Internal Control System
We have established an Internal Control Committee chaired by the president to complement the Board of Directors. This committee checks the status of internal control from the perspective of methods for achieving the four goals of financial report reliability, legal compliance, work effectiveness/efficiency, and conservation of assets, and implements corrective measures to ensure that the relevant department strives to perform appropriate and effective internal control operations when a problem is found.
Furthermore, we annually review and redefine the basic policy regarding internal control system maintenance at Board of Directors' meetings.
Enhancing Group Governance to Aim for Further Increased Corporate Value
Director, Senior Managing Corporate Officer
Chief Executive of Management Planning Headquarters
With the expansion of ESG investing, there has been a movement to enhance corporate governance to create medium- to long-term value. In order to increase the corporate value of the entire Group, we have established systems for improving capital efficiency and building universal group governance. In regard to group governance, we promote the provision and integration of group company standards for the three elements of appointment/dismissal, remuneration, and auditing. For Japanese group companies, we promote transparency and unification of the process for appointing/dismissing directors and deciding remuneration of each director. We also dispatch one auditor of each company from a dedicated department of NYK to maintain a system for supervising the operational execution of directors and ensure that the judgment criteria for this supervision is homogenous.
Fiscal 2017 saw a major change, which was Yusen Logistics Co. Ltd. (YLK) becoming a fully owned subsidiary. The Group has group companies involved in various lines of business. I hope that we can maintain an environment for achieving further growth at each company, strengthening communication and collaboration between group companies, and pursuing the creation of synergy. Since it is also necessary to organize the roles of each company and build a group structure that has a more efficient and robust foundation, I hope that we can work together with the various group companies to increase the corporate value of the entire group.
Internal Control over Financial Reporting
In regard to internal control over financial reporting, the Group has designed and operated internal controls in conformance with the practice standards mandated in the Financial Instruments and Exchange Act. In future, the 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 2017
- 132 domestic group companies were audited during the year.
- 2A specific theme was selected and emphasized for the audit of the NYK headquarter and its branches.
- 3An audit of payment control at both NYK and domestic group companies was made to check whether cash flow is adequately controlled.
Audit of overseas companies
Internal auditors belonging to the four group regional headquarters conduct periodic internal audits of approximately 210 group companies overseas (implemented at 54 companies in fiscal 2017).
Findings that audits identify are reported not only to the officer responsible at the headquarter 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* programe.
- *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 analyzing the possible financial impact and the likelihood of occurrence. Management shares the results and supports the preparation of related fraud-prevention measures. After conducted fraud risk assessments, we amended the code of conduct, revised individual operational procedures, and had compliance officers conduct training on fraud prevention.