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.
The Company makes group-wide efforts to preclude any relationship with antisocial forces, irrespective of the circumstances.
Directors shall appropriately store and manage statutory documents such as minutes of the General Meeting of Shareholders and minutes of the Board of Directors, and documents containing information on the execution of important duties (including electronic or magnetic records; the same applies hereinafter) as well as relevant documents, pursuant to the provisions of the Regulations on Document Management and other internal regulations.
Directors and Audit & Supervisory Board Members may have access to the information set forth in the preceding paragraph at any time.
In order to deal with market risk arising from changes in commodity markets, foreign exchange rates, interest rates and share prices, credit risk, investment risk, CSR and compliance risk, information security risk and various other risks, the Company shall establish an internal committee and a department or division exclusively responsible for the tracking and management of risks of the Company and subject subsidiaries, develop the necessary risk management system and management methods including the establishment of management rules, criteria for approaches, investment criteria, setting of the maximum amount of risks and transactions, and reporting and monitoring systems, and manage the risks of the Company and subject subsidiaries both comprehensively and individually.
For proper and agile decision-making on the execution of their duties, the Company shall establish the Management Advisory Conference as an advisory body for the President, where deliberations are held on the Group's general management policies and business plans and other important matters concerning the execution of their duties, and formulate management benchmarks and business plans, etc. on a consolidated basis. In addition, for the President or the Board of Directors to make decisions in a lawful, fair and efficient manner, the Company shall establish various internal committees where careful deliberations are held on business challenges in each assigned area and that will contribute to the decision-making of the President and the Board of Directors.
The Company shall develop various internal regulations such as the Regulations on Division of Duties, Regulations on Administrative Authority and the Regulations on Decision-Making Authority, clarify authority and responsibility of each officer or manager, and build a system that enables proper and efficient execution of duties.
The Company shall require subsidiaries to which it directly contributes funds to report important management matters to the Company in accordance with the Group company management rules. The Company shall also periodically call the presidents of the subject subsidiaries and hold a liaison conference to enhance the business management of the subject subsidiaries.
The Company shall determine the terms and conditions of transactions with its parent company in the same manner as general terms and conditions in light of market prices. For transactions for which market prices are not referred to, the Company shall ensure the appropriateness of the transactions by obtaining the opinions of a third party that is independent of the Company and the parent company or other methods, depending on the importance of the transaction.
The Company appoints several employees to assist the Audit & Supervisory Board Members and has the employees serve concurrently with their other posts.
The command authority over employees assisting Audit & Supervisory Board Members shall belong to the Audit & Supervisory Board Members or the Audit & Supervisory Board to the extent that the auditing services are assisted. Directors, Executive Officers and other employees do not have command authority over employees assisting the Audit & Supervisory Board Members. The prior consent of full-time Audit & Supervisory Board Members is required for decisions on personnel changes, personnel evaluation, disciplinary punishment, etc. of such employees assisting the Audit & Supervisory Board Members.
Audit & Supervisory Board Members may attend the Board of Directors’ meetings as well as the Management Advisory Conference and other important meetings, hear the status of the execution of duties by Directors, Executive Officers and employees from them and inspect relevant documents in accordance with auditing plans and the assignment of duties determined by the Audit & Supervisory Board.
Executive Officers and employees may report the following matters directly to Audit & Supervisory Board Members:
The Company shall periodically report the results of internal audits for the subject subsidiaries and the operational status of the Group's whistle-blowing system to the Audit & Supervisory Board Members. The Audit & Supervisory Board Members shall hold meetings of the Group's Audit & Supervisory Board and receive reports on the status of compliance, etc. among the subject subsidiaries from the Audit & Supervisory Board Members of the subject subsidiaries.
The Company shall prohibit any person from treating disadvantageously a person who made a report to the Audit & Supervisory Board Members due to the provision of this report, and communicate and inform all companies in the Group of the prohibition.
Directors and Audit & Supervisory Board Members of subsidiaries may directly report matters, including facts that could cause significant damage to the subsidiaries, to the Company’s Audit & Supervisory Board Members.
The Audit Department shall deliberate on an internal auditing plan for each fiscal year with the Audit & Supervisory Board Members and seek close exchanges of information and cooperation, for example by holding periodic meetings to discuss and exchange views on the results of internal audits, findings and recommendations, etc. The Audit & Supervisory Board Members and the Audit Department shall also seek cooperation with the Accounting Auditors.
The Company shall secure a certain amount of budget every year to cover audit costs. In addition, the Audit & Supervisory Board Members may use attorneys at law, certified public accountants, consultants and other external professionals in their own right if deemed necessary in the implementation of audits.