Internal Control

Enhancing Internal Control

Based on “Basic Policy Relating to System for Ensuring the Appropriateness of Operations (Internal Control System)”, which was passed by the Board of Directors, METAWATER aims to build a more effective system of governance by enhancing compliance, information management, risk management, and other initiatives.

System to Ensure the Appropriateness of Operations

Pursuant to the provisions of Item 5 in Article 362 of the Companies Act, at the meeting of the Board of Directors held on April 24, 2015, METAWATER passed a resolution regarding basic policy on the establishment of the systems set forth in No. 6, Item 4 of Article 362 of the Companies Act, and in each number of Items 1 and 3 of Article 100 of the Ordinance for Enforcement of the Companies Act, as follows.
Under the Companies Act and Ordinance for Enforcement of the Companies Act, basic policy for systems for ensuring the appropriateness of the operations of METAWATER and operations of the business group consisting of METAWATER and its subsidiaries (hereinafter referred to as “the METAWATER Group”) is stipulated as follows. System to Ensure the Appropriateness of Operations

System to ensure performance of duties by METAWATER directors and employees complies with applicable laws, regulations, and articles of incorporation

  • METAWATER strives to ensure the transparency and soundness of its management through the following corporate governance system.
    • In order to clarify management responsibilities and respond swiftly to changes in the business environment, directors serve until the conclusion of the annual general meeting of shareholders for the last business year ending within one year after their appointment.
    • In order to enhance management supervision and management audit functions, and to ensure the appropriateness of the management judgment process involved in execution of important business, METAWATER invites external officers with the appropriate qualifications.
  • METAWATER makes every effort to thoroughly familiarize all company executives and employees with its management philosophy and Code of Conduct.
  • METAWATER establishes and promotes a compliance system as follows.
    • METAWATER establishes Compliance Regulations, and set up a Sustainability Committee as a deliberative body.
    • A compliance program that clarifies the roles and responsibilities covering each regulation and law in terms of internal rules, monitoring, auditing, and education has been established with the approval of the Sustainability Committee. This program is implemented based on an annual plan, and the results are reported to the Sustainability Committee.
    • Directors and corporate auditors participate in training on laws and regulations necessary for the performance of their duties.
    • By establishing an internal reporting system that facilitates reporting from employees, etc. to the department in charge of compliance and outside lawyers through a route independent of the normal business line, METAWATER is able to prevent and promptly detect acts that violate laws and regulations, articles of incorporation, and internal rules, and take appropriate measures based on operational regulations.
  • METAWATER has established basic policies and regulations to deal with antisocial forces, and taken systematic measures to eliminate antisocial forces and groups that threaten the order and security of civilian life.
  • METAWATER has established an internal auditing department under the direct control of the President to conduct highly effective internal audits.

System for storage and management of information relating to performance of duties by METAWATER directors

METAWATER has established document management regulations to ensure that records, etc., relating to the execution of important company business are reliably stored and managed, and that directors and corporate auditors have access to the content of such records, etc.

Regulations and other systems for managing risk of loss to METAWATER

  • METAWATER has established risk management rules and created an appropriate risk management system for risks that may affect management.
  • In preparation for the occurrence of emergencies such as large-scale disasters, serious accidents, and serious scandals, METAWATER shall appoint an executive in charge of crisis management, formulate emergency response guidelines, and develop an emergency response system.

System to ensure efficient performance of duties by METAWATER directors

  • METAWATER determines the duties of executive directors by resolution of the Board of Directors, and clarifies the authority and responsibility for decision-making concerning the performance of duties by means of the Board of Directors Regulations and Regulations for Official Authority.
  • METAWATER formulates current and medium-term management plans, and periodically checks, evaluates, and reviews progress.

System to ensure reliability of financial reporting

In order to ensure the appropriateness of financial accounting documents and other information stipulated in the Financial Instruments and Exchange Law, METAWATER constructs a system of internal control over financial reporting, ensures the appropriate management of evaluation and reporting, and reports the results of such evaluations to the Board of Directors.

System for ensuring appropriateness of operations in METAWATER Group

  • In accordance with Regulations on the Management of Affiliated Companies, METAWATER makes budgets, operating results, financial condition, management issues and other important information of its subsidiaries subject to periodic reporting to METAWATER based on the size and importance of the subsidiary, and requires that METAWATER’s approval be obtained for important management matters.
  • METAWATER appoints company executives and employees as directors of its subsidiaries as necessary to ensure thorough implementation of the company's management policies and strategies, and to control and direct the management of its subsidiaries.
  • In order to ensure the effectiveness of audits of subsidiaries, METAWATER appoints company executives and employees as auditors of subsidiaries as necessary. In addition, the company's internal auditing department works with our corporate auditors to conduct internal audits in accordance with the size and importance of subsidiaries.
  • METAWATER establishes Compliance Regulations, as well as a Code of Conduct for Group executives and employees, and provides compliance education, advice, and guidance in order to promote awareness of legal compliance among our Group executives and employees. METAWATER's internal reporting system is also available to the executives and employees of subsidiaries.
  • In order to implement appropriate risk management throughout the Group, METAWATER establishes Risk Management Regulations and develop a risk management system tailored to the size and importance of subsidiaries.
  • In order to ensure the appropriateness and efficiency of the operations of its subsidiaries, METAWATER creates an affiliate management department, and establishes a system under which consultations, information sharing, guidance, communication, and support between METAWATER and its subsidiaries is carried out without delay in accordance with regulations on the management of affiliated companies.

