Basic Policy on Internal Control System
Based on the Company Law and associated enforcement regulations, TIS resolved, as follows, a system — internal control system — that ensures the services provided by the corporate group to which the Company and its subsidiaries belong (hereafter, "the Group" or "the corporate group") are fair, and in line with the content of this resolution, the Company will determine rules, establish relevant divisions, formulate plans and policies and otherwise prepare systems to promote a sound management structure. Of note, TIS handles business administration for its subsidiaries under group management and operating agreements signed with the corporate group for which the Company executes business administration directly (hereafter, "subsidiaries"). Business administration of companies other than subsidiaries that still fall under the umbrella of the corporate group will, in principle, be handled by subsidiaries.
1. System to Ensure that the Execution of Duties by Directors and Employees of the Corporate Group Conforms to Relevant Laws and Regulations as well as the Articles of Incorporation
- To ensure that the execution of duties by directors and employees of the corporate group complies with laws and regulations as well as the Articles of Incorporation, TIS formulated its Basic Policy on Corporate Sustainability. The representative director will make this direction extensively known to the directors and employees of the corporate group and make abundantly clear to all that the basis of corporate activities is premised upon respect for the law and respect for social ethics.
- In the course of performing their respective duties, directors and employees of the corporate group will abide by rules pertaining to the organization, the division of duties and designated authority.
- TIS will appoint a director responsible for compliance who coordinates compliance practices on a groupwide basis. The Company will establish a compliance control department, set in place a compliance structure that cuts across the Group, identify problem points and make efforts to guide, educate and train directors and employees in appropriate actions to uphold compliance standards.
- TIS will maintain an internal reporting system that enables directors and employees of the corporate group to report directly to a designated contact point any behavior that may violate compliance.
- Individuals using the internal reporting system shall not be treated unfavorably (put at a disadvantage) on the basis of such reports. Necessary measures will be enforced to protect individuals who have made reports.
- Management believes that measures to prevent relationships with antisocial forces are absolutely imperative, in terms of corporate social responsibility and also as a corporate defense strategy, and declares that the Company will maintain an uncompromising attitude throughout the organization toward antisocial forces and will have no association whatsoever with such individuals or groups.
- TIS will put in writing that no relationships with antisocial forces are to be tolerated. In addition, the Company will, through the compliance control department, collect information and always be on the lookout for relationships that could involve antisocial forces, and also maintain a structure underpinned by close cooperation with lawyers and agencies, such as the police, to facilitate appropriate courses of action when required.
2. System for Storing Information Related to the Execution of Duties by Directors
TIS will properly store and maintain the minutes of Board of Directors' meetings as well as authorization documents and other important information pertaining to the execution of duties by directors of the Company, in accordance with laws and regulations and rules for document management.
3. Regulations and Other Systems for Limiting Loss Exposure
- TIS will properly acknowledge Group risk and establish Rules for Risk Management to prevent the occurrence of loss. In accordance with these rules, the Company will appoint a director responsible for risk management who supervises risk management activities for the Group and will also set up a risk management supervision division and establish a risk management structure.
- TIS will formulate an overall risk management policy for the Group and verify the status of measures to control risk on a regular basis.
- TIS will set up a task force when critical risk appears within the corporate group and draw up suitable measures to hold loss to a minimum should such loss arise.
4. System to Ensure Efficient Execution of Duties by Directors of the Corporate Group
- The Board of Directors at TIS will decide on matters stipulated by law and set forth under Rules for the Board of Directors as well as significant matters related to business, and will monitor the status of duties executed by directors.
- TIS will introduce an executive officer system to realize fast and highly efficient corporate management.
- To contribute to the efficiency of the Board of Directors, TIS will set up an executive committee. This committee will discuss important matters related to the execution of business by TIS and the corporate group and perform duties within the scope of authority granted by the Board of Directors.
