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Basic Regulations for Compliance and Risk Management

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  • Basic Regulations for Compliance and Risk Management

Chapter I. General Provisions

  1. (Purpose)

    Article 1. The purpose of these Regulations is to establish a basic policy and system for compliance and risk management at MIYAJI ENGINEERING GROUP, INC. (hereinafter referred to as “MEG”) and MEG’s operating subsidiaries (hereinafter, MEG and MEG’s operating subsidiaries shall collectively be referred to as “MEG Group Companies” and shall be referred to as “each MEG Group Company” when referring to individual companies, including MEG).

  2. (Definitions)

    (Definitions)

    • Compliance means activities within an organization to prevent losses by targeting risks of infringement of laws and regulations, etc. (including notices, bulletins, guidelines, outlines, etc., in addition to various laws and regulations, as well as the Articles of Incorporation and internal regulations, etc. that are established by MEG, and other rules, etc. required by society in general. Specific details are described in Article 4.) related to the organization’s operations, goods and services handled by the organization, values generated by the organization (hereinafter referred to as “Corporate Values”), social responsibilities as an organization (hereinafter referred to as “Social Responsibilities”), and social evaluations of the organization (hereinafter referred to as “Social Evaluations”).
    • Risk means the uncertainty of the occurrence of an event that may affect the Corporate Values of each MEG Group Company, the Social Evaluations they generate in the future, and their earnings.
    • Risk management means coordinated activities that direct and control the organization with respect to risk. Risk management aims to reduce the number of dangerous or undesirable outcomes for each MEG Group Company, rather than maximize profits.
    • Risk management systems refer to the various elements of an organization’s management system for risk management, including strategic planning, decision-making, and other processes related to risks.
    • A crisis means an event that has or may have a significant impact on the management or business activities of each MEG Group Company due to having an adverse effect on human health, an adverse effect on Corporate Values, causing significant deterioration in Social Evaluations, or destroying property or rendering it unusable.
    • Crisis management means management related to prior initiatives in preparation for a crisis or emergency and the actual emergency response in the face of a crisis.

  3. (Scope of Application)

    • Article 3. These Regulations apply to the officers and employees (including part-time and temporary employees, hereinafter referred to as “Officers and Employees, etc.”) at each MEG Group Company following a resolution at a meeting of the Board of Directors and enactment by each MEG Group Company.
    • Each MEG Group Company may make partial changes to the content of these Regulations in accordance with laws and regulations, business practices, labor practices, their own types of transactions, and the content of their product construction and services, etc. before enacting these Regulations, but may not establish content that is in contrary to these Regulations.

  4. (Scope of Related Laws and Regulations, etc.)

    Article 4. The scope of the main laws and regulations that relate to compliance in these Regulations shall be as follows.

    • Various laws and regulations established by the government
    • Notices, bulletins, guidelines, outlines, etc. established by various administrative agencies
    • Various rules and regulations, etc. established by an organization to which each MEG Group Company belongs
    • Articles of Incorporation, Management Philosophy, Charter of Corporate Behavior, Code of Conduct, and other internal regulations, etc. established by MEG
    • General social rules
    • Various socially accepted norms and ethical values
    • Task Force on Climate-related Financial Disclosures (TCFD)

  5. (Targeted Risks)

    • Article 5. 1. The types of risks targeted by MEG Group Companies’ risk management initiatives are as follows.
      • Accidents that have a significant social impact at construction sites
      • Quality non-conformance issues that have a significant social impact
      • Violations of various laws and regulations established by the government and notices, bulletins, guidelines, outlines, etc. established by administrative agencies
      • Violations of various regulations, etc. established by organizations to which each MEG Group Company belongs
      • Actions and events other than those listed above that significantly damage social trust and evaluations
      • Actions that seriously violate general social rules, various socially accepted norms, and ethical values
      • Large-scale natural disasters such as earthquakes and typhoons
      • Climate change risks
      • Events that have a significant adverse effect on the Company that do not fall under any of the above
    • The assets to be protected through the promotion of risk management shall be “all tangible and intangible assets (including Corporate Values and Social Evaluations) owned and managed by each MEG Group Company.” These are all (both directly and indirectly) subject to review and implementation from the stage from which they are under the control of each MEG Group Company, affect each MEG Group Company, or are affected by each MEG Group Company, and shall be excluded from review and implementation at the stage at which they are not under the control of each MEG Group Company, do not affect each MEG Group Company, or are not affected by each MEG Group Company.

