Internal Control and Risk Management
Internal Control System
In accordance with the Corporation Law and the Enforcement Regulations of the Corporation Law, Lion has put systems in place to ensure the appropriateness of Group operations.
With regard to the systems for evaluating and auditing internal control with respect to financial reporting, as prescribed in Japan’s Financial Instruments and Exchange Act, we established controls at the Company-wide and business process levels in July 2006, and in December 2008, the Board of Directors adopted the Internal Control Policies Regarding Financial Reporting.
Evaluations of the effectiveness of our internal control are made by the Auditing Office, which is under the direct supervision of the President and reports its findings to the President and Audit & Supervisory Board members. It also reports to the Board of Directors on a regular basis. If any issues are identified, the relevant divisions are notified, and the Auditing Office confirms that said issues have been corrected thereafter.
As a result of these evaluations, we have determined that Lion’s internal control with respect to financial reporting in 2020 was effective, and we submitted our Internal Control Report along with our Securities Report to the Prime Minister in March 2021.
The Auditing Office implements audits across the Lion Group, examining their operations from the perspectives of legality, fairness, efficiency and risk management in order to establish a foundation for sound business activities.
Specifically, the Auditing Office confirms that a wide range of operations are being implemented properly and in compliance with applicable laws and internal regulations, auditing such areas as decision making, contract management, general expense processing, product quality management, environmental conservation (waste), safety, hygiene, disaster prevention and labor management.
When an issue is identified, after the audit, the Auditing Office requests that the department in question address it and then follows up to confirm that appropriate measures have been taken. The Auditing Office also selects particular topics of focus, based on which it implements cross-departmental audits.
One of the features of our internal audit system is that we exchange information closely with the Audit & Supervisory Board Members, striving to reinforce coordination. Audit results and the status of improvements are reported to the President, directors with related responsibilities and the Executive Committee after each audit. A summary of the audit results is reported to the Board of Directors twice a year to advance PDCA management of audit operations. Reports are also provided to the Executive Committee to facilitate the sharing of information with business execution departments.
Lion’s business activities entail a wide range of risks. To avoid and minimize losses caused by the actualization of risks, we have appointed a Director Responsible for Risk Management (the director responsible for the Corporate Planning Department) who comprehensively controls and supervises risk for the whole Lion Group. For the management of risk related to the environment, quality assurance, and accidents and disasters, the administrative offices for the deliberative bodies with responsibility for said areas are designated as the departments with responsibility for risk. These departments consider preventive countermeasures, with deliberation by the Executive Committee when necessary, and implement risk management.
In the case of a physical emergency, such as a natural disaster or accident, in accordance with the Emergency Response System (a system of manuals outlining countermeasures against earthquakes or influenza and other infectious diseases), we report the relevant facts to the President and Audit & Supervisory Board members. At the same time, the directors of relevant departments collect all pertinent information, formulate response measures, clarify causes, determine countermeasures and submit reports on these actions to the Executive Committee and the Board of Directors.
In light of the mounting risks posed by various environmental changes and other factors, we believe that reexamining risks from diverse perspectives and further enhancing countermeasures is crucial. Accordingly, from 2021, we have identified 13 Company-wide risks, which are disclosed in the Company’s Securities Report . To address these risks, twice per fiscal year, we draw up a list of possible risk events. The Board of Directors and other bodies use this list to discuss and confirm response measures.
- Risks related to market and consumer change
- Product quality risks
- Raw material procurement risks
- Overseas business risks
- Human resource risks
- Information management risks
- Compliance risks
- Reputation risks
- Exchange rate risks
- Major lawsuit risks
- Novel influenza and other infectious disease risks
- Major earthquake and other natural disaster risks
- Climate change and other environmental change risks
Business Continuity Plans (BCPs)
Lion works to build and maintain systems to minimize damage and to ensure the continuation of business operations so that it can provide products to customers even in the event of a major earthquake, storm or flood damage, an outbreak of infectious disease (pandemic) or other such contingency. We will set up a task force and respond according to the “Manual on Countermeasures for Earthquake Disaster” when a major earthquake occurs, and according to the “Manual on Countermeasures against Novel Influenza and Other Infectious Diseases” if a pandemic due to a novel influenza virus or other infectious disease is foreseen. We will judge whether or not to activate a BCP according to the scale and other conditions of the disaster. If a BCP is activated, our system is designed to give top priority to businesses that supply consumer products. A summary of countermeasures to risks that may have a serious impact on our business is reported to the Executive Committee annually.