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Internal Control System
We continually strive to build an internal control system that is even more transparent and robust based on sound corporate ethics
The Basic Policy on Internal Control System below was decided at a meeting of the Board of Directors on May 2, 2006, after the Companies Act came into effect on May 1, 2006. The system was implemented to ensure that the execution of duties by directors is in conformance with laws and regulations and the Articles of Incorporation, and to provide the structure required to ensure the appropriateness of Itochu Enex's business. We continually improve this basic policy to achieve a more appropriate and efficient corporate structure.
Basic Policy on Internal Control System (revised May 21, 2009)
1. Structure to ensure that the duties of directors and officers are executed in accordance with laws and regulations and the Articles of Incorporation (Companies Act, Article 362, paragraph 4, item vi, top paragraph)
(1) Corporate governance
- 1. The Board of Directors shall make decisions on important matters concerning management and supervise the execution of duties by directors in accordance with laws and regulations, the Articles of Incorporation, resolutions of the General Meeting of Shareholders, the Regulations Concerning Decision-Making Authority, the CSR and Compliance Program, the Declaration of the Group Code of Conduct, the Employee Code of Conduct, and the Board of Directors Regulations.
- 2. The directors and officers shall execute the Company's operations in accordance with laws and regulations, the Articles of Incorporation, resolutions of the Board of Directors, the Regulations for Division of Roles and Responsibilities, Regulations Concerning Decision-Making Authority, and other company regulations.
- 3. Officers must be appointed by a Board of Directors' resolution. Officers shall execute their duties within the scope defined by the Regulations for Division of Roles and Responsibilities under the direction and supervision of representative directors and the directors supervising the division of roles and responsibilities in accordance with the resolutions of the Board of Directors.
- 4. Representative directors appointed by and directors appointed to execute operations by the Board of Directors shall report on the execution of their duties to the Board of Directors at least once every three months or as required.
- 5. Corporate auditors shall exercise their authority as stipulated by laws and regulations while working together with the Audit Department and independent auditors to conduct audits on the execution of duties by directors and officers in accordance with the Board of Corporate Auditors Regulations and the Auditing Standards for Corporate Auditors.
(2) Compliance
- 1. Directors and officers shall act in accordance with the CSR and Compliance Program, the Declaration of the Group Code of Conduct, the Employee Code of Conduct, and other related regulations.
- 2. The Company shall maintain a sound compliance structure by appointing a Chief Compliance Officer and a CSR and Compliance Committee and maintaining a department that controls and supervises matters related to compliance; instituting a CSR and Compliance Program; appointing a person responsible for CSR and Compliance in each department; conducting compliance education and training; preparing compliance manuals; developing methods to respond when compliance problems occur; preparing an internal report system; and implementing a system for obtaining from all directors and employees a written form pledging compliance with the Employee Code of Conduct.
(3) Maintaining a system to ensure the accuracy of financial reports
- 1. The Company shall maintain an internal system to ensure the legality and accuracy of financial reports in compliance with accounting standards and other related laws and regulations while maintaining Financial Administration Regulations, Regulations for Consolidated Financial Statements, and other company regulations.
- 2. The Company shall maintain an Internal Control Office and implement a system for regular evaluation and improvement of its internal arrangements for ensuring the accuracy of financial reports.
(4) Internal audit
The Company shall maintain an Audit Department under the direct supervision of the President. The Audit Department shall regularly conduct internal audits on all work to confirm compliance with laws and regulations, the Articles of Incorporation, and company regulations; confirm the adequacy of the procedures for execution of duties and the details of this execution; and report the results to the President and corporate auditors based on the Auditing Regulations. Additionally, the Audit Department shall conduct follow-up audits on improvements made in response to instructions and opinions offered in the internal audits.
(5) Elimination of anti-social influences
The Itochu Enex Group refuses to respond to anti-social influences (e.g., organized crime) under any circumstances.
