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Internal Control Systems

At the Board of Directors meeting held on May 8, 2006, Akebono passed a resolution on the "Basic Policy Regarding Establishment of Internal Control Systems" (latest revision on June 16, 2022), The internal control systems at Akebono are the structure that direct and promote actions of officers and employees of the Group in order to achieve objectives such as risk management, enhancement of legal compliance operational efficiency, and appropriate financial reporting and are essential to our business as risks are involved in corporate management.

The internal control systems aim to maintain and improve corporate and shareholder value as well as prevent fraud. While continuously reviewing and enhancing the functions of these systems, Akebono believes the internal control systems are essential to realizing the Group's goals and policies as well as achieving sustainable growth which are fundamental to business management.

Akebono establishes the Internal Control Committee as an organization to develop, promote and operate an internal control system for the Company and its subsidiaries. The Internal Control Committee continuously reviews the internal control systems, improves overall operation, and reports the status of its operation to the Board of Directors and the Audit & Supervisory Committee.

Basic Policy regarding Establishment of Internal Control Systems

I.Systems to ensure that Akebono's directors and associates and its subsidiaries' directors and associates perform their duties in compliance with the laws and the articles of incorporation

  • 1.Akebono and its Group companies define compliance based on the "Global Compliance Manual," which consists of the Company's Philosophy, representative director's messages, Akebono Global Code of Conduct, Akebono Global Standards of Behavior, etc.
  • 2.Akebono establishes its Compliance Committee as a subordinate organization to the Internal Control Committee to promote compliance activities and develop a compliance system.
  • 3.Akebono sets up consultation hotlines internally and externally to prevent problems and detect and resolve them promptly, and to receive consultation requests from all associates of Akebono and its Group companies including directors, associates, dispatched workers, and resigned or retired workers (limited to within one year of resigned or retirement.) Akebono and its Group companies keep consultation details and personal information confidential and do not treat those who ask for consultations disadvantageously.
  • 4.To comply with cartel-related and other regulations under global competition laws, Akebono and its Group companies clearly indicate prohibited acts under these laws and clarify the rules for contacting competitors or trade associations.
  • 5.5Akebono and its Group companies deal with anti-social forces resolutely, stipulate clearly in the "Global Compliance Manual" that those who take action need to have a sense of justice and good sense, and disseminate this information among directors and associates. General Affairs and other divisions of Akebono and its Group companies strive to prevent damage caused by anti-social forces, and also take appropriate action in case of emergency in collaboration with outside specialized agencies if necessary as part of group-wide activities.
  • 6.To ensure reliability of financial reporting, Akebono and its Group companies implement and operate internal controls relating to financial reporting in accordance with the Financial Instruments and Exchange Act and other laws and regulations.

II.Systems related to retention and management of information about the execution of directors' duty

  • In accordance with the document management and information security rules, Akebono records, retains, and manages information about the execution of directors' duty in written or electromagnetic form. Directors are authorized to inspect these documents, etc., at any time.

III.Risk management rules and systems related to losses incurred by Akebono and its subsidiaries

  • 1.To establish and promote a risk management framework, Akebono and its Group companies set up a Risk Management Committee as a subordinate organization to the Internal Control Committee.
  • 2.To deal with various latent risks arising from corporate activities, the risk management committee conducts tasks such as regular identification of risks, determination of key risks and relevant handling policies, provision of directions to take measures and monitoring of the execution status of measures and their effectiveness.
  • 3.In the event of a crisis (an earthquake or other disaster, etc.), that is judged to cause extensive damage, Akebono and its subsidiaries shall promptly establish an emergency headquarters (headed by the President), to minimize the damage (effects/losses), and proceed quickly with restoration. In addition, Akebono and its subsidiaries prepare for emergencies by creating and distributing relevant manuals, and offering training and education programs.
  • 4.To develop an information security management system for Akebono and its subsidiaries, the ISMS Committee* is established as a subordinate organization to the Internal Control Committee to ensure the reliability and safety of information assets and to promote information security measures.
    * ISMS: Information Security Management System

IV.System to ensure that Akebono's directors and its subsidiaries' directors carry out their duties efficiently

