Internal Control and Compliance

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Internal Control System

DJK has established a “Basic Internal Control Policy” to ensure that the directors perform their duties in compliance with laws and regulations and DJK’s Articles of Incorporation, and to ensure the appropriateness of our operations as a corporation.

From the perspective of further strengthening corporate governance, the directors endeavor to build an effective internal control system and establish a structure for company-wide legal compliance, while directors who are Audit & Supervisory Committee members audit the effectiveness and functioning of the internal control system. If and when necessary, these directors must provide advice or recommend improvements to directors.

Basic Internal Control Policy

  1. Systems to ensure that directors comply with laws and regulations and Articles of Incorporation in the execution of their business duties
    1. In accordance with our business practices policy and code of conduct, the Representative Director shall ensure that business activities are premised on compliance with laws and regulations, the Articles of Incorporation, and corporate ethics by repeatedly reminding the officers and employees of the Company of this policy.
    2. To ensure that the business execution of the Company is carried out in an overall appropriate and sound manner, the directors shall endeavor to establish a practical internal control system and an overall legal compliance system from the perspective of further strengthening the Company’s corporate governance. Furthermore, the directors who are Audit & Supervisory Committee members shall audit the effectiveness and functional capability of the internal control system, and if necessary, submit recommendations for improvements to the Executive Director.
    3. To deal with antisocial forces, the Company shall thoroughly manage information on the elimination and the eradication of such influences in a unified manner. External pressure applied by such antisocial forces shall be reported to the risk management committee for an assessment of its importance and investigation.
  2. System to store and manage information on business execution by directors

    Information on business execution by directors shall be recorded in written form or electronic media (hereinafter referred to as “records”) based on the Company’s filing rules. These records shall be stored and managed so that they can be easily searched in an appropriate and accurate manner. Directors shall have free access to view these written, records.

  3. Systems providing rules to manage possible losses and other matters of DAIICHI JITSUGYO CO., LTD (the “Company”), and the Group

    As a foundation for the risk management system, the Company will determine risk management rules, assign managers to be in charge of different types of risks, and establish a risk management system based on those rules. When a management crisis occurs as defined in these rules, the Company shall set up a task force headed by the Representative Director, alomg with an information liaison team and an outside advisory team including legal counsel. These teams shall enable the Company to respond quickly, prevent further damage, and minimize losses.