  6. (Basic Compliance Policy)

    Article 6. Each MEG Group Company shall engage in compliance with the following basic policy in accordance with the Charter of Corporate Behavior and Code of Conduct stipulated separately in order to protect the legal and social security and values of all people working at the company and to establish corporate governance that pursues Social Responsibilities.

    • Each MEG Group Company shall refrain from activities that are problematic from a compliance perspective.
    • Each MEG Group Company shall honestly acknowledge violations, deviations, negligence, etc., and promptly take corrective measures and measures to prevent recurrence.
    • Each MEG Group Company shall clarify roles, responsibilities, and authority within the organization, as well as information communication routes.
    • Each MEG Group Company shall continue to provide adequate training and conduct rigorous evaluations of all Officers and Employees, etc.
    • Each MEG Group Company shall conduct an appropriate self-audit each year in accordance with management policy and guidelines.
    • Each MEG Group Company shall recognize its Social Responsibilities as a corporation and make appropriate efforts as a corporation to resolve issues necessary for a sustainable society.
    • Each MEG Group Company shall conduct compliance promotion activities as a management priority.

  7. (Basic Risk Management Policy)

    Article 7. Each MEG Group company shall accurately deal with natural disasters, accidents, other man-made disasters, and various management risks, and tackle risk management in accordance with the following basic policies in order to fulfill its Social Responsibilities by doing whatever it can to prevent and eliminate all factors that may hinder the achievement of its management philosophy and management objectives.

    • Through risk management practices, each MEG Group Company shall continually and stably develop its business and maintain and enhance its Corporate Values and Social Evaluations.
    • Giving top priority to ensuring the quality and safety of products and services, each MEG Group Company shall strive to eliminate or reduce factors that may damage its Corporate Values and Social Evaluations, as well as eliminate or reduce factors that may hinder the Social Evaluations and economic benefits of their customers, business partners, shareholders, investors, local communities, and other stakeholders, as well as their own Officers and Employees, etc.
    • Each MEG Group Company shall make it their social mission to provide a stable supply of products and services that are widely used throughout society.
    • All Officers and Employees, etc. shall comply with various laws and regulations, rules, etc., in the spirit of compliance and shall autonomously consider what is the right thing to do and act based on that judgment.

Chapter II. Structure and Responsibilities

  1. (Compliance and Risk Management Committee)

    • Article 8. A Compliance and Risk Management Committee shall be established under the MEG Board of Directors to deliberate and approve the basic policy and promotion system, etc. for the compliance and risk management system of the entire MEG Group, and to achieve the objective of building and maintaining a management system and ensuring its proper operation and establishment.
    • The operation of the Compliance and Risk Management Committee shall be governed by the separate Compliance and Risk Management Committee Regulations.

  2. (Responsibilities of the Presidents of Each MEG Group Company)

    • Article 9. The MEG President shall oversee the establishment, operation, maintenance, and improvement of the MEG Group’s overall compliance and risk management systems, and shall be responsible for systems’ implementation and results.
    • The presidents of MEG’s operating subsidiaries shall be responsible for the establishment, operation, maintenance, and improvement of their company’s compliance and risk management system.
    • The presidents of MEG’s operating subsidiaries shall immediately report to the MEG President and follow his or her instructions when any matter arises that is believed to be appropriate to bring to the attention of the MEG President.

  3. The presidents of MEG’s operating subsidiaries shall immediately report to the MEG President and follow his or her instructions when any matter arises that is believed to be appropriate to bring to the attention of the MEG President.

