Internal Control System

Fundamental Stance and Status of Measures Regarding Internal Control System

The Company’s fundamental stance is to carry out management with a high level of fairness and transparency, based on its corporate philosophy, “Through Motivation Engineering, we provide opportunities to transform organizations and individuals and create a more meaningful society.” Based on this philosophy, the Company works to strengthen its internal control system.

1. Systems for ensuring that execution of duties by directors and employees complies with laws and regulations and the Articles of Incorporation

Audit & Supervisory Board members attend important meetings, including those of the Board of Directors and the Group Management Committee, monitor the execution of duties by directors, and provide opinions on compliance.

The internal auditor implements audits of business processes at each business division and Group company, works to identify and prevent acts of misconduct, and provides advice on process improvement.

2. Systems related to storage and management of information pertaining to the execution of duties by directors

As part of appropriate and efficient business operation, information including that pertaining to the execution of duties by directors (documents including related materials and information recorded on electronic media) is stored and managed properly and reliably in accordance with laws and regulations, as well as rules including document management rules and information system management rules.

3. Rules and other systems related to management of risk of loss

The System Design Office leads measures to review business processes, enhance information systems, ensure employees are given thorough training, and develop rules and manuals as necessary.

The internal auditor implements audits of the status of risk management, reports the results to the representative directors and provides advice on improvement to the business division being audited.

4. Systems for ensuring that execution of duties by directors is performed efficiently

Board of Directors meetings are held once a month in principle, with extraordinary meetings as necessary. Decisions are made on important matters and the status of execution of duties is shared.

Group Management Committee meetings are held twice a month in principle. The committee’s structure enables rapid decision-making and flexible organizational responses.

Rules are in place delineating decision-making authority, including rules for the segregation of duties and authority.

5. Systems for ensuring propriety of business activities of the corporate group comprised of the parent company and subsidiary companies

Group Management Committee meetings are held twice a month in principle. Relevant personnel attend as necessary to report on matters relating to the execution of duties.

Group Management Committee meetings are attended by presidents and other relevant personnel of subsidiaries in order to manage the risk of loss at subsidiary companies. Information is shared on Company-related risks, including matters relating to compliance. Appropriate measures are taken as necessary.

To ensure the effective execution of duties by the directors and employees of subsidiary companies, Board of Directors meetings are held once a month in principle at subsidiaries, with extraordinary meetings as necessary. Decisions are made on important matters and the status of execution of duties is shared. Furthermore, rules are in place delineating decision-making authority at subsidiaries, including rules for the segregation of duties and authority.

To ensure that the execution of duties by directors and employees of subsidiary companies complies with laws and regulations and the Articles of Incorporation, the System Design Office leads measures to review business processes, enhance information systems, ensure employees are given thorough training, and develop rules and manuals as necessary. Audit & Supervisory Board members and the internal auditor implement audits of business processes at each business division and Group company and provide advice on process improvement to ensure compliance with laws and regulations and the Articles of Incorporation.

6. Systems related to employees appointed to assist with duties of Audit & Supervisory Board members

The System Design Office assists Audit & Supervisory Board members as appropriate, and appoints employees to assist with duties upon request.

7. Matters related to ensuring that employees appointed to assist with duties of Audit & Supervisory Board members act independently of directors

To ensure that employees appointed to assist with the duties of Audit & Supervisory Board members act independently of directors, authorization of Audit & Supervisory Board members is required for personnel matters relating to those employees, including appointment and reassignment.

8. Matters related to ensuring effectiveness of instructions to employees appointed to assist with duties of Audit & Supervisory Board members

Should employees be appointed to assist with the duties of Audit & Supervisory Board members, supervisory authority belongs exclusively with Audit & Supervisory Board members, and those employees will not be subject to instructions or orders from directors or managers.

9. Systems related to reporting to Audit & Supervisory Board members

A system is in place that enables directors or employees to report their concerns directly to Audit & Supervisory Board members, including the discovery of misconduct or other violation of laws and regulations.

A system is also in place that enables directors, Audit & Supervisory Board members and employees of subsidiaries, or persons to whom a report by the aforementioned parties has been made, to report their concerns directly to Audit & Supervisory Board members, including the discovery within the Company of acts constituting misconduct or other violation of laws and regulations.

10. Systems for ensuring persons making reports do not receive detrimental treatment as a consequence of reporting as set forth in the preceding item

Persons making reports as set forth in the preceding item that have made a report to Audit & Supervisory Board members will not receive detrimental treatment. The directors, Audit & Supervisory Board members and employees of the Company and subsidiaries have been notified of this policy.

11. Matters regarding policies related to processing of expenses/liabilities and advancement/reimbursement of expenses arising in the execution of duties by Audit & Supervisory Board members

Should the Company receive a request for an advance of expenses, etc. arising in the execution of duties by Audit & Supervisory Board members in accordance with Article 388 of the Companies Act, then the Company will promptly pay those expenses or liabilities, except in cases where the expense or liability is not clearly necessary for the execution of duties by Audit & Supervisory Board members.

12. Other systems for ensuring that audits by the Audit & Supervisory Board are performed effectively

The Company endeavors to ensure legal and appropriate audits through the appointment of outside Audit & Supervisory Board members. Moreover, Audit & Supervisory Board members work to ensure the effectiveness of audits by coordinating with the internal auditor and the accounting auditor.

Fundamental Stance and Status of Measures with Regard to Preventing Relationships with Antisocial Forces

The Company does not associate with antisocial forces that threaten the order or safety of civil society, and a firm stance is adopted throughout the Group, prohibiting any dealings whatsoever with such organizations, groups or individuals. In addition to taking preventative measures to eliminate all contact with antisocial forces, the Company rejects wrongful demands made by such forces and takes legal action when necessary.

The Group adopts a unified approach to preventing relationships with antisocial forces, with the System Design Office coordinating responses. Furthermore, the Group implements measures such as strengthening coordination with law enforcement and other public authorities, as well as attorneys and other external specialist organizations. Measures include the exchange of information and participation in various training programs, and spreading awareness within the Group by establishing detailed manuals.

Corporate Governance

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