  4. Systems to ensure that directors carry out job execution effectively
    1. In the Company’s mid-term management and annual business plans that are built around its corporate principles, each operating section and the DJK Group companies shall work toward achieving the goals of the plan and check whether the business plan is proceeding on schedule on a monthly basis based on performance reports.
    2. In executing their duties, directors shall comply with all of the obligations of the Board of Directors regarding business decisions as set out in the rules of the Board of Directors. Based on the principles of business decision-making, the Company will set up a system that distributes adequate information on items prior to their discussion to all directors and Audit & Supervisory Board members.
    3. As the foundation of the system to ensure that directors carry out the execution of their duties effectively, in principle, the Board of Directors will meet regularly once a month and as otherwise necessary. Important matters regarding the business policy and strategy of the Company will first be discussed by an Executive Committee and passed on for approval by the Board of Directors before execution.
    4. The business execution of decision made by the Board of Directors shall be carried out by directors and executive officers in accordance with the division of duties decided at the start of each fiscal year, with assignments, responsibilities, and execution procedures determined in detail.
  5. Systems for ensuring that directors, executive officers, and employees execute their business duties in accordance with laws and regulations and the Articles of Incorporation
    1. As a foundation for the compliance system, employees will be made thoroughly aware of the code of conduct.
    2. An Internal Audit Division will be established under the supervision of the representative director and will determine intern an Internal Audit Division will be established under the supervision of the Representative Director and will determine internal audit rules and establish, maintain, and improve an internal control system. As necessary, the Division shall carry out audits and training sessions in all business sections.
    3. When a major legal violation or other significant incident regarding compliance has been discovered, the Executive Director shall promptly report it to the representative director and to directors who are Audit & Supervisory Committee members
    4. As an in-house information system to report legal violations or other incidents regarding compliance, the General Manager of the Internal Audit Division will promptly establish an internal communication system where information can be directly reported and operate it in accordance with the internal communication rules.
    5. When Audit & Supervisory Board members recognize that there is a problem with the operation of the Company’s legal compliance system or internal communication system, they may give their opinion and require that improvement measures be formulated.
  6. System to ensure the fairness of operations of the corporate group comprising the parent company and the Group
    1. Based on the management rules for subsidiaries/ associated companies determined by the Company, the DJK Group’s sales results，financial position and other important information shall be reported to the Company regularly and the DJK Group meetings shall be held as necessary.
    2. To ensure the appropriate and fair conduct of the Group companies, each Group company will create a code of conduct and formulate its own related rules based on it.
    3. The Company will appoint a director in charge of business administration to implement optimal management strategies whereby prior consultation with the Company and reporting systems, as well as monitoring structure, if necessary, is in place.
    4. If a director recognizes that a Group company has violated some aspects of the business management or business guidance systems or if a compliance problem is discovered, the director shall report it to the representative director.
    5. DJK Group companies shall be audited by the Internal Audit Division of the Company, and the audit results shall be reported to the Company’s representative director.
  7. System for requesting staff to aid Audit & Supervisory Broad Committee and ensuring the independence of those staff members from the influence of Executive Director and the effectiveness of instructions given to such assisting staff
    1. Audit & Supervisory Board Committee may instruct the Internal Audit Division manager to provide assistance in matters necessary to the auditing process. The staff of the Internal Audit Division who have been instructed by Audit & Supervisory Board Committee to provide assistance regarding matters necessary to the auditing process may not receive other instructions regarding those matters from Executive Director.
    2. Based on meetings with the Audit & Supervisory Board, the Internal Audit Division General Manager will perform internal audits on items requested by Audit & Supervisory Board Committee and report the results to the directors who are Audit & Supervisory Committee members.
  8. System for Executive Director, executive officers, and employees of the Company and the Group to report to Audit & Supervisory Board members of the Company, system for making other reports to Audit & Supervisory Board members, and system to ensure executive audit of the directors who are Audit & Supervisory Committee members
    1. Executive Director, executive officers, and employees of the Company and the Group Company shall report the following important items regarding the Company’s business or influence on business performance to the directors who are Audit & Supervisory Committee members of the Company on a case-by-case basis.
      • Activities of the sections related to the establishment of the internal control system of the Company and the Group Company
      • The principal accounting policies and standards system of the Company and the Group Company and any changes in them
      • Details of announcements on business performance or business forecasts, details of important disclosure items
      • Details of operations and communications of internal communications system
      • Internal management approval documents, applications for different types of transactions, and keeping minutes of meetings as required by the directors who are Audit & Supervisory Committee members
    2. As necessary, the directors who are Audit & Supervisory Committee members may request reports on preceding issues from executive directors, executive officers, and employees of the Company and the Group Company.
    3. The Audit & Supervisory Board and the Representative Director shall establish regular meetings to exchange opinions.
    4. The Company will ensure an appropriate system for reporting to the directors who are Audit & Supervisory Committee member on legal violations and other compliance issues by maintaining the proper application of the in-house communication rules.
    5. Directors who are Audit & Supervisory Committee member will check the objectivity of the work of the Company’s independent certified public accounting firm, and will request reports and explanations of the details of the independent certified public accounting firm's audit and collaborate with the audit firm through periodic exchanges of information and other activities.
    6. Persons who have reported to the directors who are Audit & Supervisory Committee member shall not be treated in a detrimental way because of such reporting. This matter shall be disseminated among DJK and DJK Group’s directors and employees.
    7. When the directors who are Audit & Supervisory Committee member request the prepayment of expenses to be incurred in the execution of their duties, etc., such shall be treated promptly except in cases where such expenses are determined to be unnecessary for their execution of duties.

