Internal Control｜Governance｜Sustainability｜SUMITOMO SEIKA CHEMICALS CO.,LTD.

Internal Control

We have formulated a Fundamental Policy on Internal Control System Development to ensure risk management and compliance, to manage group companies and information, and to ensure the suitability of other tasks. Based on this policy, we are constructing such a system. The president and directors who are responsible for business execution will be in charge of the specific efforts to develop and operate the internal control system, in line with their positions. Through post-event checks by internal auditors and the running of the internal reporting system for legal breaches or unsuitable actions, we are ensuring that the internal control system’s development and operations are appropriate. The Internal Control Committee periodically monitors the development and operation of the system overall, including of the above. The Board of Directors, meanwhile, oversees the development and operation of the internal control system and reviews the fundamental policy to respond to changes in circumstances. Through these steps, it is working to guarantee and enhance the effectiveness of our internal control system.

Fundamental Policy on Internal Control System Development

The Company's Board of Directors has resolved the following Fundamental Policy on Internal Control System Development.

In order to ensure that business of the Group is conducted properly in accordance with the Corporate Mission, the Company shall establish the following system (internal control system) in accordance with the Companies Act and the Ordinance for Enforcement of the Companies Act.
The president and each director in charge of business execution shall be responsible for the specific development and operation of the internal control system in accordance with their duties, and the Internal Control Committee shall periodically monitor the status of the system.
The Board of Directors shall ensure and improve the effectiveness of the internal control system by supervising the development and operation of the internal control system and by reviewing this fundamental policy in response to changes in circumstances.

A system for ensuring that the execution of duties performed by directors and employees of the Company and its group companies complies with laws, regulations, and the Articles of Incorporation
1. Establish a code of conduct for the Company and the Group, and ensure that all officers and employees act in accordance with the code. If a material violation of laws, regulations, or the articles of incorporation is discovered, a report shall be made to the Audit and Supervisory Committee and the Board of Directors. In addition, for violations that do not fall under these categories, a prescribed report shall also be made.
2. Establish specific procedures for the proper and efficient execution of business operations, and execute duties in accordance with such procedures.
3. To ensure compliance, education and training shall be conducted within the Company and its group companies, and efforts shall be made to promote and thoroughly enforce compliance throughout the entire Group.
4. Establish a Compliance Committee to promote and supervise compliance within the Company and the Group.
5. Establish an internal reporting system so that officers and employees of the Company and its group companies can directly report compliance violations or possible violations to the Whistleblower Help Desk (inside or outside the Company).
6. Establish a dedicated department in charge of internal audit for the execution of business operations of the Company and its group companies. If problems are found, the department implements measures for improvement.
7. Eliminate all relationships, including business relationships, with anti-social forces.
8. To ensure that the duties executed by the directors and employees of the group companies comply with laws and the Articles of Incorporation, the Company shall manage and supervise the execution of such duties.
A system for the retention and management of information related to the execution of duties by the Company’s directors
The Company shall establish management rules for information pertaining to the execution of duties and shall retain and manage such information according to the nature and importance of the information in consideration of the laws and these rules.
A system and rules for managing the risk of loss for the Company and the Group
1. Establish regulations regarding risk management during normal times and procedures for emergencies such as disasters or accidents.
2. Designate a department to promote risk management for the Company and its group companies, and implement initiatives to prevent the occurrence of emergencies and to minimize damage, loss, and disadvantages if such events occur.
3. Establish a Risk Committee to oversee risk management within the Company and its Group.
4. Develop a reporting system to appropriately report information related to management risks of the Company to the Board of Directors and other relevant bodies.
5. The Company shall regularly review the operation status of the above management system and undertake improvements if any issues regarding its operation or effectiveness are identified.
A system to ensure efficient execution of duties by directors of the Company and the Group
1. The Company shall establish rules that clearly define the authority and responsibilities of each organization under the control of the directors to ensure the efficient execution of duties by the directors of the Company and the Group.
2. The Company shall establish an IT system for easy and quick access to management information for the entire Group to improve the efficiency of management.
System for reporting matters related to the execution of duties by directors, etc. of the Company's Group to the Company, and other systems to ensure the proper operation of the Company's Group business
1. Standards and procedures regarding the approval by the Company and reporting to the Company in connection with the execution of duties at the Company’s group companies shall be established, and the Company shall provide guidance on such approvals and reports. In addition, for important management matters at each group company, proposal criteria shall be established, and based on these, deliberations shall be held by the Company’s Board of Directors and other relevant bodies.
2. The Company shall establish departments and systems responsible for managing its group companies in order to ensure the proper operation of the businesses of the group companies.
Matters concerning employees assisting the Audit and Supervisory Committee, matters concerning the independence of such employees from directors (excluding directors who are members of the Audit and Supervisory Committee), and matters concerning the effectiveness of instructions given to such employees by the Audit and Supervisory Committee
The Company shall establish rules for the appointment of assistant employees and for ensuring their independence, as well as rules for ensuring the effectiveness of the Audit Committee’s instructions to such assistant employees.
A system for reporting to the Audit and Supervisory Committee
1. Directors and employees of the Company and the Group shall promptly report to the Audit and Supervisory Committee when requested to report matters necessary for audits by the Committee or when reporting is required by laws and regulations.
2. The plans, progress of implementation, and results of internal audits conducted by the department in charge of internal audits shall be reported to the Audit and Supervisory Committee.
3. Establish regulations stipulating that no unfavorable treatment shall be given to those who have made reports to the Audit and Supervisory Committee on the grounds of having made such reports.
Matters concerning the policy for processing of expenses, etc., incurred in the execution of duties by members of the Audit and Supervisory Committee
The Company shall budget for expenses related to the execution of duties by members of the Audit and Supervisory Committee and shall bear such expenses within an appropriate range.
Other systems to ensure the effective implementation of audits by the Audit and Supervisory Committee
1. Members of the Audit and Supervisory Committee shall be entitled to attend important internal meetings and to inspect the minutes of important meetings, approvals, contracts, and other information necessary for audits by the Audit and Supervisory Committee.
2. Regular meetings shall be held for exchange of opinions between the President and the Audit and Supervisory Committee members.

Group Company Management

For group companies, business-related issues are handled by business departments that have a close relationship with the relevant business area, while compliance matters are under the purview of the legal department, and the corporate planning and accounting department deals with other general operational matters. In this way, each related department supports and manages our group companies.