Internal Control
Basic Views on Internal Control System and the Progress of System Development
The contents that the company resolved by its board of directors as systems necessary to ensure that the execution of the duties by the directors complies with the laws and regulations and the articles of incorporation, and other systems necessary to ensure the properness of operations of a Stock Company and operations of group of enterprises consisting of the Stock Company and its Subsidiary Companies are as follows.
1.1. Purpose
This policy aims for the Company working to improve the effectiveness of corporate governance of the IHI Group and thereby increase corporate value, through resolution by the Board of Directors, regarding a basic policy relating to “systems to ensure that the execution of duties by directors complies with laws and regulations and the articles of incorporation, and other systems necessary to ensure the appropriateness of operations of a stock company and of operations of a corporate group consisting of said stock company and its subsidiaries” as stipulated by the Companies Act, and it.
1.2. System for ensuring compliance of performance of duties by directors and employees with laws and regulations and articles of incorporation
Directors of the Company shall establish rules to ensure that the performance of their duties is compliant with laws and regulations and articles of incorporation, and directors and employees shall observe such rules. Directors of the Company shall establish systems to ensure the appropriateness of operation activities throughout the Company, at each department, and at each subsidiary and affiliate company, and to audit such activities are properly pursued.
- Preparation of rules and regulations
Directors shall prepare group-wide, company-wide and departmental rules and procedures such as the “Basic Code of Conduct for the IHI Group” that all directors and employees of the Company must follow to perform their duties. Departments in charge of each operation must be specified clearly in each rule and regulation. A mechanism to update such rules and regulations in the event of amendment of applicable laws and regulations shall also be defined. - Compliance activities
With respect to compliance activities, the “Compliance Committee” chaired by an officer in charge of compliance for the entire Company shall establish a company-wide compliance policy. The company-wide policy shall be applied to the plan for each department, and each department shall create its own rules and activity plans. In addition to the company-wide training organized and administered by the Legal Division, training for each level (such as managerial staff, mid-level staff, and new employees) and training for each competency (such as human resources, finance, and procurement) shall be conducted to ensure compliance by all employees. - System to ensure and correct activities
An internal audit mechanism shall be created to monitor, inspect, and assess operation activities at each department to ensure the appropriateness of such activities. “Internal Audit Division,” shall be established as an internal audit department that is a department independent of all other departments. The Internal Audit Division shall report the results of audits to the Board of Directors as needed. A “Compliance Hotline” shall be established as an internal reporting system and separate from the organizational hierarchy, the Legal Division shall be made a point of contact to provide consultations and receive reporting to effectively act as a self-correcting function and prevent noncompliance before it occurs.
1.3. System for storing and managing information
Directors of the Company shall preserve information related to Directors’ exercise of their duties as a written document or in an electromagnetic form. Directors shall establish a basic policy for storing and managing documents and electromagnetic records, and shall manage information thereof. Amendment of such basic policy shall be subject to approval of the Board of Directors.
1.4. System for managing risks
Directors of the Company shall continuously assess, identify, and monitor business risks at each division of IHI group companies. Directors shall recognize the importance of assessing, identifying, and monitoring any of the following risks as various risks relevant to the execution of business of IHI group companies, and shall establish an appropriate system to manage such risks as well as a system to apply and evaluate it.
- Contracts/agreements
Operational risks relating to contracts/agreements such as competition, alliance/M&A with other companies, business integration, overseas operations, material procurement, and debt guarantee. - Design, manufacturing, and technologies
Risks that manufacturing sites, quality assurance, technology agreements, and research and development perform below expectations. - Laws and regulations
Risks of losses or loss of credibility due to violation of law. - Information systems
Risks of leakage, theft, and loss of information assets, and damage thereto. - Safety, health, and environment
Risks of problems with health and safety assurance and environmental conservation at offices and construction sites. - Disaster and system failure
Risks of interruption of business activities due to disaster, accidents, and information system failures. - Financial activities
Risks regarding financial activities such as exchange rate and interest rate trends. - Financial reporting
Risks of fictitious financial reporting (whether due to fraud or negligence).
Directors of the Company shall continuously assess, identify, and monitor business risks at each division of IHI group companies and promptly appoint personnel to deal with risks in the event new risks arise, and shall report to the Board of Directors of the Company regarding such risks that may affect IHI group performance, financial condition, and share price.
1.5. System for ensuring that Directors exercise their duties efficiently
Directors of the Company shall clearly separate the function of management supervision from that of performance to ensure efficient performance of duties, and shall delegate most authorities to perform duties to executive officers for efficiency. To make appropriate decisions through multi-dimensional considerations, the Chief Executive Officer shall organize the Management Committee as an advisory body to discuss important matters of IHI group companies. Directors shall prepare profit plans including target profitability of each Business Area / SBU at the beginning of every financial period, verify the respective results each month, and perform management of the execution status of duties.
1.6. System for ensuring properness of operations within the corporate group
Directors of the Company shall establish a system to ensure governance that is accountable for the entire scope of the IHI Group’s business operations including those of the group companies by setting rules to manage group companies and appointing responsible departments to manage, control, and direct such companies. As for group company matters with high levels of importance, directors shall submit/report to the Board of Directors and the Management Committee of the Company. Directors of the Company shall monitor the business conditions of group companies on a routine basis by deploying part-time audit & supervisory board members to group companies or assigning other employees in charge of such operations for the respective company. If necessary, responsible department or related department shall provide support to secure the appropriateness of business operations. Directors also assign members in charge of corporate group management within the Corporate Planning Division.
1.7. Employees to assist audit & supervisory board members
Audit & supervisory board members of the Company shall establish an audit office to assist them in the performance of their duties. The audit office shall consist of several employees, including managerial staff, of the Company, and personnel matters regarding such employees shall be decided based on mutual consultation between audit & supervisory board members and related directors. The audit office employees shall follow the instructions of the audit & supervisory board members, and directors shall pay attention to maintaining independence of the audit office employees from the persons who execute business and to ensuring the effectiveness of instructions by the audit & supervisory board members to the audit office employees.
1.8. Audit by audit & supervisory board members
Audit & supervisory board members of the Company, in accordance with the audit policies defined at the Audit & Supervisory Board, shall attend important meetings including Board of Directors meetings and Management Committee meetings, and audit the performance of duties by directors through interviews with directors, reviews of documents related to important resolutions, and investigations of operations and financial situations of each department and major subsidiaries. The Company shall bear any expenses required for the performance of duties by audit & supervisory board members.
1.9. System related to reporting to audit & supervisory board members
Directors and employees of the Company shall, without delay, report to audit & supervisory board members and the Audit & Supervisory Board on matters provided for in laws and regulations, results of internal audits, results of internal reporting system, and other important matters that have an impact on the IHI Group. No individual shall be treated unfavorably for making such a report.
Corporate Governance Report
Corporate Governance Report (Submitted 30 June, 2021) （573.7KB）