Status of the internal control system

The status of our internal control system is as follows.

  1. On the compliance front, a business practices policy, a code of conduct, whistleblowing rules, and other relevant notices were formulated and announced internally and highlighted in the President’s policy messages and compliance training sessions including e-learning for all officers and employees. Internal audits are carried out by the Internal Audit Division regularly in accordance with internal audit rules. All these initiatives are designed to ensure that directors, executive officers, or employees will execute their duties in compliance with applicable laws and regulations and the Articles of Incorporation.
  2. For risk management purposes, we have established risk management rules that define management systems for preventing possible risks and ways of responding to them as they occur. These rules also require that a risk management committee be organized to manage risks in an effective and efficient manner, and the committee chairperson reports a summary of risk management initiatives to the Board of Directors where appropriate and ensure risk management materials are known and understood by officers and employees.
  3. We have several information management rules, including document management rules, which specify document management and required retention periods; information system management rules, which address information system management and operation; and information security management rules, which provide for the establishment and proper administration of information security management schemes. Based on these rules, we developed a system for the retention and management of information concerning the execution of duties by directors, executive officers, or employees.
  4. Group companies are supervised and monitored in accordance with affiliated companies’ management rules under the leadership of the director in charge of affiliated companies. Group companies also established codes of conduct, rules on authority to approve transactions, accounting rules, and so forth to ensure proper business execution in the business group.

Compliance

As a foundation for the compliance system, employees will be made thoroughly aware of the code of conduct. An Internal Audit Division will be established under the supervision of the Representative Director and will determine internal audit rules and establish, maintain, and improve an internal control system. As necessary, the Division shall carry out audits and training sessions in all business sections. As an in-house information system to report legal violations or other incidents regarding compliance, the General Manager of the Internal Audit Division will promptly establish an internal communication system where information can be directly reported and operate it in accordance with the internal communication rules.

Compliance Initiatives at Group Companies

Domestic affiliates (DAIICHI MECHA-TECH CORPORATION, DAIICHI JITSUGYO VISWILL CO., LTD., and DJ-WAVE Engineering Co., Ltd.) promote compliance in accordance with the DJK Group Code of Conduct. Overseas affiliates also work to strengthen compliance in line with the same Code of Conduct, while building and maintaining appropriate and globally applicable compliance systems tailored to the circumstances in Europe, the Americas, China, and Asia.

Basic Philosophy on the Exclusion of Antisocial Forces, and Current Status

Basic philosophy

Our basic internal control policy and code of conduct state that we will deal with antisocial forces with a firm resolve to exclude any and all connections with them.

Status of our system for excluding antisocial forces

  1. Assignment of primary responsibility for responses and for protection against unjust demands
    At our company, primary responsibility for dealing with unjust demands is assigned to the Administration Department of the head office, and the general manager of the Administration Division is responsible for protection against unjust demands.
  2. Coordination with outside specialized institutions
    Responsible for dealing with unjust demands, the general affairs group of the head office is a member of the Council against Special Forces, working in close coordination with the competent police station.
  3. Collection and management of information concerning antisocial forces
    We participate vigorously in seminars and regular block meetings held by Tokyo Metropolitan Citizens’ Center for Excluding Organized Crime Groups and the Council against Special Forces to collect and manage information concerning antisocial forces.
  4. Development of response manual
    Our code of conduct specifies the way our officers and employees should respond to antisocial forces.
  5. Training
    Compliance training courses provided for all officers and employees include explanation and guidance about the code of conduct. Other training sessions are held where necessary on the basis of information collected from specialized institutions and at seminars.
  6. Political Contributions
    In accordance with the Political Funds Control Act, we do not make political contributions.