NPR-RIKENRIKEN CORPORATION

CSR

Corporate Governance

Internal Control System

At a meeting of the Board of Directors held on May 19, 2006, the Board of Directors resolved to adopt a basic policy on the development of an internal control system (final revision in April, 2020). Riken is working to develop an internal control system based on the Companies Act. In addition to strengthening compliance and risk management, we established the Internal Control Div. in June 2007. Further, we are vigorously working to develop an internal control system for financial reporting based on the Financial Instruments and Exchange Act. The basic policy for the development of the internal control system is as follows.

Basic Policy

Affiliates of Riken and Riken (hereinafter referred to as "Riken Group") have established the following as Riken Group Mission Statement and Guiding Principles, and are promoting their corporate activities.
In addition, Riken Group's basic policy demands that Riken Group's directors and employees shall comply with laws, regulations and social norms, and conduct their business in accordance with the Riken Group Code of Ethics, internal rules and social decency.

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 advancements in knowledge 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 the responsibility of the management to prepare and manage the internal control system to conduct lawful and appropriate business activities. We will continue to improve the system.

Guiding Principles
Be Customer Driven
Be Compliant with the Law
Be Focused on the Basics
Be Open
Be Proactive
Be Prompt

Based on this Mission Statement, Riken recognizes that it is an important management responsibility to develop and operate a system for appropriate business execution, and will make efforts to develop an even more appropriate group internal control system.

  1. System to ensure that the execution of duties by the directors and employees complies with laws and regulations and the articles of incorporation

    Recognizing that thorough compliance is essential to the continued existence of an enterprise, Riken Group will endeavor to establish a management system that is widely trusted by society, in which all directors and employees comply with laws, regulations, and social norms, and act in accordance with a fair sense of ethics.

    1. Establish Code of Ethic and conduct guidelines applicable to Riken Group as a whole in order to establish a system for Riken Group's directors and employees to comply with laws, regulations and the articles of incorporation, and carry out appropriate business activities.
    2. The Audit and Supervisory Committee, the majority of whose members are outside directors, shall be established to enhance the soundness and efficiency of the management.
    3. In order to establish a management system that is trusted by society, Riken will establish the Compliance Committee, which chairman is the President, and will promote various activities necessary to firmly establish and thoroughly implement compliance.
    4. To ensure thorough compliance, the Personnel & General Affairs Div. systematically plans and provides compliance education to the directors and employees.
    5. We will establish an external contact point for compliance consultations and reporting of improper conduct, and operate an internal reporting system that thoroughly protects whistleblowers.
    6. The Internal Control Div. uses periodic internal audits to assess the actual state of Riken's business operations, investigate and verify that all operations are conducted appropriately, properly, and rationally in compliance with laws and regulations and the Articles of Incorporation, and that Riken's internal rules and regulations and organizations are adequate and appropriate. Then, the Office reports the results of audits to the President and the Audit and Supervisory Committee.
    7. The above compliance activities shall be periodically reported to the Board of Directors.
  2. System for the preservation and management of information pertaining to the execution of duties by the directors

    Riken shall properly record information on the execution of duties by directors including records of the decisions of important meetings such as the board of directors and the documents decided by each director based on the Standards for Division of Business and the Decision-making Standards in accordance with laws and regulations as well as the Rules for Document Management, and shall preserve such records for a specified period of time.

    1. The following documents (including an electronic or magnetic record) shall be retained together with the relevant documents, in accordance with laws and regulations and the Rules for Document Management.
      1. Documents provided for by law
        • Minutes of General Meeting of Shareholders (Article 318 of the Companies Act), Minutes of Meeting of the Board of the Directors (Article 369 of the Companies Act)
      2. Documents based on the Rules for Document Management
        • Minutes of Executive Committee Meeting, Minutes of Technical Committee Meeting, Minutes of CSR Committee Meeting, Minutes of Compliance Committee Meeting
        • Other minutes of committee meetings that were chaired by the directors
        • Approval document in which the director becomes the approver
        • Other important documents specified in the Rules for Document Management
    2. Unless otherwise stipulated in laws and regulations, the documents are managed by the division responsible for each document based on the Rules for Document Management.
  3. Rules and other systems concerning the management of the risk of loss

    Riken Group will endeavor to develop systematic measures to minimize the risk of losses by, for example, preparing appropriate countermeasures in advance according to the magnitude and likelihood of various risks of losses.

