3. Internal Controls

7.    Internal Control



Status of development of internal control system

The "Systems for Ensuring the Proper Performance of the Company's Business (Basic Policy for Internal Control System)" of the Company is as follows.

1. Systems for ensuring that the performance of the duties of Directors and employees of the Company conforms to laws and regulations and to the Articles of Incorporation

  1. The Company establishes compliance regulations and fully disseminates them among all the Directors and employees so that the performance of Directors' and employees' duties conforms to the laws and regulations and to the Articles of Incorporation, adheres to corporate ethics, and fulfills the Company's social responsibilities.
  2. The Company establishes the Compliance Committee to cultivate a corporate culture in which compliance is importantly recognized.
  3. The Company puts its officers and employees under an obligation to, if they come to know doubtful acts from the viewpoint of compliance in the Company, report such acts to the internal compliance hotline set up inside and outside the Company, which will take proper steps, under guarantee that they will not suffer any disadvantage.
  4. The entire organization of the Group, including its officers and employees, is resolutely opposed to any antisocial forces or groups that threaten the order and safety of civil society. The Company establishes a structure in which it has no connections whatsoever with antisocial forces.

2. Systems for keeping and managing information concerning the fulfillment of the duties of the Company's Directors
The Company properly retains and manages information about the fulfillment of the Directors' duties in accordance with the internal regulations regarding the handling thereof.

3. The Company's regulations for the management of the risk of losses and other systems
The Company establishes risk management regulations as the basis of the risk management system, organizes the Risk Management Committee, and carries out risk management activities in accordance with the said regulations.

4. Systems for ensuring that the duties of the Company's Directors are efficiently fulfilled.

  1. In principle, the Company holds a meeting of the Board of Directors once a month and extraordinary board meetings as necessary to make prompt and proper decisions on important matters.
  2. In the conduct of business, the Company makes decisions promptly and efficiently according to the internal regulations including those regarding duties and authorities.
  3. In order to ensure that the Directors' duties are efficiently fulfilled, the Company establishes appropriate business organizations and segregation of duties.

5. Systems for ensuring that the Group conducts its business properly

  1. The Company stipulates internal regulations to control the framework used to ensure that the Company is appropriately involved in major decisions taken by its subsidiaries and to request that subsidiaries report to the Company regarding important matters related to business execution. The Company manages and oversees subsidiaries in cooperation with major subsidiaries and ensures that subsidiaries' Directors perform their duties in an efficient manner.
  2. The Company's internal audit division conducts audits regarding subsidiaries' compliance with laws and regulations and with the Articles of Incorporation, and the effectiveness of the internal control system. The division responsible for the relevant subsidiary properly guides the subsidiary to promptly take appropriate measures to correct or improve these systems, if necessary.
  3. The Group stipulates the risk management regulations for the Company, and for subsidiaries as appropriate, and identifies and controls group-level risks in cooperation with the Company.
  4. The Company requests that the Compliance Committee provide reports regarding matters related to subsidiaries' compliance through group-wide efforts in order to ensure Directors' and employees' compliance with laws and regulations and with the Articles of Incorporation. The Company also develops the internal compliance hotline system across the Group, which will take proper steps.

6. Matters regarding the employee who is to assist the Audit and Supervisory Board Members of the Company, matters regarding the securing of the independence of such employee from Directors of the Company and the effectiveness of instruction given by the Company's Audit and Supervisory Board Members to the employee

  1. The Company will, at the request of the Audit and Supervisory Board, appoint an employee who assists the Audit and Supervisory Board Members with their duties and should gain the consent of the Audit and Supervisory Board for the appointment and relocation of such employee.
  2. An employee who assists the Audit and Supervisory Board Members with their duties performs his/her duties of assisting the Audit and Supervisory Board Members under their direction. The efficiency rating of such employee should be made by listening to the opinions of the Audit and Supervisory Board Members.

