Group-wide Risk Management and Internal Controls

「Internal Control Committee」

「When a major risk materializes, the company establishes an emergency response headquarters and takes action to minimize its adverse impact on business performance and other matters. Specifically, the Risk Management Regulations stipulate that an emergency response headquarters is to be established for any materialized risk that could have a particularly serious impact on the group or its stakeholders, in order to respond to the major risk and consider and implement measures to prevent recurrence.」

「The head of the Corporate Management Headquarters has been appointed Chief Risk Management Officer, establishing a structure under which that officer builds, operates, and oversees the risk management framework for the entire group. Under the officer’s supervision, risk management committees have been established for each business unit, known as Business Headquarters Risk Management Committees, to prevent risks in each of the company’s businesses from materializing and to promote responses to risks that have materialized. An Internal Control Committee has also been established to oversee the internal control system for the entire group, including these structures.」

「Regarding the governance structure, in addition to measures already implemented, such as increasing the number of outside directors and ensuring diversity, we have implemented measures including strengthening integrated management of group companies, and will continue optimizing the governance structure to suit the group’s growth trajectory.」

「With regard to Basic Policy 3, “Strengthening the Collection and Sharing of Risk Information,” we clarified the standards for reporting risks and established a new external reporting channel. Going forward, we will work to embed the operation of the measures for reorganizing risk information and to make continuous improvements in line with the new business execution structure.」

「With regard to the governance structure, we will also rebuild the organization for future growth by delegating authority for business execution, redefining the allocation of roles and responsibilities, and strengthening the organization's ability to respond to risks that differ among the Group's businesses and regions, while continuing to optimize the governance structure to suit each stage of growth.」

「As measures to strengthen governance, we have also been considering rebuilding the structure for future growth, including delegating authority for business execution, redefining the allocation of roles and responsibilities, and strengthening the organization’s ability to respond to risks that differ by group business and region.」

「With respect to the misconduct issue in China, we recognize challenges in the management systems of the local subsidiary and in support for internal controls by the parent company. Regarding the nonconformity issue, we recognize challenges in the compliance system and in the transmission of information between headquarters functions and business locations. We will continue to formulate and steadily implement fundamental measures to prevent recurrence, while also advancing consideration of measures to strengthen the governance structure.」

「In addition to headquarters, each business location holds a Risk Management Committee meeting once a month, thereby disseminating the matters discussed by the headquarters Risk Management Committee to the business locations. The business-location Risk Management Committees are also responsible for establishing risk management systems within their locations and proposing operational improvements to headquarters.」

「The Risk Management Committee has been established as the body responsible for group-wide risk management, including consolidating risk information, deciding on specific measures, rolling them out horizontally across the group, considering operational improvements, and preventing risks from materializing. The committee meets once a month.」