DyDo Group Holdings

Internal Control

Fundamental Policy Regarding the Buiding of Internal Control Systems

1. Frameworks to ensure that directors and employees of the corporate group comprised of the Company and the subsidiaries of the Company (the "Group") perform their duties in conformity with laws and regulations and the articles of incorporation
  • (1) The Group shares as a management philosophy its Group Philosophy and Group Vision, and toward their realization works to observe the Group Code of Conduct and corporate ethics.
  • (2) The Group establishes and maintains necessary frameworks for the maintenance and monitoring of internal control consistent with the scale and characteristics of the Group.
  • (3) The Group establishes the DyDo Compliance Hotline ("Hotline") which guarantees that Group employees and corporate officers as well as outsiders will be able to make reports on compliance matters directly and without exposure to retaliation.
  • (4) The internal auditing department of the Company, in coordination with the board of corporate auditors, identifies non-conformities and proposes improvement measures based on audits of each department's status of compliance with laws and regulations, the articles of incorporation, and internal regulations. Additionally, the internal auditing department of the Company performs internal audits in accordance with necessity and promotes the expansion of frameworks for compliance with laws and regulations at subsidiaries.
  • (5) The Group maintains no transactional relationships with anti-social elements that threaten public order and safety. The Group, in coordination with the relevant institutions, defends itself vigorously across the entire organization to prevent damages should fraudulent claims be brought against the Group.
2. Frameworks concerning the preservation and management of reports on the performance of directors' duties

Matters concerning reports on the performance of directors' duties are appropriately preserved and managed in accordance with internal regulations and shall be accessible for the perusal by directors and corporate auditors when necessary.

3. Regulations and other frameworks for managing the risk of damages to the Group
  • (1) The Company practices risk assessment and analysis in accordance with the fundamental regulations for risk management, maintains and regularly convenes a risk management committee chaired by the representative director serving as president, and engages in proactive risk management. Moreover, the Company works in coordination with subsidiaries to unify and share information concerning the Group's risk management and crisis management.
  • (2) For the case of unforeseeable events with potential to materially affect the business of the Company, the Company establishes and maintains frameworks for the convocation of a crisis management committee chaired by the representative director serving as president, and steps to be taken to minimize damages and other adverse effects.
4. Frameworks to ensure that directors, etc., of the Group perform their duties in an efficient manner

All companies of the Group aim through the following measures consistent with the scale and characteristics of each company to achieve the efficient performance of the duties of directors. Moreover, the Company promotes effective group management by formulating and managing the progress of management strategies relating to the entire Group.

  • (1) Division of duties and clarification of authorities
  • (2) Deliberations and reporting on important management matters at board of directors' meetings convened at regular intervals or as the need arises
  • (3) Establishment of a management committee comprised of board directors
  • (4) Preparation, progress management, and improvement measure implementation for consolidated mid-term management plans and fiscal-year budgets
5. Matters concerning reports to the Company regarding the performance of the duties of directors, etc., of subsidiaries

The Company, in accordance with internal regulations, establishes and maintains a department charged with the coordination of and control over its subsidiaries and the reporting to subsidiaries on the status of execution of operations.

6. Matters concerning employees whose deployment is requested by corporate auditors to support their duties, matters concerning the independence of such employees from directors, and matters for ensuring the effectiveness of instructions issued by corporate auditors to such employees
  • (1) Upon request of the corporate auditors to have employees deployed to support their duties, the Company deploys employees equipped with the capabilities and knowledge necessary to support corporate auditors and confers upon the corporate auditors the right of command over such employees.
  • (2) Corporate auditors shall be able to obtain from the director responsible for human resources in advance reports on personnel transfers and personnel assessments with respect to the employees whose support the corporate auditors request, and shall be able, based on reasons to be stated, to request of the director responsible for human resources changes to such personnel transfers.
  • (3) The director responsible for human resources shall for disciplinary measures, etc., against subject employees obtain the advance approval of the corporate auditors.
7. Frameworks for reports to corporate auditors and frameworks to prevent retaliation against persons who have reported to corporate auditors
  • (1) Through attendance at the meetings of the board of directors and meetings of other important deliberative bodies such as the management committee, etc., of the Company, the standing corporate auditor shall receive timely reports on important information concerning the Group. Moreover, the risk management department and the legal affairs department shall at regular intervals report on their respective duties to the corporate auditors.
  • (2) In addition to item (1) above, Group directors, corporate auditors, and employees, etc., shall promptly report to the corporate auditors any matters that affect or threaten to affect the Group in a significant way.
  • (3) The internal auditing department shares the results of internal audits of the Group with the board of corporate auditors.
  • (4) Persons who have reported a compliance issue to corporate auditors are protected against retaliation on grounds of such reporting. If a person who has reported a compliance issue is found to have been retaliated against, appropriate steps are promptly taken to remove the retaliatory measures.
8. Procedures for advances or reimbursement of costs that arise in connection with the performance of the duties of corporate auditors and matters concerning policies for the treatment of other costs and obligations that arise from the performance of such duties

Advances or reimbursements, etc., claimed by corporate auditors related to expenses that arise in the execution of their duties are settled promptly unless found unnecessary for the execution of the duties of the subject corporate auditor.

9. Other frameworks to ensure the effective execution of audits of corporate auditors

To ensure appropriate communication and effective audit execution, corporate auditors maintain close contact with the internal auditing department, the accounting auditor, and the corporate auditors of subsidiaries, and meet at regular intervals for exchanges of opinion with the representative director serving as president.

10. Frameworks to ensure the reliability of financial reporting

The Group maintains, operates, and assesses continuously its frameworks for the effective and appropriate internal control concerning financial reporting in accordance with the Financial Instruments and Exchange Act and other laws and regulations and works to ensure the reliability and appropriateness of financial reporting.

Revised January 21, 2017