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Internal Control (Compliance and Risk Management)

Policies and Rules

NEC has established the Basic Policy on Internal Control Systems as a guideline for developing systems for ensuring that the performance of directors’ duties complies with laws and regulations and NEC's Articles of Incorporation, and systems for ensuring the appropriateness of other operations. (Article 362, Paragraph 4, Item 6 of the Company Law of Japan, etc.)
Furthermore, NEC conducts annual evaluations of the establishment and operation of the internal control systems under this basic policy, as well as implementing the measures necessary for its improvement. In addition, NEC conducts consistent reviews of this basic policy in response to changes in the business environment and other developments. In this way, NEC confirms that the internal control systems have been established and are operating effectively. Two key themes with respect to internal control systems are compliance and risk management.

NEC believes that compliance is essential for a company to coexist with society and fulfill the expectations of stakeholders. Moreover, the NEC Group Charter of Corporate Behavior sets forth key corporate activities required of members of the NEC Group from the perspective of fulfilling the NEC Group’s social responsibilities.
Furthermore, the NEC Group Code of Conduct specifies the behavior expected of each and every officer and employee of the NEC Group. The NEC Group Charter of Corporate Behavior and the NEC Group Code of Conduct have been established at all consolidated subsidiaries in Japan and overseas, and are positioned as the foundation of all of the NEC Group’s business activities.

Guided by the key concepts of “awareness” and “information sharing,” the NEC Group’s basic approach to implementing compliance is to foster an awareness among every officer and employee so that irregularities are recognized as “abnormal,” and to encourage officers and employees to consult with supervisors, related departments and the Compliance Hotline without brushing under the carpet any issues they may have noticed, with the view to resolving and improving those issues collectively as an organization.

Furthermore, NEC Corporation has established the Rules of Basic Risk Management. Under these rules, NEC effectively and comprehensively conducts risk management on the basis of an integrated, group-wide policy. Each division reinforces its risk management activities based on individual activities it has engaged in to date. For the company as a whole, every year NEC selects risks that require group-wide priority countermeasures (referred to as "Priority Risk") from a management perspective, examines those risks, and implements countermeasures.

Framework

To enforce compliance and implement effective risk management, NEC Corporation conducts activities led by the Risk Control and Compliance Committee, the Internal Control Division and the Risk Control and Compliance Promoters.

  • The Risk Control and Compliance Committee, whose members are officers, investigates the underlying causes of serious compliance breaches, studies related preventive measures, and discusses policies for risk management activities and measures to select and address priority risks.
  • The Internal Control Division exchanges opinions on various occasions with designated employees in corporate staff and other divisions specializing in matters described in the NEC Group Code of Conduct as concurrent assignment staff, and plans, formulates and implements various initiatives designed to enforce compliance, including instilling knowledge of the NEC Group Code of Conduct. In addition, the Internal Control Division provides necessary support and coordination, as well as guidance, to ensure that risk management at business divisions and corporate staff divisions is implemented systematically and effectively.
  • The Risk Control and Compliance Promoter system is a Company-wide framework designed to rigorously enforce compliance and risk management among all NEC Group employees. Risk Control and Compliance Promoters assigned to business divisions (400 people*) and NEC Group subsidiaries in Japan (134 people*) serve as points of contact for the Internal Control Division. (* As of March 31, 2013)
  • The Executive Committee deliberates important risks related to NEC's management strategies.
  • Given its oversight role with respect to business execution, the Board of Directors receives reports related to material misconduct along with reports on priority risks.
  • The Corporate Auditing Bureau and Corporate Auditors perform internal audits according to each of their roles to check whether there are any problems in the execution of business operations by NEC and NEC Group companies from the viewpoints of accounting and legal compliance.