    • Article 10. The MEG President shall appoint an officer in charge of compliance and risk management to oversee the work involved in the establishment, implementation, and maintenance of processes necessary for the MEG Group’s overall compliance and risk management system.
    • The officer in charge of compliance and risk management at MEG shall assist the MEG President in conducting duties related to compliance and risk management for the entire group.
    • The presidents of MEG’s operating subsidiaries shall appoint officers in charge of compliance and risk management to oversee the work involved in the establishment, implementation, and maintenance of processes necessary for their company’s compliance and risk management system.
    • The officers in charge of compliance and risk management at MEG’s operating subsidiaries shall conduct duties related to compliance and risk management at their company.

  4. (Compliance and Risk Management Supervising Department)

    • Article 11. MEG’s General Affairs and Human Resources Department shall oversee the establishment and promotion of a compliance system for the entire MEG Group.
    • The general affairs division of each operating subsidiary shall oversee the establishment and promotion of compliance systems at MEG’s operating subsidiaries.
    • The general manager of each MEG Group Company’s compliance and risk management supervising department shall assist the officer in charge of compliance and risk management at his or her company and, as the key organization for compliance and risk management, shall oversee compliance and risk management implemented by each division or department. Specific details regarding internal audits shall be established separately in the Internal Audit Regulations.

  5. (General Manager of the Audit Office)

    • Article 12. The General Manager of the MEG Audit Office shall assist the MEG President in auditing the compliance and risk management of the entire MEG Group and shall conduct the following duties.
      • Formulate internal audit plans (annual plans and individual implementation plans)
      • Establish key audit topics and create checklists
      • Conduct on-site and written audits (scheduled and extraordinary)
      • Prepare and submit audit working papers and audit reports
      • Give improvement recommendations and follow-up in order to develop compliance and risk management systems
      • Support internal audits by each MEG Group Company
      • Educate and raise awareness of compliance, risk management and internal audits
      • Consult, coordinate, liaise with and report to the Audit and Supervisory Committee and Accounting Auditor
    • The general manager of the internal audit division at each MEG Group Company shall assist the president of his or her company in auditing compliance and risk management, and shall conduct work equivalent to the work of the Audit Office referred to in the preceding paragraph. Specific details regarding the work of internal audit divisions shall be established separately by each operation subsidiary.

  6. (Charter of Corporate Behavior, Code of Conduct and Manual “Guidelines”)

    • Article 13. The Compliance and Risk Management Committee shall establish a Charter of Corporate Behavior and Code of Conduct that specifies the main items in laws and regulations to be complied with in business activities, policies for dealing with such items, and precautions, etc.
    • MEG shall publish its Charter of Corporate Behavior and Code of Conduct on its website, etc.

  7. (Education and Training)

    • Article 14. The Compliance and Risk Management Committee shall instruct the secretariat to prepare educational materials on compliance and risk management for officers and employees above a certain position at each MEG Group Company.
    • The presidents of each MEG Group Company shall ensure that their officers (including executive officers) participate in the training on compliance and risk management referred to in the preceding paragraph.
    • Officers in charge of compliance and risk management who have attended the training referred to in the preceding paragraph shall ensure that all employees of their company, etc. also participate in similar training.

  8. (Gathering and Sharing Legal Information, etc.)

    • Article 15. The compliance and risk management supervising department shall strive to monitor trends in the enactment, amendment, or repeal of laws and regulations, etc. and shall provide useful information to each MEG Group Company.
    • When each officer in charge of compliance and risk management obtains information that may be useful to other MEG Group Companies, he or she shall report the information to the Compliance and Risk Management Committee secretariat and strive to share information.

  9. (Appointment of Legal Advisors)

    • Article 16. In principle, MEG Group Companies with a certain level of sales should appoint legal advisors.
    • The officer in charge of compliance and risk management of a company that has appointed a legal advisor shall maintain and manage the contract with the legal advisor.