Matters concerning employees required to assist in the duties of METAWATER corporate auditors

  • In the event that a corporate auditor requests that an employee be appointed to assist corporate auditors with their duties, METAWATER shall appoint an assistant auditor, and shall endeavor to reflect the opinions of full-time corporate auditors in its decision.
  • In assisting corporate auditors with their duties, the relevant employees shall follow the instructions of the corporate auditors, and shall not receive instructions from the Board of Directors or directors, etc.

System for METAWATER Group executives and employees to report to company auditors

METAWATER shall establish regulations relating to reports, etc. by Group executives and employees to corporate auditors, and stipulate the following for establishing a system that allows corporate auditors to smoothly and appropriately gather information necessary for the performance of their duties.

  • Concreate measures shall be established to enable METAWATER Group executives and employees to gather information on the execution of business, such as ensuring opportunities for corporate auditors to attend important meetings on decision‐making for business execution, regularly reporting to corporate auditors, and circulating important documents.
  • If executives and employees of the METAWATER Group discover facts that violate laws and regulations, or articles of incorporation, etc., or that are likely to cause substantial damage to METAWATER or its subsidiaries, they are required to report immediately to the corporate auditors in accordance with the methods prescribed in the relevant regulations.
  • The METAWATER Group prohibits unfavorable treatment of executives or employees on the grounds that they have submitted reports to corporate auditors, and shall protect those submitting such reports.

Other systems to ensure efficient audits by METAWATER corporate auditors

  • In order to ensure the transparency and soundness of management, METAWATER invites outside auditors with the expertise and experience necessary to conduct audits.
  • METAWATER aims to ensure the effectiveness of audits by strengthening the coordination of the audit functions of corporate auditors, the internal auditing department, and the accounting auditors.
  • METAWATER establishes budgets for expenses that corporate auditors request in advance as being necessary for the performance of their duties, and when corporate auditors request expenses for consultations or investigations, etc. with lawyers, certified public accountants, or other experts in excess of the said budget, METAWATER complies with such requests except in cases where proven that such expenses are not necessary for the performance of corporate auditor duties.

Operational Status of System to Ensure the Appropriateness of Operations

The following is an overview of the principal operational status for the fiscal year under review.

Compliance

  • METAWATER has established a corporate philosophy and METAWATER Group Corporate Charter of Conduct, and is working to ensure that all Group executives and employees are fully aware of the principles. In addition, in order to ensure compliance with regulations, laws, and internal rules, METAWATER has established a compliance program based on METAWATER Group Compliance Regulations, conducts education and other activities based on the annual plan, and reports its results to the Sustainability Committee.
  • METAWATER has established an internal reporting system (helpline system) to receive reports from and offer consultations for Group employees, etc., and the department in charge takes appropriate measures based on operational regulations.

2) Risk management

  • Based on METAWATER Group Risk Management Regulations, the Group identifies, analyzes, and evaluates risks and reports them to the Sustainability Committee.
  • In preparation for emergencies such as crises and disasters, METAWATER has established a Business Continuity Plan (BCP) based on METAWATER Group Business Continuity Management (BCM) Regulations, and holds regular BCM Promotion Committee meetings to implement improvements and conduct training.

3) Ensuring directors carry out their duties efficiently

  • In accordance with the Board of Directors Regulations and Regulations for Official Authority, METAWATER clarifies rules for decision-making on matters to be resolved by the Board of Directors.
  • In accordance with METAWATER’s “Basic Policy on Corporate Governance ” (established November 27, 2015), in order to enhance the transparency, soundness, and efficiency of management, METAWATER implements matters stipulated in the relevant basic policy, such as analyzing and evaluating the effectiveness of the Board of Directors.

4) Internal control over financial reporting

  • In accordance with the internal control management regulations for financial reporting, METAWATER’s internal auditing department evaluates the overall development and operational status of the internal control systems of METAWATER and its consolidated subsidiaries, and reports the results to the Board of Directors.

(5) Group company management

  • In accordance with matters on which final decisions are to be made stipulated in the METAWATER group regulations on the management of affiliated companies, METAWATER makes necessary final decisions on proposals submitted by subsidiaries. And in accordance with these regulations, METAWATER receives reports from subsidiaries on their financial condition, management issues, and other important information.
  • In accordance with internal audit regulations, METAWATER's internal auditing department conducts internal audits of subsidiaries.

(6) Ensuring the effectiveness of audits carried out by corporate auditors

  • Corporate auditors receive reports from executives and employees of METAWATER and its affiliates on information necessary to conduct audits as needed, and attend important meetings relating to decision-making on business execution. In addition, the internal auditing department and accounting auditors work closely together to improve the effectiveness of audits by regularly exchanging information with corporate auditors.
  • In order for the Board of Corporate Auditors and each corporate auditor to perform their duties appropriately, METAWATER has assigned employees to assist corporate auditors. In addition, expenses expected to be necessary in the course of duties based on discussions among corporate auditors are budgeted.