5. System to Ensure Appropriate Operations in the Corporate Group
- To contribute to accurate and effective management practices throughout the Group while respecting the independence of its subsidiaries to run their own operations, TIS will establish a Management Philosophy for the Group and Management Rules for the Group. Subsidiaries, too, will be required to adhere to this philosophy and efforts will be made to create a unified environment for internal control in the Group as a whole.
- TIS will send directors and Audit & Supervisory Board members, as necessary, to subsidiaries to raise the level of governance on a groupwide basis and will monitor management practices at subsidiaries.
- TIS will appoint a director responsible for internal control who coordinates internal control on a groupwide basis and will set up an internal control supervision department, put in place an internal control structure that cuts across the Group and identify problem points. The Company will set up a Group Internal Control Committee, which will have the internal control supervision department as its secretariat, and this committee will evaluate and discuss important matters from an internal control perspective, such as compliance, risk management and information security, and report its conclusions to the Board of Directors.
- The department responsible for internal audits at TIS will implement internal audits in each division of the Company and will also implement or coordinate audits at subsidiaries and monitor the status of internal control practices established by subsidiaries in line with the standard set by TIS and offer guidance, when necessary, to ensure that the internal control mechanism is functioning properly.
6. Matters Relating to Employees Who are Asked to Assist Audit & Supervisory Board Members with Auditing Duties
When deemed necessary by Audit & Supervisory Board members, employees with the skills and know-how required by these Audit & Supervisory Board members shall be assigned to assist in the execution of auditing duties.
7. Matters Relating to Independence from Directors of Employees Assisting Audit & Supervisory Board Members
- To ensure the independence of employees who have been assigned to help Audit & Supervisory Board members execute auditing duties, assigned employees shall not take instructions or orders from directors when executing said duties.
- Transfers, personnel evaluations and disciplinary action affecting employees who have been assigned to assist Audit & Supervisory Board members execute auditing duties shall require prior approval from Audit & Supervisory Board members.
- Employees who have been assigned to assist Audit & Supervisory Board members in the execution of auditing duties shall have the authority to engage in duties made at the request of Audit & Supervisory Board members as well as those incidental to the execution of audits, and shall be able to collect information necessary to their tasks.
8. System for Directors and Employees of the Corporate Group to Report to TIS's Audit & Supervisory Board Members, and Other Systems for Reporting to the Company's Audit & Supervisory Board
- Directors and employees of the corporate group will provide reports to TIS's Audit & Supervisory Board members about management practices, operations, finances, compliance, risk management and the status internal audits on a regular basis, mainly through the committee meeting structure that runs laterally through the Group, to facilitate information sharing and discussion on issues and solutions as well as to confirm business direction. In addition, directors and employees of the corporate group will inform TIS's Audit & Supervisory Board members immediately should facts be discovered that indicate a possibly serious violation of laws or internal rules or might lead to a material loss.
- TIS shall not engage in negative treatment (put at a disadvantage) of a director or employee of the corporate group who has reported a concern to TIS's Audit & Supervisory Board members by reason of said report.
- The compliance control department will report to TIS's Audit & Supervisory Board members on a regular basis regarding the operating status of the internal reporting system as well as important information and matters requiring consultation.
- Directors and employees of the corporate group will provide explanations about matters pertaining to the execution of business whenever requested to do so by Audit & Supervisory Board members.
9. System for Ensuring that Other Audits by Audit & Supervisory Board Members are Effective
- Members of TIS's Audit & Supervisory Board shall attend meetings of the Company's Board of Directors as well as those of the Executive Committee and other key councils and committees, and may express opinions at any of these meetings.
- The representative director of TIS, the accounting auditor and departments responsible for internal audits will meet separately with the Company's Audit & Supervisory Board on a regular basis to exchange opinions.
- TIS will appoint experts, such as lawyers and certified public accountants, as required by the Audit & Supervisory Board, and ensure opportunities to access advice related to auditing duties.