RIKEN CORPORATION

CSR

Corporate Governance

Internal Control System

The board of directors of Riken Corporation resolved on May 19, 2006 that it adopts the "Basic Policy on Internal Control System" and most recently resolved in January 2016 that it revised a part of it.

Basic Policy

Riken and Riken group companies ("Riken group") is conducting business activities based on the mission statement and the guiding principles.
The directors and employees of Riken group promise to observe the relevant laws and social rules and to act in accordance with its ethic code, internal rules and the social morality.

Guiding Principles
Be Customer Driven
Be Compliant with the Law
Be Focused on the Basics
Be Open
Be Proactive
Be Prompt
Mission Statement
We will provide superior long-term economic value for our shareholders through effective use of their invested capital.
We will offer products and services that continually exceed our customers' increasing expectations through constant innovation and continued acvancements in kowledge and technology.
We will continuously renew ourselves by encouraging initiative and entrepreneurism and by being constantly committed to change.
We will value the contributions of each member of our global team and provide a workplace where every employee can share a sense of ownership in the success of our organization.
We will be a leading corporate citizen that always operates with respect for the laws environment, safety and the overall well being of the global communities where we conduct our business.

Under such mission statement, we recognize that it is responsible for the management to prepare and manage the internal control system to conduct lawful and appropriate business activities. We will continue to improve the system.

  1. System to ensure that the execution of duties by the directors of the company is in compliance with the relevant laws and the articles of incorporation and the by-laws of the company
  2. System to ensure that the execution of duties by the employees is in compliance with the relevant laws and the articles of incorporation and the by-laws of the company

    Riken group recognizes that thorough implementation of the compliance is indispensable for maintaining the sustainability of the company.
    We will establish the widely trusted management system that its directors and employees are in compliance with the relevant laws and social rules and act in a fair-minded ethical manner.

    1. Riken group will establish the "Riken Code of Ethic" and the "Guiding Principles" to have its directors and employees observe the relevant laws and the articles of incorporation and the by-laws of the company and build up the system to conduct lawful and appropriate business activities.
    2. To become a trusted company, Riken Corporation started the Compliance Committee, which reports direct to the President, in order to promote various activities and thoroughly implement the compliance.
    3. In order to ensure the thorough implementation of the compliance, the General Administration Division will give compliance education to the directors and employees.
    4. Riken group set up the help desk specialized for consultations regarding the compliance and informing of injustice acts. We will operate this whistle blowing system ensuring that whistleblowers are protected.
    5. Internal Audit Department, a department of the Internal Control Division, always grasps the situation of the employees who are working in daily operations through the regular internal audit procedures. They examines whether all the operations are conducted appropriately and rationally in compliance with the relevant laws, the articles of incorporation and the by-laws of the company and other internal rules and inspect whether the system, organization and other rules are appropriate and reasonable. They will reports to the President on the results of such examination and inspection.
    6. The status of the above-said activities related to the compliance is regularly reported to the board of directors.
  3. System for preserving and controlling information related to the execution of the duties of the directors

    We make proper records related to the duties of the directors and preserve them for the determined period in accordance with the relevant laws and internal rules of the document control. The records include minutes of the board of directors and minutes of other important meetings for decision-making and other documents related to the decision-makings based on the approval standards.

    1. We preserve the following documents based on the relevant laws and the internal rule of document control.
      1. Preservation is required by the relevant laws
        • minutes of the shareholders meeting, minutes of the board of directors
      2. Preservation is required by the internal rule of document control
        • minutes of the Management Meeting, minutes of the Technology Committee and minutes of CSR Committee
        • minutes of meeting chaired by a director
        • approval documents for director’s decision-making
        • other important documents stipulated by the internal rule
    2. Each division is responsible for the preservation and control of its own documents listed above in accordance with the internal rules, unless specified by the relevant laws.
  4. Regulations and control systems for the risk of losing profit

    Riken group makes best effort to minimize any possible risks of losing profit and proactively prepare the appropriate systematic countermeasures proactively.

