Internal control system
Last updated: June 24, 2022
Basic concept of the internal control system
Our internal control system is a comprehensive framework covering the Corporate Philosophy, Articles of Incorporation, Board of Directors Regulations, and other standards, rules, regulations, guidelines, and detailed operating rules ("rules and regulations" hereinafter). Accordingly, it is the basic policy of the Company Board of Directors to ensure compliance with these rules and regulations, keep abreast of and adapt to changes in laws, regulations, and social conditions affecting our business activities, and review and revise the Company's systems and rules and regulations as necessary from the perspective of business execution efficiency to realize the spirit and objectives of the above laws and regulations.
State of development of the internal control system
Outlined below is the current status of the Company's systems and rules and regulations, with regard to the systems described in Article 362, Paragraph 4, Item 6 of the Companies Act and the items of Article 100, Paragraph 1 of the Regulations for Enforcement of the Companies Act.
(1) System for ensuring that the execution of the duties of Directors and employees conforms to laws, regulations, and the Articles of Incorporation
a. In accordance with applicable rules, important matters related to management of the Company and Group companies are determined by the Board of Directors after policy deliberations in management meetings. Decisions on important investments are made by the Board of Directors in accordance with the specified review process and applicable rules.
b. Business execution is implemented by the Director in charge and other authorized personnel under the leadership of the President & CEO, in compliance with ethics laws and regulations and in accordance with organizational authority and the business rules of each section.
c. The internal audit section audits the status of compliance with ethics laws and regulations.(2) System for ensuring that the duties of Directors are efficiently executed
a. In addition to substantial and efficient discussions by the Board of Directors and other meeting bodies, we examine business execution from the perspectives of efficacy and efficiency, and review rules on a continual basis in management meetings and on other occasions.
b. The internal audit section audits business execution efficacy and efficiency.(3) System related to retention and management of information related to the execution of the duties of Directors This system consists of rules and regulations on the retention and management of information, including comprehensively the Board of Directors Regulations, Information Security Management Rules, Document Management Rules, and Confidential Information Management Rules.(4) Rules and other systems related to control of risk of loss
a. With regard to management-related risks, the Directors in charge and others strive to identify risk management issues in the course of business execution within Company sections. Major risks are individually discussed in management meetings and on other occasions whenever necessary. Risks related to the Company's businesses in a cross-sectional manner are identified and response policies are continually deliberated in management meetings and on other occasions.
b. Risks related to disasters, accidents, and other such incidents are addressed based on the Companywide Disaster Management Rules and other rules and regulations. Specific measures and responses or revisions to rules are discussed in management meetings and on other occasions.
c. The Companywide Crisis Management Committee determines response policies in the event of a serious crisis impacting the entire Company.(5) System for securing appropriate business operations within the Group of companies consisting of the Company and its parent companies and subsidiaries
a. The Company is a subsidiary of JFE Holdings, Inc. and JFE Steel Corporation. The Group management system of the JFE Group, maintained by its parent companies, is one whereby the Company and its subsidiaries are incorporated into a structure based on compliance with ethics laws and regulations, risk management, and financial reporting and information disclosure, among other efforts.
b. The Company requires consultation with parent companies or reporting on certain important matters concerning Group management or important matters regarding Company subsidiaries (including matters related to management of risks of losses). It has established procedures on matters such as decision-making under the Company's Board of Directors Regulations and other rules and regulations and holds discussions and makes decisions or receives reports accordingly.
c. The Company has established a Compliance Committee under the Compliance Committees established at the parent companies. In cooperation with the Compliance Committees of the parent companies, the Compliance Committee discusses and makes decisions on basic policies and important matters related to ethical, legal, and regulatory compliance at the Company and its subsidiaries. It also monitors the implementation of related measures. The Company's subsidiaries maintain the systems needed to ensure ethical, legal, and regulatory compliance.
d. The Company has established and operates a Corporate Ethics Hotline as a system for direct communication from workplaces to top management of important information concerning the ethical, legal, and regulatory compliance at the Company and its subsidiaries. Those eligible to use the system include not only Company employees, but employees of subsidiaries.
e. In cooperation with the internal audit sections of the parent companies, the internal audit sections of the Company and its subsidiaries audit the efficacy and efficiency of business operations undertaken by the Company and its subsidiaries, as well as their state of compliance with laws, regulations, and the Articles of Incorporation.
f. The Company and its subsidiaries maintain the systems needed to secure the reliability of financial reports and timely and appropriate disclosure of information.
- Outlined below is the current state of the Company's systems and rules and regulations related to the systems described in the items of Article 100, Paragraph 3 of the Regulations for Enforcement of the Companies Act.
(1) Matters related to employees assisting in the duties of company auditors, matters related to their independence, and matters related to ensuring the effectiveness of instructions given to such employees
While no such employees are currently assigned, discussions related to their assignment would take place if so requested by a company auditor.(2) System related to reporting to company auditors
a. Company auditors attend meetings of the Board of Directors, management meetings, and other important meetings and receive reports.
b. As necessary or if required by the Audit & Supervisory Board or company auditors, Directors, executive officers, and employees report to the Audit & Supervisory Board and company auditors on the execution status of their duties (including important matters concerning the Company and its subsidiaries). Directors, executive officers, and employees of Company subsidiaries report to company auditors on the execution status of their duties when necessary or when requested by the company auditors.
c. Details of conduct or acts such as violations of laws or regulations covered in whistleblower reports to or consultations with the Corporate Ethics Hotline are reported to company auditors. Measures are in place to ensure those submitting whistleblower reports to or consulting with the Corporate Ethics Hotline or otherwise reporting related matters suffer no disadvantageous treatment as the result of having done so.(3) Matters related to procedures for prepayment or refunding costs incurred in the execution of the duties of company auditors or other policies on processing of costs or obligations incurred in the execution of such duties
When so requested, the Company prepays or refunds expenses necessary for the execution of the duties of company auditors if such expenses are not specifically unreasonable.(4) Other systems to ensure audits by company auditors are implemented effectively
a. Company auditors have established Board of Auditors Regulations and created a systematic and effective audit system.
b. Directors and employees cooperate to maintain the audit environment to ensure that the activities of company auditors, including access to important documents required for audits, on-site inspections, exchange of opinions with Directors and others, subsidiary inspections, and cooperation with company auditors of subsidiaries, proceed smoothly.
c. Company auditors work closely with and receive reports on audit results from accounting auditors and internal audit section.