting a risk assessment.

4. System to ensure the efficient execution of directors' duties

（1）The Board of Directors shall convene regularly or as necessary for extraordinary meetings to resolve matters stipulated by laws, the Articles of Incorporation, and the Board of Directors Regulations, and to make important management decisions. It shall also receive reports from each director and executive officer regarding business operations, perform monitoring and supervisory functions, and establish a flexible management structure responsive to changes in the business environment by setting the directors' term of office at one year.
（2）To flexibly respond to changes in the business environment and expedite management decision-making, a Management Committee shall be established to conduct preliminary deliberations on important management matters and items to be submitted to the Board of Directors.
（3）To expedite business execution and clarify responsibilities, the company has adopted an executive officer system. Executive officers appointed by the Board of Directors shall execute their assigned duties in accordance with the policies and strategies determined by the Board, within the scope of delegated authority. They shall report on the progress and results of their duties at Board meetings and other meetings.

5. System for ensuring the proper conduct of business within the corporate group comprising our company and its subsidiaries

（1）Our company and its subsidiaries share a fundamental approach to corporate governance while striving to enhance independent and responsible corporate governance structures tailored to the laws and regulations of each country and local business environments. Furthermore, by appointing subsidiary leaders as members of our company's Compliance Subcommittee and Risk Management Subcommittee, we aim to improve compliance and risk management across the entire group.
（2）Regarding the management of subsidiaries, while respecting their autonomy, we supervise the execution of their business operations by having our directors or executive officers serve as officers of the subsidiaries. Furthermore, based on internal regulations, we receive regular reports from subsidiaries on important matters to enhance the soundness and efficiency of management across the entire Group.
（3）Regarding the management of overseas subsidiaries, the Overseas Business Division oversees the promotion of global initiatives. Additionally, Regional Division Heads appointed under the regional division system make prompt management decisions locally. They collaborate with the Overseas Business Division in management meetings to conduct prior consultations on important matters and provide regular reports.
（4）To ensure that the business operations of subsidiaries comply with laws and regulations as well as the articles of incorporation and are conducted soundly, audits by auditors and internal audits by the Internal Audit Office are conducted.

6. Matters concerning employees who should assist auditors in their duties, matters concerning the independence of such employees from directors, and matters concerning ensuring the effectiveness of instructions given to such employees

（1）When an auditor requests the appointment of employees to assist in their duties, the company shall appoint employees to assist in the audit work and have them perform such assistance.
（2）Personnel evaluations for employees assisting in audit duties shall be conducted by the auditors. Decisions on other personnel matters shall require the consent of the auditors. This ensures the independence of such employees from directors and the effectiveness of instructions issued to them by the auditors.

7. The system for directors and employees of the Company and its subsidiaries to report to the auditors, other systems related to reporting to the auditors, and the system to ensure that no adverse treatment is received as a result of making such reports

（1）To ensure the effective performance of audits by auditors, in addition to attending board meetings and other important meetings, the Company has established “Reporting Standards for Auditors” as guidelines for directors, executive officers, other responsible departments, and directors and employees of subsidiaries to report necessary information to auditors in a timely manner. Reports are made to auditors based on these standards. Furthermore, the Company will not subject any person who reports to auditors based on these standards to any disadvantageous treatment as a result of such reporting.
（2）Directors and employees shall promptly report to the auditors through the Compliance Officer any facts they become aware of regarding violations of laws, company regulations, or the Code of Conduct in corporate activities, including information related to the corporate ethics improvement proposal window covering the entire Group, or conduct that deviates from social norms.

8. System to ensure effective audits by other auditors

（1）Auditors shall exchange opinions with the representative director as much as possible and strive to maintain constant communication.
（2）The auditors shall collaborate with the Internal Audit Department to enhance the effectiveness of audits. When auditors utilize external experts or other resources to form their own independent judgment in conducting audits, the company shall bear the associated costs.

9. Basic approach and system development for excluding antisocial forces

（1）Basic approach for excluding antisocial forces
Our group resolutely opposes any association with antisocial forces that may disrupt the order of civil society or threaten public safety, and will not yield to any unreasonable demands whatsoever.
（2）System development for excluding antisocial forces
Our Code of Conduct explicitly states the exclusion of relations with antisocial forces as a guiding principle and ensures its thorough dissemination. Should any unreasonable demands be made by antisocial forces, we will clearly express our refusal to such forces and promptly report the incident to the relevant police station. Furthermore, we will regularly participate in liaison meetings organized by the police and external specialized agencies to centrally manage and accumulate information regarding antisocial forces, while striving to ensure a cooperative framework with these specialized agencies.