Internal Control System
Basic Policy for Developing an Internal Control System (Revised October 1, 2020)
Our officers who execute our business (hereinafter referred to as the "Executive Officers") and our directors who supervise the Executive Officers (hereinafter referred to as the "Directors") will, as the core element of their duties, assume the development of the group-wide internal control system of Daiwa House Group (Daiwa House and its subsidiary companies (as defined in Article 2(iii) of the Companies Act). Furthermore, those who concurrently serve as Directors and Executive Officers will be aware that they are responsible for two duties, will exercise their respective powers appropriately, and will endeavor to establish and operate an internal control system.
Based on the above system, Daiwa House determines to manage all the executives and employees of Daiwa House Group, including the representative directors, and establishes this basic policy to declare that all the executives and employees are the bearers of the internal control system.
1. Establishment of an Internal Control Committee
- The Internal Control Committee shall be established as a meeting body to receive reports on the status of the operation of Daiwa House Group's internal control system and to verify any deficiencies and promote remediation thereof.
- The Internal Control Committee shall report the status of its activities to the Board of Directors.
2. Compliance/risk management structure
The following systems shall be established to ensure appropriate compliance and risk management within Daiwa House Group.
- Establish Daiwa House Group Principles of Corporate Ethics and Code of Conduct to maintain and improve the social trust of Daiwa House Group.
- Appoint a Risk Management Head among the executive officers and make him/her responsible for establishing, operating, and supervising Daiwa House Group's compliance and risk management system.
- The Risk Management Committee shall be established as an organization to prevent risks from materializing in each business and to promote countermeasures against risks that have materialized.
- In the event that any risk that could have a material impact on management has materialized, an Emergency Response Headquarters shall be promptly established to respond to it.
- In order to accurately identify risk information, an internal reporting system shall be established in addition to the organizational reporting line.
- Establish a department that audits the business process of employees and seeks to make the business in accordance with laws and regulations, rules, etc.
- Ban on any relations with anti-social forces and respond to it systematically with a resolute attitude.
- Establish rules and regulations concerning disciplinary punishments and take appropriate measures against any executive and employee that has committed the violation, etc. of laws and regulations or of the articles of incorporation.
- The executives and employees shall check out whether they are properly performing their own duties by themselves and shall always supervise the fulfillment of the duties by other executives and employees.
3. System for the retention and management of information
Daiwa House will appoint an Executive Officer in charge of the retention and management of information related to the business operations by executives and employees and establish the following system.
- Any information related to business operations shall be stored in and controlled by the core systems or documents of Daiwa House.
- Directors, Executive Officers, and company auditors shall have access to such information at all times.
4. System to ensure the efficiency of business operations
Daiwa House will establish the following systems to ensure the efficiency of business operations of executives and employees.
- Determine an efficient system of business operations, including the concrete measures to be taken and the allocation of powers and duties for each department.
- Establish regulations for managerial approvals to clarify and expedite the decision-making system.
- Actively use IT systems, such as electronic approval systems, in order to improve the efficiency of business operations of executives and employees and to accelerate and simplify information sharing and communication with other executives and employees.
5. System for the management of Group Companies
Daiwa House will appoint a person responsible for ensuring appropriate business operations of Daiwa House Group among the Executive Officers and establish the following systems according to the size, characteristics, etc. of the subsidiary companies (hereinafter referred to as the "Group Companies").
- Daiwa House may request the Group Companies to submit reports on the matters related to their business operations, in order to appropriately keep and manage information for the entire corporate group.
- Make the Group Companies submit reports on the status of their internal control system to the Board of Directors, as necessary.
- Make each of the Group Companies establish an institution to plan and operate an internal control system, request them to report on their discussion items to Daiwa House, and provide them with guidance for improvement, as necessary.
- Cooperate with related Group Companies to monitor the status of internal controls of the applicable Group Companies and provide them with advice and guidance, as necessary.
- Respect the autonomous management by the executives of the Group Companies. Provided, however, that regarding the matters designated by Daiwa House, Daiwa House will request the Group Companies to submit the report to Daiwa House and will provide the Group Companies with instructions and advice, as necessary.
- Conduct internal audits of the Group Companies.
- Disseminate the existence, usage, etc. of the internal reporting system established by Daiwa House to the Group Companies.
6. System to ensure effective auditing
Daiwa House will establish the following system to ensure that audits by company auditors are conducted effectively.
1) System for assisting company auditors
- A department that assists company auditors shall be established, and full-time employees (hereinafter referred to as "assistant to company auditors") shall be assigned at the request of company auditors.
- The board of company auditors shall be entitled to receive reports from the Executive Officers in charge of human resources in advance with respect to the change of any assistant to company auditors and, if necessary, to submit to the Executive Officer in charge of human resources a request for the change of assistant by attaching the reasons.
- In the event that any assistant to company auditors is subject to disciplinary action, the Executive Officer in charge of human resources shall obtain prior approval from the board of company auditors.
- Any assistant to company auditors shall only be subject to the instructions and orders by company auditors in performing their duties.
2) System for reporting to company auditors
- In the event that a report is requested by company auditors, the Executive Officers and the Directors shall immediately report in writing or orally in the event of an unavoidable circumstance.
- In the event that a report is requested by an auditor of Daiwa House, the executives and auditors of the Group Companies shall immediately report in writing or orally in the event of an unavoidable circumstance.
- The staff of Daiwa House Group may report directly or indirectly to the company auditors of Daiwa House when it is deemed necessary to report to them.
- Rules, etc. shall be established so that any person that has reported to the company auditors will not receive unfavorable treatment based on said report.
3) System for audit costs, etc.
Daiwa House will clarify the financial policy for audit costs, etc. so as not to restrain the audits conducted by the company auditors.
4) Other systems for effectively conducting audits
- The company auditors may receive reports on the status of implementation of internal audits from time to time and, if necessary, request the implementation of additional internal audits, the formulation of business improvement measures, etc.
- The company auditors may attend important meetings such as the Board of Directors, Management Committee, Internal Control Committee, etc. and request explanations and the presentation of related materials, as necessary.
- The board of company auditors and the company auditors may exchange opinions with the representative directors and the financial auditor from time to time.
- The board of company auditors may, where necessary, request the participation of attorneys and accountants and obtain advice on the audits conducted by the company auditors.