Internal Control System
To ensure appropriateness, raise transparency, and maintain compliance of its management, the Board of Directors has established the “Basic Policy on Developing the Internal Control System” to develop and operate the internal control system of the Company.
Basic Policy on Developing the Internal Control System
１．System to Ensure that Directors and Employees Execute Their Duties in Compliance with Laws and Regulations and the Articles of Incorporation
The Company has established a Board of Directors which supervises the execution of duties by Directors, and a Board of Corporate Auditors which is authorized to conduct auditing, and also appoints External Directors and External Corporate Auditors. By doing so, the Company strictly monitors the execution of duties by Directors, and ensures that the execution of duties by Directors complies with laws and regulations, articles of incorporation, and internal rules.
２．System Concerning Retention and Management of Information on the Execution of Duties by Directors
- （１）The Company has established a system for adequately retaining and managing information on the execution of duties by Directors, in compliance with internal rules as well as laws and regulations and articles of incorporation.
- （２）The information retained and managed shall be accessible at any time upon requests from Directors or Corporate Auditors.
３．Rules and Other Systems Concerning Management of Risk of Loss
With regards to systems concerning management of risks of loss, the Board of Directors, to which internal and external information gathers, considers and implements risk identification, evaluation, preventive measures and countermeasures. Also, representatives of respective divisions attend the Board of Directors’ meetings on an as needed basis to report on risk identification and evaluation.
４．System to Ensure Efficient Execution of Duties by Directors
- （１）To ensure that Directors execute their duties efficiently, decisions regarding business execution are made through holding regular Board of Directors’ meetings once every month, and extraordinary Board of Directors’ meetings on an as-needed basis.
- （２）With regards to business execution, authorities and responsibilities are stipulated in internal rules and revised on an as-needed basis.
５．System to Ensure Appropriateness of Operations Within the Corporate Group Comprised by the Company, Parent Company and Subsidiaries
- （１）The Group’s management structure is established, enhanced and operated with regards to all matters described in “System to Ensure that Directors and Employees Execute Their Duties in Compliance with Laws and Regulations and the Articles of Incorporation,” “System Concerning Retention and Management of Information on the Execution of Duties by Directors,” “Rules and Other Systems Concerning Management of Risk of Loss,” and “System to Ensure Efficient Execution of Duties by Directors.”
- （２）Each group company cooperates by unit of business division and strives to share information with the Company.
- （３）The Company’s Internal Audit Office audits each group company.
６．Matters Concerning the Appointment of an Employee/Employees to Assist the Duties of Corporate Auditors
The Company shall appoint necessary personnel to assist the Corporate Auditors in the case where Board of Corporate Auditors or Corporate Auditors themselves request the appointment of an employee/employees to assist their duties.
７．Matters Concerning Independence of the Employee/Employees Assisting the Duties of Corporate Auditors from the Board of Directors
To ensure the independence of the employee/employees assisting the Corporate Auditors, the transfer, evaluation and discipline of such employee/employees shall require the consent of the Board of Corporate Auditors.
８．Matters Concerning Ensuring Effectiveness of Instructions from Corporate Auditors to the Employee/Employees Assisting Corporate Auditors
- （１）The authority to command the employee/employees assisting Corporate Auditors’ operations shall be transferred to the Corporate Auditors during the period of assistance designated by the Corporate Auditors, and he/she shall not receive command or orders from the Representative Director, President and CEO.
- （２）Contents of the preceding item shall be strictly observed by the Company’s officers and employees.
９．System for Directors, Accounting Advisors and Employees to Report to Corporate Auditors, and Other Systems Concerning Reporting to Corporate Auditors
- （１）Corporate Auditors shall attend Board of Directors’ meetings and receive reports on important matters, etc.
- （２）Directors and employees shall report immediately to Corporate Auditors when identifying facts that pose the risk of materially damaging the Company.
10．System to Ensure that Individuals Reporting to Corporate Auditors Are Not Treated Unfavorably on the Grounds of Such Reporting
- （１）Internal rules stipulate that officers or employees reporting to Corporate Auditors shall not be treated unfavorably on the grounds of such reporting.
- （２）Contents of the preceding item shall be strictly observed by the Company’s officers and employees.
