In order to secure the appropriateness of the SMS Group’s operations and build the business foundation toward realization of the SMS Group mission, the Board of Directors resolved to set forth the “Basic Policy on Internal Control” that follows below, taking into consideration related laws and regulations. In addition to constantly evaluating the status of the establishment and operation of the internal control system based on this basic policy, and putting in place the required improvement measures, the basic policy itself will be revised in a timely manner in response to changes in the business environment, striving to achieve a more efficacious establishment and operation of an internal control system.
(Last update: resolved by the Board of Directors on June 24, 2016)
System for ensuring that execution of duties by Directors and employees of the Company complies with laws and regulations as well as the Articles of Incorporation
1. Compliance with laws and regulations, the Articles of Incorporation and societal norms is placed at the core of management, and in order to achieve thorough and continued improvement within the Company and its subsidiaries (hereinafter, the “Group”), a compliance system will be maintained and improved, determining policy related to compliance with laws and regulations, fostering a sense of ethics, and group-wide risk management.
2. For the purpose of early detection and correction of violations of laws and regulations, and other compliance issues, the Group shall establish an internal reporting system (whistle-blowing system) with an internal reporting contact window and legal counsel law office designated to receive information, aiming at early detection or prevention of issues.
3. The Company has established rules related to risk management including compliance, and the department responsible for risk management oversees all organizations handling compliance for the Group. The Executive Committee conducts decision-making related to compliance activities and details are reported regularly to the Board of Directors.
4. The Internal Audit Department audits the status of compliance of laws and regulations, fostering a sense of ethics and group-wide risk management, and reports its activities to the Board of Directors and the Audit & Supervisory Committee.
5. The entire Group takes an unwavering stance toward completely cutting off relationships with anti-social forces and organizations that threaten societal order and safety.
System for storage and administration of information related to execution of duties by Directors of the Company
1. The Company has established rules for the type of documents, period of retention and method of administration for information related to the execution of duties of Directors and its administration, and after recording them in written or electronic media, shall store them along with materials used in management decisions.
2. In preparation for the case of a request from Directors, the Company shall store and maintain records in an appropriate, reliable, and easily searchable state, depending on the type and characteristics of the information, and shall maintain them in a viewable state.
Provisions and other measures related to crisis management for loss at the Company
1. The Company has defined rules on the policy for establishing and building a risk management system which covers business activities of the Group, and recognizes risks of business activities based on these rules. The Company shall also conduct risk management according to importance, with a view toward impact and potential for occurrence.
2. The department responsible for risk management oversees all organizations handling risk management for the Group, with decision-making related to risk management activities conducted at the Executive Committee, and details are reported regularly to the Board of Directors.
3. The Company has established a countermeasure policy for the Group in the case of a natural disaster, accident or other critical event, and by determining the level of the crisis based on the policy and carrying out a rapid response, prevents damage from growing and minimizes losses.
System to ensure that execution of duties by Directors of the Company is carried out efficiently
1. The Company has established regulations and operational guidelines for each type of major committee meeting including the Board of Directors, as well as for segregation of duties, and limits of authority, thereby clarifying the duties, authority and responsibilities of Directors. Also, it defines matters to be discussed by the Board of Directors, delegating authority to other committee meetings and those in charge of each department, targeting efficient operation of the execution of duties overall.
2. The Group supervises and verifies important decision-making concerning the businesses and execution of operations through its Board of Directors. Also, through regular meetings on the progress of operations with each department, Directors who are not Audit & Supervisory Committee members conduct swift sharing of information, implementing appropriate management decisions.
3. Overall strategy of the Group is decided by the Board of Directors, and each department and subsidiary takes into account Group strategy in formulating their own strategies. Also, through regular monitoring of the status of progress by the Board of Directors, execution of strategy is secured.
4. In addition to the Board of Directors meeting, the Company regularly holds meetings of the Executive Committee, comprised of Directors who are not Audit & Supervisory Committee members, and managerial staff involved in the execution of key operations, aimed at sharing business information, as well as debating important matters related to the execution of operations, thereby carrying out nimble decision-making and advancing management efficiency.