  • 1.Akebono adopts the executive officer system to separate management from execution, and clarifies responsibility and authority. Board of Directors meetings are held once a month and whenever necessary. Akebono also establishes multiple important meeting structures comprising directors and executive officers to discuss management issues in advance. After deliberations made, the board of directors decides whether to give approval as a preliminary deliberation system.
  • 2.Akebono establishes organizational regulations and rules of Administrative Authorities to clarify the division of duties of each organization, the administrative authority and responsibilities of executive directors and executive officers, and the rule of document approval, etc., in order to improve the efficiency of the execution of duties by executive directors and executive officers.
  • 3.Akebono and its Group companies prepare midterm business plans reflecting future business environments, create annual budgets, and formulate and carry out specific plans to meet plan objectives.
  • 4.The status of duties executed by each director or executive officer in accordance with resolutions made is reported to the Board of Directors, whenever necessary and is regularly audited by the Audit & Supervisory Committee.

V.Matters reported to Akebono regarding the duties executed by its subsidiaries' directors

  • 1.Akebono establishes a system to provide ordinary management, guidance, support for its Group companies, and a framework for receiving reports from its Group companies regarding their individual operating results, financial condition and other important management matters through the departments in charge of business operations and related departments based on the "Affiliated Company Management Regulations."
  • 2.To ensure that Akebono and its Group companies can execute operations appropriately, it sets job authority rules for itself and each of its Group companies. In addition, Akebono grants the persons in charge of Group companies decision making authority in accordance with the Regulation on Approval and Authority for Group Companies.
  • 3.Akebono's Internal Audit Division regularly conducts audits of its Group companies in Japan and overseas, and reports the audit results to its board of directors and relevant divisions.

VI.System to ensure that Audit & Supervisory Committee' audits are conducted effectively

  • 1.Matters related to associates who assist the Audit & Supervisory Committee in their duties
  • (1)In the case that the Audit & Supervisory Committee need assistance to support their duties, Akebono sets up an Audit & Supervisory Committee Office and assigns full-time staff (hereinafter "Audit & Supervisory Committee Office staff").
  • (2)To ensure that Audit & Supervisory Committee Office staff are independent of directors (excluding directors who are Audit & Supervisory Committee members,) and that the Audit & Supervisory Committee's directions are given to them effectively, they carry out their duties under the control of the Audit & Supervisory Committee and do not receive directions or instructions from directors (excluding directors who are Audit & Supervisory Committee members.)
  • (3)The Audit & Supervisory Committee Office staff's personnel change, evaluation and disciplinary action need to be discussed with the Audit & Supervisory Committee members.
  • (4)Audit & Supervisory Committee staff executes exclusively the job to support the Audit & Supervisory Committee and do not concurrently carry out any other duties. In this way, the Audit & Supervisory Committee can give directions to Audit & Supervisory Committee Office staff effectively.
  • 2.Systems to report to the Audit & Supervisory Committee and to ensure that those who report to the Audit & Supervisory Committee are not treated disadvantageously due to such reporting
  • (1)When a director or associate of Akebono or any of its Group companies (including those who receive reports from such director or associate) identifies a fact that may have a material effect on the management and performance of Akebono and its Group companies, a material violation of law or the articles of incorporation, and an equivalent situation or a fact that such situation may occur, such director or associate reports the fact to the Audit & Supervisory Committee without delay in an appropriate manner.
  • (2)Akebono and its Group companies do not treat such director or associate disadvantageously due to such reporting.
  • 3.Matters related to the prepayment of expenses incurred in connection with the Audit & Supervisory Committee's execution of duties, expenses incurred in connection with redemption procedures or the execution of other duties, or policies for the processing of liabilities When an Audit & Supervisory Committee member makes a request for prepayment, etc., of expenses in connection with his/her execution of duties, Akebono immediately processes such prepayment or obligations, except when these expenses or obligations are considered to be unrelated to the said Audit & Supervisory Committee member's execution of duties.
  • 4.Other systems to ensure that Audit & Supervisory Committee members' audits are conducted effectively
  • (1)The Audit & Supervisory Committee maintains ordinary and flexible cooperation with the internal audit division by receiving reports on the results of the audits and by requesting investigations or issuing specific instructions as necessary.
  • (2)The Audit & Supervisory Committee receives explanations of the audit plan from the accounting auditors in advance, receive periodic reports on the implementation of the audit, and meet regularly with the accounting auditors to figure out Key Audit Matters (KAM) and actively exchange opinions and information with them.
  • (3)Akebono's management holds regular meetings to exchange opinions with the Audit & Supervisory Committee.