11．Matters Concerning Policies on Procedures for Advanced Payments of Expenses or for Securities Incurred in Association with the Execution of Duties by Corporate Auditors, and on Handling of Other Expenses or Obligations Incurred in Association with Such Execution of Duties
- （１）The Board of Corporate Auditors is authorized to utilize lawyers, certified public accountants and other external experts, and to pay expenses on an as-needed basis.
- （２）In the case where Corporate Auditors request the payment of expenses in association with the execution of their duties, the Company shall bear such expenses promptly other than when such expenses are proven to be unnecessary in executing duties.
12．System to Ensure Effective Auditing by Corporate Auditors
- （１）The Representative Director shall hold meetings with the Corporate Auditors whenever possible, and shall strive to communicate through not only reporting of businesses, but also exchanging opinions about corporate management.
- （２）Corporate Auditors shall hold regular discussions with accounting auditors and the Internal Audit Office, and exchange information to conduct effective auditing.
13．System to Eliminate Anti-Social Forces
The Company shall not be involved with any anti-social forces or organizations that pose threats to the order and safety of civil society, and shall respond resolutely together with lawyers and the police towards unreasonable demands.
Summary of Operation of the Internal Control System
Based on the “Basic Policy on Developing the Internal Control System,” the Company strives to establish and operate the system and reports the status of operation at the Board of Directors meeting annually. For the fiscal year ended November 2020, significant defects or deficiencies were confirmed not to exist for matters prescribed in the Basic Policy at the Board of Directors meeting held on November 18, 2020.
１．Execution of Duties by the Directors
- ・To enhance management monitoring functions, five of the eleven Directors and all three of the Corporate Auditors are externally appointed to establish a structure that enables External Directors and External Corporate Auditors can provide useful supervision and audit from a neutral position. The appointment of candidates is determined by the Board of Directors pursuant to the report by the Nomination and Compensation Committee, which serves as Advisory Committee to the Board of Directors.
- ・The Board held twelve regular meetings and four extraordinary meetings with attendance by the Directors and Corporate Auditors to deliberate and report on individual agenda in accordance with the authorization criteria, as well as on important management matters (business strategy, capital policy, investments, human resource strategy, etc.). In addition, active exchange of opinions is promoted by early distribution of Board of Directors meeting materials, enhancement of contents, and prior briefings, etc.
２．Compliance and Risk Management System
- ・The “Group Compliance Rules” and “Money Forward Group Compliance Manual” have been established to apply to and be strictly observed by the whole Group. Compliance training for all officers and employees of the Group (new hire orientation, insider trading training, and harassment training) has been held to improve compliance awareness of officers and employees.
- ・An Internal Reporting System has been established to enable officers and employees of the Group to directly report acts by the Company and Group companies that breach or are likely to breach compliance to the designated department of the Company, and has been notified to all Group officers and employees to ensure early identification and prompt and appropriate countermeasures against violation of laws and regulations, etc.
- ・With respect to information security, which is the most significant risk for the Company, training on information security and personal data protection has been held for all Group companies. In adition, Executive Officer and CISO periodically reports on the status of information security management and future policies to the Representative Director.
The Internal Audit Office which directly reports to the Representative Director performs internal audit on the Company and Group companies to capture the status of business operation, confirm the status of compliance with laws and regulations, and to prevent acts in violation of laws and regulations. The result of the internal audits is reported to the Representative Director and the Board of Corporate Auditors on timely basis and reported at the Board of Directors meetings.
４．Execution of Duties by the Corporate Auditors
- ・Board of Corporate Auditors has met fourteen times and conducted on-site audits and hearing of opinions from Directors or employees based on the audit plan by the Board of Corporate Auditors. The Corporate Auditors also monitored the execution of duties by the Directors by attending the sixteen Board of Directors meetings.
- ・The Board of Corporate Auditors aims to enhance and improve its audit functions by holding periodic meetings with the Representative Director to exchange opinions on matters including management issues, status of establishment of the environment for corporate auditors’ audits, and material issues regarding the audit; and periodic meetings are held with external directors for exchange of opinions and cooperation.
- ・Full-time Corporate Auditor has established a system to audit compliance issues on routine business level by attending the Compliance Meetings to directly observe the status of compliance with laws and regulations and confirming the status of Group internal audit by the Internal Audit Office.
- ・Execution of duties by the Corporate Auditors is supported by appointment of an employee (holding a concurrent position at the Internal Audit Office) to assist duties of Auditors with appropriate knowledge, ability, and experience.