7. Systems for reporting to the Audit and Supervisory Board Members of the Company and other systems for ensuring that the audit by the Audit and Supervisory Board Members is conducted effectively

  1. In addition to important business matters determined by methods other than a Board resolution, Directors, Audit and Supervisory Board Members and employees of the Company and its subsidiaries shall report to the Company's Audit and Supervisory Board Members the findings of internal audits and the status of the internal compliance hotline directly or through meetings with Audit and Supervisory Board Members.
  2. The Audit and Supervisory Board Members may request and inspect any documents or reports from Directors or employees of the Company and its subsidiaries for the purpose of conducting an audit.
  3. The Group does not treat those who provide the above reports disadvantageously based on the fact that they have made such reports to Audit and Supervisory Board Members.
  4. The Company allocates a budget that covers expenses incurred for audits performed by Audit and Supervisory Board Members so as to ensure the effectiveness of the audit.

Status of the development of a compliance enhancement system

The Group believes compliance is an important management issue. The Company and The Group companies have established compliance regulations. Each company has a compliance manager to ensure compliance with laws and regulations and prevent bribery, corruption, fraud and harassment and they strive to exclude anti-social forces from their activities.
To increase awareness of compliance, the Group continues every year to send company newsletters with compliance topics(available to all employees) and to provide e-learning programs (to all full-time employees and contract employees). To reinforce measures to uncover wrongdoing, the Group conducts surveys to all of the Group's employees (full-time employees, contract employees, and dispatched temporary employees) to identify wrongdoing at an early stage and checks internal controls within each division using a fraud prevention checklist (distributed to division heads).

▼Diagram of compliance promotion structure


Diagram of compliance promotion structure

・Establishment of a whistleblowing office

The KADOKAWA Group has established a whistleblowing office within a third-party organization as a Group-wide contact point and manages an internal whistleblowing system that considers whistleblower’s protection in compliance with the Whistle-Blower Protection Act which is prescribed under the Japan Law. Whistleblowers can contact the office anonymously or using their real names if they choose to. Either way, the information is strictly protected. The Group handles information appropriately to ensure that no whistleblower or individual is unfairly treated in any way because of their whistleblowing or consulting, including their dismissal or the degradation of their work environment.
After a report is received, the Group will establish an investigation team according to the content of the report. The team will investigate and take corrective action appropriately based on its findings. The Compliance Committee will report to the Board of Directors twice a year.

Whistleblowing office:
1. Web form
https://koueki-tsuhou.com/sLMfZe8Pka9s/en/


2. Email
kadokawa_group_hotline@dmsig.jp.nec.com
3. Telephone
0120-996-206

The whistleblowing office can be contacted by:
・Officers and employees of the Company and group companies (including officers, employees, contract employees, fixed-time employees, part-timers, dispatched temporary employees)
・Retiree
・Business partners

Reportable facts:
Act that is or is suspected to be in violation of laws, regulations, internal rules
(Examples)
・Fraudulent act that causes damage to corporate assets
・Inappropriate relationship with business partner
・Unjust act against subcontractor
・Disclosure/leakage of personal/confidential information to third party
・Fraudulent accounting treatment
・Harassment prohibited by the employment rules

・Response to anti-social forces

The Group has established a code of conduct relating to anti-social forces, which clearly states that the Group shall not have any relationships with anti-social forces. In practice, the Group takes steps to exclude anti-social forces, including checking transactions before they are conducted to ensure that there is no involvement of any anti-social forces and implementing anti-social forces exclusion provisions in contracts.


Status of development of risk management systems

The Group has established Risk Management Regulations. Under these regulations, the Group has created the Risk Management Committee. The chairperson of the committee is the President and Member of the Board, and the members are the Chief Officers of the divisions. The executive office is the division responsible for internal control. The committee meets twice a year and reports its activities to the Board of Directors.
To manage risks, each division selects major risks, considering internal factors (management resources, business characteristics, etc.) and external factors (infectious diseases, climate change risk, etc.), and develops measures to address these risks. The division in charge of internal control monitors each division's activities and continually improves activities.
The Group has prepared risk information reporting rules and manuals. If the risk defined in the reporting manuals occurs, it will promptly be reported to management and related divisions. The relevant division will address the risk in a timely and appropriate manner and take steps to prevent recurrence. In addition, the Group has developed a system for initial responses to major risks.

Status of improvement of systems for ensuring appropriate business operations of subsidiaries

The Company’s Board of Directors discusses or receives reporting from its subsidiaries regarding decision-making conducted by the subsidiaries on important matters in accordance with the Group’s management regulations.
The Company’s Risk Management Committee works to identify and respond to risks facing the Group.
The Company’s Compliance Committee identifies and responds to the Group’s compliance-related issues.