Internal Control System

Internal Control Activities

The Internal Control Committee, chaired by the president, was established to strengthen compliance for internal control under Japan’s Companies Act, the Financial Instruments and Exchange Act, and other laws. Internal control is a means of achieving four corporate goals: reliable financial reporting, compliance with statutory laws and regulations, effective and efficient operations, and the safeguarding of assets. Based on this viewpoint, the Internal Control Committee periodically checks the status of internal control and reflects findings in improvements. Further, the Board of Directors re-approved a resolution on basic policy for the provision of an internal control system in compliance with Japan’s Companies Act. The NYK Group will continue to strengthen the system and develop internal regulations in order to prevent illegal acts and corruption and ensure that operation of the organisation is effective and efficient.

Internal Control over Financial Reporting

In regard to internal control over financial reporting, the NYK Group has designed and operated internal controls in conformance with the practice standards mandated in the Financial Instruments and Exchange Act. In future, the NYK Group will work to ensure the reliability of financial reporting by continually upgrading and effectively operating the internal control system.

Internal Auditing Activities

Audit of domestic companies

Internal auditors make suggestions on the soundness, effectiveness, and efficient operation of business management. Internal auditors also follow up on the progress of improvements based on suggestions.
The Internal Audit Chamber’s internal auditors perform internal audit activities for the Company and 140 domestic Group companies.

Major auditing activities in fiscal 2015

  1. Nineteen Group companies were audited during the year.
  2. A specific theme was selected and emphasised for the audit of the NYK Headquarters and its branches.
  3. An audit of payment control at both NYK and domestic Group companies was made to check whether cash flow is adequately controlled.
  4. An IT audit in relation to the status of IT risk management and IT security was conducted at both NYK and domestic Group companies.

Audit of overseas companies

Internal auditors belonging to the four Group regional headquarters conduct periodic internal audits of approximately 220 Group companies overseas (implemented at 72 companies in fiscal 2015).
Findings that audits identify are reported not only to the officer responsible at the head office who provides direction and oversight but also to the regional heads overseas to help raise the overall level of internal control in each region.
The staff of the Internal Audit Chamber and the internal auditors overseas contribute to enhancement of the internal control of the NYK Group as a whole by conducting the audits based on the same philosophy and rules and in accordance with the Fraud Risk Assessment* programme.

* Fraud Risk Assessment:
This assessment makes use of anonymous replies collected from employees to identify the probability of risk associated with each potential fraud case by analysing the possible financial impact and the likelihood of occurrence. Management shares the results and supports the preparation of related fraud-prevention measures. In fiscal 2015, we conducted fraud risk assessments at seven bases (eight companies), amended the codes of conduct of respective companies, revised individual operational procedures, and had compliance officers conduct training on fraud prevention.
Europe
Office: London, the United Kingdom;
50 target companies
We conduct internal audits and provide consulting services with due consideration to different legislative, operational and stages of maturity in our companies and across countries. In fiscal 2015, corporate governance and compliance were identified as prioritised areas for enhancement which was achieved through the measures developed and adopted jointly by Group regional headquarters and local companies’ senior management teams. We also provided support for the preparation of disaster recovery and business continuity plans to mitigate the risks associated with terrorism and cyberattacks.
The Americas
Office: Secaucus, the United States;
50 target companies
To fully support our stakeholders, it is important to understand the many different cultures and the geographic diversity of North and South America as well as the special characteristics of particular businesses. We conduct audits and provide advice based on thorough familiarity with the various business and regulatory trends in each country in close coordination with each company’s senior management team. We focus our efforts on planning and securing the resources required to provide high value-added risk assessment and related services to each client.

Audit team of Group regional
headquarters in Europe
Audit team of Group regional
headquarteres in South Asia
Audit team of Group regional
headquarteres in the Americas
Audit team of Group regional
headquarteres in East Asia

South Asia
Office: Singapore;
80 target companies
In South Asia, which has grown markedly in recent years, we conduct an extremely varied range of audits that reflect the characteristics of particular cultures, regions, and business conditions. From fiscal 2016, we will also provide the necessary support to the new ‘home doctor’ function and continue to offer our consulting services aimed at controlling risk while enhancing business value.
East Asia
Office: Hong Kong, China;
40 target companies
We take measures in response to the policies of the Chinese government that affect businesses, such as the campaign to eradicate corruption or the easing of the one-child policy.
Also, taking into consideration the local situation of each company we conduct appropriate audits and propose improvements. In addition, we promote to joint-venture partners that the NYK Group initiatives are an effective way of enhancing corporate value and assist Group companies in accordance with the Anti-Fraud Programme.

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