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Sustainability Basic Policy for Internal Control

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  4. Basic Policy for Internal Control
  1. Establishing a system for ensuring that the execution of duties by Group Directors, etc. (including persons equivalent to directors of the Company's subsidiaries) and employees is in compliance with all laws, regulations, and the Articles of Incorporation
    • The Ryoyo Ryosan Group Code of Conduct has been established as a standard for Directors, etc. and employees of the Group to act in compliance with relevant laws, the Articles of Incorporation and social norms. To ensure thorough compliance, the CSR Department oversees compliance initiatives group-wide.
    • By treating the development of an internal control system as an important management issue, the Group has established the following rules to ensure appropriate organizational management: Board of Directors Regulations, Division of Duties Regulations, Job Authority Regulations, and Approval Regulations.
    • Through regular meetings of the Board of Directors, the members mutually verify individual progress in the execution of duties.
    • The Internal Auditing Department regularly checks the appropriateness and efficiency of operations conducted by each department, and, in cooperation with the CSR Department, audits their compliance status. These activities are regularly and appropriately reported directly to the Representative Director, President & Chief Executive Officer, the Board of Directors, and the Audit and Supervisory Committee.
    • A compliance hotline has been established as a means for employees to directly submit information regarding internal activities that may infringe upon laws and regulations.
    • The Group takes a resolute stance against anti-social forces (organized crime) and groups that threaten the order and safety of civil society. It also works closely with the police and specialized lawyers, and ensures that the Group has no ties to such individuals or groups.
  2. Creating a system for the storage and management of information related to the execution of duties by the Company's Directors
    • Information pertaining to the duties of Directors shall be stored and managed in accordance with the "Document Management Regulations" and the "Information Security Management Regulations," with Directors and the Audit and Supervisory Committee Members able to access these documents at all times.
  3. Establishing rules and other systems for containing the risk of damages to the Group
    • For risks related to the environment, disasters, and information security, these risks are appropriately managed in accordance with the Disaster Prevention Measures Regulations and Information Security Management Regulations.
    • Operational risks of the Group are appropriately managed in accordance with the Subsidiary Management Regulations and regulations related to the operational management of subsidiaries.
    • In the event that an emergency related to the aforementioned risks, etc. occurs, the Group will respond appropriately under a crisis management system in accordance with the Crisis Management Manual and Disaster Countermeasures Regulations, etc.
  4. Maintaining a system for ensuring the efficient execution of duties by Group Directors, etc.
    • The Board of Directors decides matters in line with laws and regulations and the Articles of Incorporation, as well as important matters related to management (including important matters concerning subsidiaries). The number of directors is set appropriately so that decisions can be made quickly and accurately based on sufficient discussion, thereby enhancing the board's function.
    • The Board of Directors is a management decision-making and supervisory body, operating and making decisions separately from the business execution function. This system enables flexible business execution by the Representative Director, President & Chief Executive Officer, Representative Director, Executive Vice President, and Executive Officers.
    • In order to enhance objectivity in the nomination and remuneration for Directors and Executive Officers, the Group has established a Nomination and Remuneration Committee. A majority of the members are independent Outside Directors, and the committee reports the results of its deliberations to the Board of Directors.
  5. Setting up a system for ensuring the appropriateness of operations undertaken by the corporate group consisting of the Company and its subsidiaries and for facilitating reporting to the Company with regard to the execution of duties by directors, etc. of subsidiaries
    • The Group has established Subsidiary Management Regulations. Subsidiaries are obliged to report their financial status and other important matters to the Company on a regular basis, and the companies within the Group must work together to ensure beneficial cooperation and sound business development.
    • In order to ensure the reliability of financial reporting in accordance with the provisions of Japan's Financial Instruments and Exchange Act, the Group has established Regulations of Internal Control Over Financial Reporting. The Group has also implemented an internal control system, and regularly evaluates its effectiveness.
    • Working with the departments in charge of operations at each Group company, the Internal Control Manager ascertains the status of internal controls and provides guidance for improvement, as necessary.
    • The Internal Auditing Department regularly conducts internal audits of each Group company, checks the status of compliance with laws and regulations, and provides necessary guidance.
  6. Establishing a framework concerning employees who should assist the Audit and Supervisory Committee Members in its duties, the independence of these employees from Directors, and ensuring the effectiveness of the orders issued to such employees by the Audit and Supervisory Committee Members
    • To assist the Audit and Supervisory Committee in its duties, an Audit and Supervisory Committee Office has been established, and employees to assist the Audit and Supervisory Committee are assigned.
    • Employees assisting the Audit and Supervisory Committee perform their duties in accordance with the instructions of the Audit and Supervisory Committee and do not receive instructions from Directors regarding the performance of such duties.
    • When instructed by the Audit and Supervisory Committee, the employees mentioned in the preceding item shall prioritize the duties related to such instructions over other duties.
  7. Implementing a system concerning reports submitted by Directors and employees of the Company and by Directors, Corporate Auditors, and employees of subsidiaries to the Audit and Supervisory Committee of the Company; other systems concerning reports submitted to the Audit and Supervisory Committee
    • The directors and employees of the Company and the directors, corporate auditors, and employees of its subsidiaries must promptly report to the Audit and Supervisory Committee any matters, in addition to statutory matters, that could cause significant damage to the Group, along with important management information, the status of internal audits, and the content and status of reports made using the Compliance Hotline, and matters for which the Audit and Supervisory Committee has requested reports and submission of materials.
  8. System for ensuring that persons who have made reports as described in the preceding item are not subjected to disadvantageous treatment for having made such reports
    • The Code of Conduct and Internal Reporting Regulations stipulate that under no circumstances shall a person who has reported to the Audit and Supervisory Committee be subjected to disadvantageous treatment for having made such a report.
  9. Establishing a process related to policies concerning the procedures through which the Audit and Supervisory Committee Members may receive reimbursement, prior to or after the fact, for expenses incurred during the execution of their duties as well as the treatment of other expenses and liabilities incurred as part of the execution of duties
    • With regard to various expenses incurred by the Audit and Supervisory Committee Members in the execution of their duties, a necessary budget is allocated to ensure the effectiveness of audits.
    • When an Audit and Supervisory Committee Member requests advance payment or similar measure for expenses related to the execution of their duties, the payment shall be processed in accordance with that request, except in cases where such payment is deemed unnecessary for the performance of duties by the Audit and Supervisory Committee Member concerned.
  10. Creating other systems for ensuring effective auditing by the Audit and Supervisory Committee Members
    • Effective audits are ensured by appointing Audit and Supervisory Committee Members with respective expertise.
    • The Audit and Supervisory Committee Members hold regular Audit and Supervisory Committee meetings and also hold extraordinary meetings as necessary.
    • At Audit and Supervisory Committee meetings, the Audit and Supervisory Committee Members report on the status and results of audits, conduct necessary deliberations, receive reports on accounting audits from the Accounting Auditor, and exchange opinions.

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