5. The corporate functional departments provide support to business departments in executing strategy as well as decision-making by the Board of Directors, in such areas as business administration, risk management, human resources management and operations management. A similar structure is being built in key subsidiaries, aimed at optimizing support for respective business strategy.
System to ensure the soundness and propriety of operations of the Company and its subsidiaries
1. The Company has established rules for policy regarding business administration of subsidiaries, under which important matters related to the business and financial situation of subsidiaries must be reported to the Company, and important decision-making must be made with the approval of the Company, thereby realizing appropriate business administration of subsidiaries.
2. The Company has established departments responsible for the administration of subsidiaries, and conducts administration through cooperation with persons in charge of administration of subsidiaries. Also, the Company collects, organizes and retains the latest information regarding subsidiaries, and provides the information to related parties as required.
3. The internal reporting contact window set up by the Company can be used by all Directors and employees in the domestic Group, aimed at early detection or prevention of violations of laws and regulations and other compliance problems of subsidiaries.
4. The Internal Audit Department conducts audits regarding administration of subsidiaries and operations activities.
Matters related to Directors and employees that assist duties of the Audit & Supervisory Committee, matters related to their independence from Directors who are not Audit & Supervisory Committee members, and system to ensure effectiveness of the Audit & Supervisory Committee’s instruction towards those assistants
1. The Internal Audit Department assists duties of the Audit & Supervisory Committee.
2. In order to ensure independence of the Internal Audit Department member who assists duties of the Audit & Supervisory Committee, the decision requiring transfer of said personnel must be made with prior consent from the the Audit & Supervisory Committee.
3. An assistant employee who receives instructions related to audit work from the Audit & Supervisory Committee is not subject to instructions from Directors who are not Audit & Supervisory Committee members with respect to those instructions.
A reporting framework for directors of the Group to the Audit & Supervisory Committee of the Company, and other reporting to the Audit & Supervisory Committee of the Company
1. In addition to statutory matters, if matters that could have a critical impact on the business, matters thought to be in violation of laws and regulations or the Articles of Incorporation, matters that could result in a substantial loss to the Company, or other matters that must be reported to the Audit & Supervisory Committee occur, the Group’s Directors and employees, Audit & Supervisory Board Members of subsidiaries must report them promptly to the Audit & Supervisory Committee, and the Corporate Department shall provide support to facilitate smooth reporting.
2. The Internal Audit Department reports result of Internal Audit and circumstance of internal reporting contact to the Audit & Supervisory Committee regularly.
Systems for ensuring that persons who report to the Audit & Supervisory Committee are not treated disadvantageously because of their reporting
1. The Company stipulates explicitly in the “Rules of Whistleblower Protection” that under no circumstances shall the Company invoke disadvantageous measures such as dismissal or re-assignment against a person who has made a report to the Audit & Supervisory Committee, citing the report as the reason for the disciplinary action.
Matters regarding policies related to processing expenses/liabilities and prepayment/reimbursement of expenses arising related to the execution of duties of Audit & Supervisory Committee
1. Regarding expenses arising related to the execution of duties of Audit & Supervisory Committee Members and the Audit & Supervisory Committee, normal audit expenditures are included in the initial budget, and unplanned expenditures, with the exception of those deemed to be clearly not required for the execution of audit duties, shall be handled quickly through advances and expense claims.
System to ensure that audits by the Audit & Supervisory Committee are carried out efficiently
1. The Audit & Supervisory Committee Members has the authority to attend major meetings as well as meetings of the Board of Directors, may access important documents regarding the execution of duties such as approval documents and request explanation by Directors who are not Audit & Supervisory Committee members and employees.
2. The Audit & Supervisory Committee shall conduct audits in cooperation with the Internal Audit Department. Also, the Audit & Supervisory Committee shall hold regular meetings with CEO and accounting auditors, exchanging opinions and information.