  10. (Whistleblowing)

    • Article 17. The president of each MEG Group Company shall establish a whistleblowing mechanism and ensure that all employees of his or her company, dispatched employees under his or her management, and employees of related partner companies are thoroughly aware that if they discover of a fact or danger of a serious compliance risk violation in their workplace or their work and if it is difficult to resolve the violation autonomously through reporting to their direct superior, then they should report the violation directly to the general manager of their organization, the officer in charge of compliance and risk management, or via the prescribed whistleblowing system, and presidents shall guarantee that no disadvantage will be imposed as a result of such reporting.
    • Specific details of MEG’s whistleblowing system shall be established separately in the Whistleblowing Regulations.

Chapter III. Crisis Management

  1. (Development of a Crisis Management System)

    Article 18. The officer in charge of compliance and risk management at each MEG Group Company shall examine crisis management systems prepared for emergencies and present his or her findings to the relevant divisions.

  2. (Action Principles in Emergencies)

    Article 19. In an emergency or a situation assumed to be an emergency (hereinafter referred to as an “Emergency, etc.”), the Officers and Employees, etc. of each MEG Group Company shall act calmly and orderly, giving top priority to respect for human life.

  3. (Invoking the Crisis Management System)

    Article 20. The officer in charge of compliance and risk management at each MEG Group Company shall determine whether a situation is an Emergency, etc., and shall then obtain approval from the president of his or her company or the MEG President in accordance with the following systems to announce the invocation of the crisis management system internally or within the MEG Group.

    • A System (major incident affecting the corporate brand) Head of the Emergency Response Headquarters: MEG President
      Secretariat: Officer in charge of compliance and risk management of MEG
      Submit to: Boards of Directors of MEG and the relevant operating subsidiaries
    • B System (incidents other than the above) Head of the Emergency Response Headquarters: President of the relevant operating subsidiary
      Secretariat: Officer in charge of compliance and risk management at the relevant operating subsidiary
      Submit to: Board of Directors of the relevant operating subsidiary

  4. (Establishment of Emergency Response Headquarters)

    Article 21. An emergency response headquarters shall be established by promptly selecting the appropriate personnel for the situation, based on instructions from the presidents of each MEG Group Company or based on the approval from the president of the company for a proposal from an officer in charge of compliance and risk management.

  5. (Initial Response)

    • Article 22. The emergency response headquarters shall quickly collect and analyze information relating to the Emergency, etc., and shall compile initial information such as the details of the Emergency, etc. and the current situation, assumed cause, state of response, state of human and property damage, response schedule (including expected recovery), whether a similar Emergency, etc. has occurred in the past, and whether the company concerned is responsible (obtain advice from an attorney, etc.), as soon as possible after the occurrence of the Emergency, etc.
    • The emergency response headquarters shall, if necessary, obtain approval from the head of the emergency response headquarters and announce initial information concerning the Emergency, etc., the views of MEG or the relevant operating subsidiary, and other necessary information, both internally and externally, as soon as possible after the occurrence of the Emergency, etc.

  6. (Investigation to Determine the Cause and Implementation of Countermeasures)

    Article 23. Based on the initial information and investigations into any similar Emergency, etc. at other companies, the emergency response headquarters shall compile additional information, including information on a thorough investigation to determine the cause, plans for necessary additional measures, prevention of a similar Emergency, etc., response to human and property damage, and the impact on management, with the cooperation of internal and external experts, as necessary. Approval of the MEG President shall be obtained to announce additional information internally and externally as necessary.

  7. (Specific Recovery Measures)

    Article 24. The officer in charge of compliance and risk management shall investigate and take specific recovery measures, such as establishing cooperative relationships with external organizations and developing procedures for the effective use of management resources.

Chapter IV. Reports

  1. (Reporting to the Board of Directors)

    Article 25. The head of the emergency response headquarters shall report at the Board of Directors meetings of his or her own company and MEG held immediately after implementing emergency measures.

  2. (Risk Reporting)

    Article 26. When Officers and Employees, etc. at each MEG Group Company obtain information relating to risks, they shall report such information, without delay, to a higher-level manager, then to the division or department person responsible for compliance and risk management, and then to the officer in charge of compliance and risk management.

