Internal Control and Internal Audit
The Sumitomo Corporation Group has strengthened its internal controls in order to retain the trust of all its stakeholders.
The Sumitomo Corporation Group is formed of seven Business Units as well as regional organizations in Japan and overseas. The Business Units, organizations and group companies collectively work together in broad business fields. It is essential that we provide a uniform standard in operational quality at these businesses, irrespective of their business sector or region. This standard must also meet the expectations of our stakeholders.
From this perspective, we launched our Internal Control Program in 2005 to perform a comprehensive evaluation of the status of internal controls using a standards-based checklist. This Internal Control Program checklist covers approximately 350 points pertaining to general operations that should be common across the Group, including risk management, accounting and financial controls and compliance.
To ensure that this checklist assessment is conducted effectively, we make concerted efforts to educate all our officers and employees, including those at Group companies, on the essential fine points of internal controls that must be verified.
In August 2010, we launched a fully redesigned Internal Control Committee. The new committee is responsible for the management and evaluation of overall internal control across the entire Sumitomo Corporation Group and the development and implementation of basic policies on internal control. While the committee promotes group-wide activities, business units and regional organizations in Japan and overseas are implementing their own internal control activities in place of the previous group-wide, comprehensive checklist assessment.
These “Internal control activities” specifically refer to the planning, implementation, evaluation and improvement of our internal control systems and processes. Each organizational unit carries on these activities continuously on a daily basis with timely and optimal support from its Planning & Administration Department, contributing to the sustainable growth and development of the Group.
Fulfillment of Legal Requirements
In recent years, due to social demands, legislation requiring companies to constantly improve and monitor their internal control systems has been passed under the Japanese Company Law and the Financial Instruments and Exchange Law. We have treated meeting these legal obligations as an opportunity to further reinforce our internal control program, which we had implemented ahead of the enactment of this legislation. Our efforts in this area are ongoing and not transitional.
The Japanese Company Law, which came into effect in May 2006, calls for companies to establish “systems ensuring that the execution of duties by directors conforms to legal regulations and their Articles of Incorporation as well as systems ensuring that business processes are handled appropriately.” Having previously established various systems and frameworks, the Sumitomo Corporation Group fulfills the requirements of this law.
To comply with the internal control reporting rules stipulated in the Financial Instruments and Exchange Law, which took effect on April 1, 2008, we are tracking and evaluating our internal controls with regard to the reliability of financial reporting, as required by the law, through the effective application of Internal Control Program results and its promotion structure.
Through the aforementioned efforts and measures, the Sumitomo Corporation Group aims to continuously improve the quality of its operations.
The Internal Auditing Department, which reports directly to the President, was established as an independent organization to monitor company-wide operations. Internal audits are performed at all organizations within the Company and Group companies. The internal audit results are reported directly to the President every month, and reported regularly to the Board of Directors. The Internal Auditing Department helps to raise the quality of organizational management by evaluating the effectiveness of risk management, controls and organizational governance processes.