2. Arrangements for the storage and management of information related to the execution of duties by directors (Ordinance for Enforcement of the Companies Act, Article 100, paragraph 1, item i)
(1) Storage and management of information
The Board of Directors shall properly store and manage legal documents including the minutes of the General Meeting of Shareholders, minutes of the Board of Directors, and other documents containing information relating to the execution of important duties (including digital records; the same applies below) and related documents in accordance with the Document Storage Regulations and other company regulations.
(2) Inspection of information
The directors and the corporate auditors shall be able to inspect at any time the information mentioned in the previous item.
3. Regulations and other structures relating to risk management (Companies Act, Article 100, paragraph 1, item ii)
To insulate itself from market risk, credit risk, investment risk, CSR and compliance risk, information security risk, and other risks due to changes in product prices, exchange rates, interest rates, and stock prices, the Company shall maintain a department responsible for assessing and managing the risks faced by internal committees and the Itochu Enex Group overall. The Company shall maintain management regulations, action criteria, investment criteria, risk limits, and transaction limits; maintain a reporting and monitoring structure; and maintain risk management structures and risk management methods as required to comprehensively and individually manage risks for the entire Company.
4. Structure to ensure that the execution of duties by directors is conducted efficiently (Ordinance for Enforcement of the Companies Act, Article 100, paragraph 1, item iii)
(1) Internal committees
The Company shall establish a Management Committee for consultations with the President to facilitate discussions on overall management policies and plans and other important matters relating to the execution of duties to ensure that decisions on the execution of duties can be conducted properly and flexibly. Additionally, to ensure that the decision-making process of the President and Board of Directors is conducted properly, efficiently, and in a manner compliant with the law, an Advance Credit Discussion Committee and other internal committees must be established. These committees shall carefully discuss management issues in their respective field to contribute to the decision-making process of the President and Board of Directors.
(2) Divisional system
- 1. The Company employs divisional system whereby multiple divisions are each assigned and responsible for managing an area of the Company's business.
- 2. The general manager of each division shall manage operation efficiently pursuant to established management plans and the authority granted by the Regulations Concerning Decision-Making Authority.
- 3. The general manager of each division shall manage the division in accordance with laws and regulations, the Articles of Incorporation, company regulations, and company standards. Numerical targets for major balance-sheet and income-statement items shall be set for each division, the degree of attainment of the numerical targets shall be regularly assessed, and the executional status of operations shall regularly be reported to the Board of Directors.
(3) Clarification of work authority and responsibility
The Company shall maintain Regulations for Division of Roles and Responsibilities, Work Authority Regulations, Regulations Concerning Decision-Making Authority, and various other company regulations; clearly define the authority and responsibilities of management personnel; and institute a structure that allows for the accurate and efficient execution of duties.
5. Structure to ensure that the execution of duties by employees is in conformance with laws and regulations and the Articles of Incorporation (Ordinance for Enforcement of the Companies Act, Article 100, paragraph 1, item iv)
- 1. In addition to laws and regulations and the Articles of Incorporation, employees shall act in accordance with the CSR and Compliance Program, the Declaration of the Group Code of Conduct, the Employee Code of Conduct, and other company regulations.
- 2. Employees shall report to the designated internal contact point upon discovery of a violation of laws and regulations, violation of the Articles of Incorporation, violation of company regulations, or an act that contravenes standards of socially acceptable behavior. For the internal report system, a structure shall be maintained that allows accurate response while both offering protection to the reporter and maintaining transparency.
- 3. The Audit Department shall regularly conduct internal audits on all work to confirm compliance with laws and regulations, the Articles of Incorporation, and company regulations; confirm the adequacy of the procedures for execution of duties and the details of this execution; and report the results to the President and corporate auditors based on the Auditing Regulations. Additionally, the Audit Department shall conduct follow-up audits on the improvements made in response to instructions and opinions offered in the internal audits.