  3. (Public Relations)

    • Article 27. The officer in charge of compliance and risk management at each MEG Group Company shall disclose information relating to risks to all stakeholders as necessary, without delay.

  4. (Notification to Government Agencies, etc.)

    • Article 28. The officer in charge of compliance and risk management at each MEG Group Company shall notify the competent authorities, etc. of an Emergency, etc. without delay in cases that require government agencies, etc. to be notified.
    • The officer in charge of compliance and risk management at each MEG Group Company shall obtain approval from the president of his or her company or the MEG President regarding the content of the notification to the government agency, etc.

Chapter V. Compliance Risk Management Performance Evaluations and Compliance and Risk Management System Effectiveness Evaluations

  1. (Compliance Risk Management Performance Evaluations)

    Article 29. The officer in charge of compliance and risk management at each MEG Group Company shall conduct compliance and risk management performance evaluations at his or her company, as necessary. Note that, officers in charge of compliance and risk management may instruct the division or department person responsible for compliance and risk management at their company to conduct compliance and risk management performance evaluations in each division or department.

  2. Note that, officers in charge of compliance and risk management may instruct the division or department person responsible for compliance and risk management at their company to conduct compliance and risk management performance evaluations in each division or department.

    Article 30. The officer in charge of compliance and risk management at each MEG Group Company shall evaluate the effectiveness of his or her company’s compliance and risk management system with regard to compliance and risk management, as necessary. Note that, officers in charge of compliance and risk management may instruct the division or department person responsible for compliance and risk management at their company to conduct compliance and risk management system effectiveness evaluations in each division or department.

Chapter VI. Implementation of Corrective Measures and Improvements Related to Compliance and Risk Management Systems

  1. (Implementation of Corrective Measures and Improvements Related to Compliance and Risk Management Systems)

    Article 31. The officer in charge of compliance and risk management at each MEG Group Company shall continuously implement corrective measures and improvements to the compliance and risk management system as necessary, based on the monitoring and measurement of risk management implementation, compliance and risk management performance evaluations, compliance and risk management system effectiveness evaluations, and compliance and risk management system audits.

  2. (Confirmation of Implementation of Corrective Measures and Improvements)

    Article 32. The officer in charge of compliance and risk management at each MEG Group Company shall inspect the state of implementation of corrective measures and improvements relating to the compliance and risk management system and confirm the implementation thereof.

Chapter VII. Mechanisms for Maintaining the Compliance and Risk Management Systems

  1. (Review by Presidents)

    Article 33. The president of each MEG Group Company shall review the compliance and risk management system comprehensively across all activities, while paying attention to its overall relevance, in order to maintain the compliance and risk management system and improve its adequacy and effectiveness.

  2. (Compliance and Risk Management System Audits)

    Article 34. The General Manager of the Audit Office shall conduct audits of compliance risk every fiscal year, compile the results in an audit report, and submit the report to the Audit and Supervisory Committee and the President.

  3. (Monitoring of Discovered Risks)

    Article 35. The officer in charge of compliance and risk management shall continuously monitor changes in discovered risks. To monitor discovered risks, the officer shall identify and gather information on the factors that may cause changes to discovered risks.

  4. (Education and Training)）

    Article 36. The officer in charge of compliance and risk management shall provide appropriate education and training to ensure that personnel acquire and maintain the necessary skills to implement countermeasures.

Chapter VIII. Disciplinary Punishment

  1. (Disciplinary Action)

    • Article 37. Each MEG Group Company shall take disciplinary action in accordance with each company’s disciplinary rules such their Rules of Employment when Officers and Employees, etc. have engaged in acts that violate these Regulations.
    • When Officers and Employees, etc. cause loss or damage to MEG Group Companies intentionally or through gross negligence in breach of these Regulations, such person shall also assume indemnity liability for the loss or damage.
    • Officers and Employees, etc. cannot be exempt from the indemnity liability referred to in the preceding paragraph even after separating from employment.
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