Our Philosophy and Principles

We have established priority management materiality issues based on The Denka Value (corporate philosophy) that the Denka Group must fulfill to achieve SDGs. We are committed to strengthening the Group’s internal control systems to improve corporate value in order to strengthen corporate governance, one of our priority management materiality issues. We will achieve this through appropriate and efficient business operations in compliance with laws, regulations and the Articles of Incorporation.
We consider the fulfillment of our social responsibilities, especially those related to compliance, to be essential to sustainable corporate development. Accordingly, we established a basic policy on the development of internal control systems. In line with this policy, we made it a rule to periodically assess the operational status of internal control systems in the Denka Group as a whole and constantly improve and strengthen these systems. Moreover, we established a Corporate Action Policy that details action principles for all Group members.

Efforts to Raise Awareness among Group Members

Denka’s president takes advantage of various opportunities and methods to deliver his message to all Group officers and employees, to convey the philosophies and policies discussed above. The president communicates the importance of a shared sense of crisis with regard to the consequences of corporate misconduct, which can damage the Group’s credibility from the perspective of social responsibility, put it in position to draw harsh criticism from the general public and endanger the continuity of its business operations.
Furthermore, representatives of the main Group companies meet twice a year with Denkaʼs directors and heads of corporate departments to ensure a shared understanding of the corporate philosophy and management policies as well as of current issues facing the Group. These meetings also address material risks associated with internal control and discuss and deepen the sharing of policies on how to handle such risks.
The Legal Department prepared the Denka Global Compliance Program, a compliance education program designed to ensure the Group measures up to the global standard in terms of guiding employee conduct to maintain compliance with laws, regulations and corporate ethics. Via this program, we have systematically provided all Group officers and employees in Japan and abroad with compliance education so that they are properly educated about the Corporate Action Policy and other compliance matters.

Monitoring, Internal Auditing and the Compliance Hotline System

The Audit Committee attends key meetings, performs audits targeting Denka and its main subsidiaries and regularly inquiries about the status of business execution with business operating departments and managing departments to ensure the appropriateness of business operations undertaken by the Denka Group as a whole.
In the Internal Control Department, the seven staff members from the Internal Auditing Department, an independent organization for business monitoring, work closely with the Audit Committee to ensure effective and efficient audits. They assess the status of internal control in accordance with Japan’s Financial Instruments and Exchange Act (J-SOX), and carry out operational and management risk audits of organizations and business processes not subject to J-SOX.
The Internal Control Department formulates each audit plan with the approval of the president, the Audit Committee and the Board of Directors. The department reports findings from such audits to the heads of the business units it audits and also makes regular reports to the president and the Board of Directors.
In addition to targeting Denka and its subsidiaries, the aforementioned operational and management risk audits encompass some affiliates led by individuals dispatched from Denka to assume representative director or other positions with significant management responsibilities. As a large number of business units are subject to these audits, we strive to enhance the effectiveness and efficiency of the audits by narrowing down material risks via the self assessment of compliance status. With regard to on-site audits, we assess the implementation and operation status of internal control related to risk management, legal compliance, asset management and operational management within the Group. By doing so, we seek to identify risks inherent in and issues associated with these matters while monitoring the effectiveness and appropriateness of each process.
Addressing issues identified via audits, the Internal Control Department provides executives of audited entities with advice on how to resolve these issues or make improvements in a way that respects said entities’ autonomous management. The department shares information with Denkaʼs relevant business units as necessary to resolve issues in the subject organization.
Furthermore, from FY2021, the Internal Control Department is endeavoring to help each Group organization reduce operational and management risk while contributing to improvement in their corporate value in tandem with the Internal Control Promotion Department by, for example, setting up organizations within the department to support and promote the implementation of internal control with the objective of strengthening preventive controls, and by reinforcing Group controls, including overseas subsidiaries.
In addition, as an audit by the business execution department, the Accounting & Finance Department separately performs accounting audits of main subsidiaries, while the Legal, Environment and Safety, Quality Assurance and other departments likewise undertake audits on a standalone basis or in collaboration with the Internal Control Department to secure legal compliance in their areas of specialty.
Furthermore, to strengthen internal control at overseas bases, dedicated departments were established in Southeast Asia and China, where there are high concentration of bases, to manage internal control within local business units. The promotion of internal control implementation and internal audits are now taking place at local bases in collaboration with Denkaʼs Internal Control Department.
To supplement the internal audits discussed above, we have established and are encouraging the proactive use of the Group Compliance Hotline System, which is designed to ensure the early detection of incidents involving the violation of laws, regulations and in-house rules while supporting the swift implementation of correction measures.