    1. Establish risk management regulations and related regulations, including the basic policy for risk management, in order to establish a risk management system across Riken Group and implement appropriate risk management.
    2. The Risk Management Subcommittee (Chairman: General Manager of Corporate Planning Div.) and the BCM Subcommittee (Chairman: General Manager of Administrative Coordination Div.) will be established under the CSR Committee to promote various activities necessary to firmly establish and implement risk management and business continuity plans.
    3. Based on the risk management rules, identify and evaluate business opportunity risk and business activity execution risk in Riken Group every year, and formulate and promote a risk response plan.
    4. In addition to preventing large-scale accidents, disasters, and scandals, a crisis headquarters chaired by the President (or a person designated by the President) will be established to respond in the event of an accident.
    5. The above risk management activities shall be periodically reported to the Board of Directors.
  4. System to ensure efficient execution of duties by the directors

    Riken shall formulate and implement a medium-term and annual management plan to respond to changes in the operating environment. Riken shall strive to improve the efficiency of the daily operations by the directors with the aim of achieving the goals of the management plan.

    1. The business and authority to make decisions of the directors shall be stipulated in the Organization Rules, the Standards for Division of Business, and the Decision-making Standards.
    2. The Board of Directors shall decide the management policies, matters stipulated by laws and regulations, and other important matters concerning management, and supervise the execution of business by the directors.
    3. The Executive Committee, chaired by the President, shall be established under the Board of Directors (in principle, twice a month) to deliberate on the matters to be resolved by the Board of Directors in advance, as well as to discuss and make decisions on matters such as the execution of Riken's operations and the implementation of measures within the scope of the authority delegated by the Board of Directors.
  5. System for Ensuring Appropriateness of Business Operations in Riken Group

    Riken shall strive to establish an internal control system for the Riken Group including affiliated companies, and will endeavor to manage Riken Group appropriately, while respecting the autonomy of each subsidiary company, based on the "Rules for the Management of Affiliated companies."

    1. As part of Riken Group management, we shall share the Mission Statement, Guiding Principles, and compliance regulations with affiliated companies, and promote the Riken Group Management Plan in an integrated manner.
    2. The Corporate Planning Div. and the Overseas Operations Div. shall participate in the Board of Directors meetings of domestic affiliates and overseas affiliates respectively and conduct interviews to confirm the legitimacy and efficiency of management.
    3. The Internal Control Div. shall conduct regular audits of affiliated companies.
    4. The Audit and Supervisory Committee Members of Riken shall serve as corporate auditors of major affiliated companies to conduct accounting and operational audits.
  6. Employees Assisting the Duties of the Audit and Supervisory Committee

    In cases where the Audit and Supervisory Committee requests a full-time employee to assist with his/her duties, such employee shall be assigned after prior consultation with the Audit and Supervisory Committee.

  7. Matters related to the independence of the employees set forth in the preceding paragraph from the directors (excluding the directors who are Audit and Supervisory Committee Members)

    The employees set forth in the preceding paragraph shall be placed under the direction of the Audit and Supervisory Committee without receiving instructions from the directors (excluding the directors who are Audit and Supervisory Committee Members), and shall report to the Audit and Supervisory Committee in advance with regard to personnel changes and evaluations, and obtain its approval.

  8. Systems for the directors (excluding the directors who are Audit and Supervisory Committee Members) and employees to report to the Audit and Supervisory Committee, and other systems for reporting to the Audit and Supervisory Committee

    The directors (excluding the directors who are Audit and Supervisory Committee Members) and employees of Riken Group shall report to the Audit and Supervisory Committee the facts that could cause substantial detriment to Riken Group and other important matters relating to the operation of the business. The directors (excluding the directors who are Audit and Supervisory Committee Members) and employees who have reported to the Audit and Supervisory Committee shall not be treated in a disadvantageous manner for the reason of the report, and that fact shall be made known to the public.
    Matters to be reported to the Audit and Supervisory Committee and the methods of reporting shall be established after the consultation with the Audit and Supervisory Committee, and the directors (excluding the directors who are Audit and Supervisory Committee Members) and employees shall report appropriately.
    The Meeting Committee which the Audit and Supervisory Committee Members attend or inspect materials for shall be established after consultation with the Audit and Supervisory Committee, and Audit and Supervisory Committee Members shall attend the Meeting Committee or inspect the meeting materials and minutes.

  9. Matters concerning policies regarding the handling of expenses, etc. arising from the execution of duties by Audit and Supervisory Committee Members

    In cases where a request has been received from an Audit and Supervisory Committee Member for the expenses required for advance payment or the reimbursement of the expenses that arose in the execution of his/her duties or for the expenses required for the processing of expenses or obligations, etc. that arise in the execution of said duties, Riken shall bear such expenses except where it is found clearly unnecessary for the execution of his/her duties by an Audit and Supervisory Committee Member.

  10. Other systems to ensure that audits by the Audit and Supervisory Committee are conducted effectively

    The Audit and Supervisory Committee shall hold regular meetings in order to mutually communicate with the President, maintain coordination with the Internal Control Div., accounting auditors, and auditors of affiliated companies, and endeavor to ensure the effectiveness of audits by the Audit and Supervisory Committee.