6. Structure to ensure the appropriateness of business conducted by the corporate group comprising the Company and its subsidiaries (Ordinance for Enforcement of the Companies Act, Article 100, paragraph 1, item v)
(1) Subsidiary management structure
The Company shall assign personnel to each division and the Company's Administration Division for the supervision of subsidiaries. A supervising department shall be assigned for each subsidiary and this supervising department shall manage operations and provide management guidance in accordance with the operating regulations of the affiliated company and other company regulations. Additionally, a director and corporate auditor shall be seconded to each subsidiary, and the Company's corporate auditors shall convene meetings of the corporate group's Board of Corporate Auditors.
(2) Compliance
In accordance with the CSR and Compliance Program, the Company shall audit and provide guidance to subsidiaries in the maintenance of a compliance structure, institution of a compliance program for each subsidiary, appointment of a person responsible for CSR and compliance, preparation of compliance manuals, development of methods for response when compliance problems occur, and the maintenance of systems for providing internal information. The Company shall provide subsidiaries with compliance education and training, and work to increase awareness of compliance throughout the Group.
(3) Internal audit
All of the business activities of subsidiaries shall be subject to an internal audit by the Audit Department. Additionally, to improve the quality of audits as a Group, the Audit Department shall work to maintain its internal audit function as part of the Itochu Enex Group while working closely together with the internal auditing organization within each Group company.
7. Assistants requested to assist the duties of corporate auditors (Ordinance for Enforcement of the Companies Act, Article 100, paragraph 3, item i)
A number of assistants may be assigned to assist the corporate auditors and hold concurrent posts.
8. Independence of corporate auditor assistants from the Board of Directors (Ordinance for Enforcement of the Companies Act, Article 100, paragraph 3, item ii)
The authority to direct the actions of the assistants to the corporate auditors within the scope of audit-related work shall belong to the corporate auditors and the Board of Auditors. The directors, executive officers, and other employees shall have no authority to direct the actions of the assistants to the corporate auditors. Additionally, the prior approval of the Board of Auditors is required for decisions on personnel transfer, personnel evaluation, and disciplinary action relating to these assistants.
9. Structure for reports by directors, executive officers, and employees to corporate auditors and other reports to corporate auditors (Ordinance for Enforcement of the Companies Act, Article 100, paragraph 3, item iii)
(1) Attendance at important meetings
In accordance with the audit plan and division of duties determined by the Board of Auditors, corporate auditors may attend the meetings of the Board of Directors, the meetings of the Management Committee, and other important meetings; conduct hearings with directors on the execution of their duties; and inspect the related documents.
(2) Reporting requirements of directors and other management personnel
- 1. Management personnel including directors, executive officers, sales managers, and administrative managers shall report on the execution of their duties in response to the requests of the Board of Auditors.
- 2. Directors shall immediately report to the corporate auditors matters stipulated by law and the following items.
Decisions that could have a significant impact on the Company's financial position or business (on a consolidated or non-consolidated basis)- Contents of announcements on business results or business outlooks (on a consolidated or non-consolidated basis)
- The status of management plans, funding plans, CSR, and compliance
- Contents and results of internal audits
- Status of information provision based on the internal report provision system
- Contents of administrative penalties
- When any other event has occurred that could have severe repercussions on company management or cause significant losses, or when the occurrence of such an event is expected
- Matters requested by corporate auditors other than the items above
(3) Reports by executive officers and employees
Executive officers and employees may directly report the following items to corporate auditors.
- 1. Matters that could cause significant damage to the Company.
- 2. Violations of important laws and regulations or the Articles of Incorporation
10. Other structures to ensure that audits by corporate auditors are conducted effectively (Ordinance for Enforcement of the Companies Act, Article 100, paragraph 3, item iv)
(1) Cooperation between the Audit Department and corporate auditors
The Audit Department strives to closely share information and cooperate with the corporate auditors by holding discussions on the internal audit plan every business year and holding regular meetings to have discussions and share opinions on instructions and opinions offered in the internal audits. Additionally, the corporate auditors and Audit Department cooperate with the independent auditors for mutual oversight.
(2) Appointment of external specialists
Corporate auditors may independently appoint lawyers, certified public accountants, consultants, and other external specialists if it is recognized as necessary for the audit.
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