    1. We prepared the risk management rule including risk management policy and other related rules in order to establish the risk control system covering the whole Riken group and to appropriately cope with the risks.
    2. We create the Risk Management Committee and the BCM Committee, as sub-committees of the CSR committee, which report to the President. They promote various activities in order to establish and thoroughly operate the risk management and the business continuity plan.
    3. According to the risk management rule, we will annually discover and evaluate potential business opportunity risks and business activity risks and prepare necessary contingency plans.
    4. We will always try to prevent possible large scale accidents, disasters and unlawful acts. If happened, we will immediately set up an emergency headquarters of which chairman is the President (or other person appointed by the President) and cope with such accidents.
    5. The status of the above-said activities of the risk management are regularly reported to the board of directors.
  5. System to ensure that the duties of directors are efficiently conducted

    Riken group establishes and promotes their midterm management plan and annual management plan in order to appropriately respond to changes in the business environment. Utilizing these management plans, we are promoting efficient execution of the duties of directors for accomplishing the management plan.

    1. Duties and decision-making authority of the directors are provided in the internal rules such as the organization rule, the job description rule and the decision-making standard.
    2. The board of directors decides the company’s management policy, important issues which are legally required to be treated by the board of directors and other important managerial issues. The board of directors supervises the execution of duties of the directors.
    3. We have the Management Meeting, chaired by the President, a sub-meeting of board of directors, twice a month in principle. The members of the Management Meeting discuss the issues to be proposed to the board of directors for its approval in advance. They also discuss and decide their own the execution and the measures of the execution related to the operation within the range authorized the board of directors.
  6. System to ensure the appropriate operations of Riken group

    Riken Corporation will establish the internal control system covering the whole Riken group and is trying to promote a more appropriate group management while respecting the independence of each group company in accordance with the internal rule of supervising group companies.

    1. Riken group will work together to accomplish the management plan of the Riken group sharing the mission statement, the guiding principles and the internal rules and manuals regarding the compliance of the group.
    2. Riken Corporation supervises lawfulness and efficiency of the managements of the group companies. In this regard, Corporate Planning Division is in charge of domestic companies and Global Business & Operations Division is in charge of overseas companies.
    3. Internal Audit Department of Internal Control Division regularly audits the Riken group companies.
    4. Corporate auditors of Riken Corporation hold additional posts of corporate auditor of the major group companies and audits the concerned group company on its accounting and operation.
  7. Assistant staffs for corporate auditors

    If requested by a corporate auditor, we will consult with the corporate auditor and staff appropriate employees for assistance as necessary.

  8. Independence of assistant staff from the directors

    Assistant staff for corporate auditor reports direct to the corporate auditors and is free from directions by the directors. Personnel matters of assistant staff, such as transfer and evaluation, require prior consultation and consent of the corporate auditors.

  9. Reporting system to corporate auditors from directors and employees

    The directors and employees are required to report the facts and other operational matters that have the potential risks to cause considerable damages to Riken group.
    The directors and employees are not to be treated disadvantageously by reason of making such reports to the corporate auditors.
    The directors and employees discuss with the corporate auditors and decide how to and what to report to the corporate auditors and appropriately report to the corporate auditors.
    Further, we discuss and decide on which meeting the corporate auditors are required to attend and review the meeting materials. The corporate auditors will do so.

  10. Policies on treatment of expenses generated from the execution of duties of corporate auditors

    Riken Corporation will bear and compensate for the expenses of the corporate auditors and other expenses related to the execution of duties of the corporate auditors, whichever they are prepayment or repayment, except for the case that the payment is evidently unrelated to the execution of duties of the corporate auditors.

  11. System to ensure that the audit and other activities by corporate auditors are effectively conducted

    In order for corporate auditors to have good communication with the President, the corporate auditors have regular meetings with the President. They also have close cooperation with the Internal Audit Department of Internal Control Division and the accounting auditors and the corporate auditors of group companies in order to ensure effective audit by the corporate auditors.