ITO EN Group Basic Policy for Internal Control System

1. Basic Policy for Business Operation

The Company’s management priority is to fulfill its corporate social responsibility by actively cooperating with the government, local communities, consumers, shareholders, retailers, suppliers, financial institutions, employees and other stakeholders, aiming for sustained corporate growth and the improvement of corporate value under the Group's Management Principle of “Always Putting the Customer First.”

We also use the ITO EN Group Code of Conduct (link below), which applies the abovementioned management principle to specific conduct, as guidelines for our day-to-day business operations. The ITO EN Group Code of Conduct breaks down our relationship with laws and regulations, the Founding Charter and internal rules into eight tenets and we use these as a code of conduct for the officers and employees of the ITO EN Group.

The Policy shall apply to all officers and employees (including part-time workers, contract workers and dispatched workers) in the Group.

• Group Code of Conduct

2. Systems to ensure that the Group’s Directors and employees execute duties in compliance with laws and regulations and the Articles of Incorporation

1. The Company's basic policy is that the Board of Directors passes a resolution on the ITO EN Group Code of Conduct pertaining to the compliance system to ensure that the Group's Directors and employees, etc. take action in compliance with laws and regulations, the Articles of Incorporation and corporate ethics.

2. The Company increases the effectiveness of the compliance system of the ITO EN Group based on the ITO EN Group Code of Conduct by establishing the Compliance Committee chaired by the Director appointed by the President and establishing an administrative office for the Compliance Committee in the Compliance Office of the Legal Department.

3. The Company establishes a whistleblowing desk inside and outside the company as a means for the employees, etc. to be able to directly provide information on acts that run counter to laws and regulations and compliance.

3. Systems to store and manage information on the execution of duties by Directors

1. During the storage period of information on the execution of duties by Directors that is provided for by laws and regulations and internal regulations, the Company records and stores the information in documents or electromagnetic media in a searchable state and maintains a state to allow the Directors to inspect the information.

2. Unless otherwise provided for by laws and regulations, the storage period of documents above shall be dependent on the type of each document specified by the Documents Handling Regulations.

4. Regulations and other systems for managing loss risks of the Group

1. The Company has set out Risk Management Regulations and established the Risk Management Committee, which is chaired by the President, to develop the Group's risk management system.

2. The Risk Management Committee gains an understanding of information about risks faced by the Group and the status of action taken to address them, identifies and evaluates significant risks, and reports to the Board of Directors on risk management including action taken to avoid and mitigate risks.

3. The Company establishes a committee or other body responsible for each risk category, such as compliance, sustainability, quality and disaster management, and develops a system for achieving cooperation between these bodies and the Risk Management Committee.

4. The Company develops a system to minimize damages when an unforeseen situation occurs by establishing a task force headed by the President to prevent the escalation of damages by taking prompt measures.

5. System to ensure the efficient execution of duties by the directors

1. The Board of Directors and the Executive Board are the basis of these systems and hold a meeting once a month, in principle, and on an ad hoc basis, as needed.

2. Each department in charge executes operations based on decisions of the Board of Directors according to the division of duties and the Authority Regulations, and the Directors in charge check the execution of operations as needed.

6. Systems to ensure the adequacy of operations in the ITO EN Group

1. The Company has established the ITO EN Group Code of Conduct and other standards to ensure the compliance system in the Group companies and maintains a whistleblowing desk inside and outside the company for the employees, etc. to provide information on acts, such as a violation of the law by the Company or any Group company, directly to the Company.

2. For the business management of the Group companies, the Company has established management systems and management standards in the Affiliates Management Regulations, and reports on and examines the business management of Group companies through regular meetings and other means. Important matters are determined by resolution of the Board of Directors of the Company.

3. The Internal Auditing Department conducts audits on the internal control system of the Company and the Group companies and reports the audit results to the Representative Director and President, the Board of Directors and the Audit & Supervisory Committee.

7. Matters concerning employees who are to assist the Audit and Supervisory Committee in its duties, matters concerning the independence of such employees from Directors who are not Audit and Supervisory Committee Members, and matters for ensuring the effectiveness of orders issued to employees by the Audit and Supervisory Committee

1. The Company assigns Audit and Supervisory Committee staff needed to assist the Audit and Supervisory Committee in its duties to the Internal Auditing Department.

2. Audit and Supervisory Committee staff assist the Audit and Supervisory Committee in its duties under the direction and orders of the Audit and Supervisory Committee and do not take direction or orders from Directors (excludes Directors who are Audit and Supervisory Committee members) and others.

3. The Company ensures the independence of Audit and Supervisory Committee staff from Directors who are not Audit and Supervisory Committee members by obtaining the consent of the Audit and Supervisory Committee to the appointment, evaluation, transfer and other personnel matters of the Audit and Supervisory Committee staff. 

8. System for the Group's Directors and employees to report to the Audit and Supervisory Committee and other systems for reporting to the Audit and Supervisory Committee

1. The Group's Directors and employees appropriately report important issues that could have a major impact on the execution of operations and the management to Audit and Supervisory Committee.

2. The Audit and Supervisory Committee may ask the Group's Directors and employees for a report, as needed.

3. The Company prohibits the disadvantageous treatment of the Group's Directors and employees who make a report to Audit and Supervisory Board Members on the grounds that they made such a report. 

9. Other systems for ensuring that audits by the Audit & Supervisory Committee are carried out effectively

1. The Audit and Supervisory Committee exchanges information and opinions with the Representative Director and President, the Internal Auditing Department and the accounting auditor to enhance their audit work.

2. When the Audit and Supervisory Committee recognizes that there is a problem in the development and operation of the Company's internal systems, it may express opinions at a meeting of the Board of Directors and ask for the implementation and reporting of improvement measures.

3. The Company will secure a system under which any violation of laws and regulations and other compliance problems in the Group are reported appropriately to Audit and Supervisory Committee.

4. When Audit and Supervisory Committee requests the advance payment of expenses necessary for the execution of their duties, the Company appropriately processes the expenses or payables. 5. If there is any inconsistency between the directions issued by the Representative Director and President and the directions issued by the Audit and Supervisory Committee, the Company gives precedence to the latter to ensure the independence of audits and maintain an effective and efficient audit system.