Internal Control System
The NYK Group maintains an Internal Control Committee that acts as a complementary body to the Board of Directors. This committee is chaired by the president and monitors the status of internal control in four areas: reliability of financial reporting, legal compliance, operating effectiveness and efficiency, and protection of assets. In the event an issue is found, the committee implements corrective measures to ensure the relevant department performs appropriate and effective internal control operations.
The Internal Control Committee monitors the activities of Corporate Departments that determine companywide systems and internal committees and meetings responsible for cross-functional systems with the objectives of verifying the operating status and strengthening the internal control systems.
In fiscal 2020, the Company bolstered the operation of the internal control system for the entire Group by establishing the Management Committee to change the decision-making process, by amending the Company’s regulations, and by strengthening internal auditing functions.
Committees Dedicated to the Four Objectives
- Internal Control Committee
- Risk Management Committee
1. Committees related to the reliability of financial reporting
- Internal Control Committee (JSOX)
- Information Disclosure Committee
2. Committees related to law compliance
- Executive Committee Overseeing Thorough Law Compliance
- Compliance Committee
- Global Compact Promotion Committee
- Safety and Environmental Management Committee
3. Committees related to operating effectiveness and efficiency
- Human Resources Planning Committee
- Investment Management Conference
- Investment and Credit Committee
- Financial Policy Conference
- Group Management Council
- Group IT Policy Meeting
- Save Bunker Committee
4. Committees related to safeguarding assets
- Disaster Measures Headquarters
- Information Security Management Committee
As planned at the time of its establishment, the Governance Committee was dissolved in March 2021. The committee’s activities have been assumed by the Legal & Fair Trade Promotion Group, the ESG Management Promotion Group, and the Internal Audit Chamber.
A Review of the Activities of the Governance Committee
【Action Plan and Execution Content】
- 1Improve effectiveness of the Board of Directors
- Conduct self-evaluation survey to assess the effectiveness of the Board of Directors
- Enhance methods for sharing information with independent outside directors
- Hold discussion meetings
- 2Strengthen structure for supporting and enacting the business decisions of the president
- Establish the Management Meeting
- Adopt a flexible, transparent decision-making process
- 3Strengthen Group governance
- Bolster the operation of internal control functions
- Strengthen internal auditing functions
- Extend to domestic and overseas Group companies
- 4Conduct activities to strengthen governance and spread awareness
- Hold governance roundtables
Held three times in fiscal 2019, 135 participants in total
Held four times in fiscal 2020, 399 participants in total
- Conduct governance dialogues with regional governance officers and regional management offices*
Together with the regional governance officers of the four overseas regions, confirmed the progress and penetration of governance activities
- *The functions of regional management offices:
We have established regional management offices at our business sites in the Americas, Europe, South Asia, and East Asia. Under the supervision of regional governance officers, regional management offices provide direction and guidance on legal affairs, compliance, internal auditing, accounting, finance, and crisis management.
For Group companies in their respective regions, the offices are also responsible for gathering information in relation to public relations, the environment, and the internal control reporting system (the Financial Instruments and Exchange Act (J-SOX)).
- Hold governance roundtables
Internal Control over Financial Reporting
In regard to internal control over financial reporting, the Group has designed and operated internal controls in conformance with the practice standards mandated in the Financial Instruments and Exchange Act. In future, the Group will work to ensure the reliability of financial reporting by continually upgrading and effectively operating the internal control system.
Internal Auditing Activities
Audit of domestic companies
Internal auditors make suggestions on the soundness, effectiveness, and efficient operation of business management. Internal auditors also follow up on the progress of improvements based on suggestions.
The Internal Audit Chamber's internal auditors perform internal audit activities for the Company and 140 domestic group companies.
In addition, as part of a project to strengthen internal auditing, the Company continues to reform internal auditing processes. Having verified data analysis methods that check all expenses-related data and flag abnormalities, the Company is introducing new data-based auditing methods.
Given that increasing the project’s capabilities requires personnel with specialist knowledge, seven Internal Audit Chamber personnel have been seconded to the Company from Group companies Yusen Logistics Co., Ltd., and Nippon Cargo Airlines Co., Ltd. (NCA) since fiscal 2020. To enhance the quality of auditing, the Company is promoting understanding of new auditing duties and providing opportunities to attend seminars hosted by audit firms.
Major auditing activities in fiscal 2020
- 124 domestic group companies were audited during the year.
- 2A specific theme was selected and emphasized for the audit of the NYK headquarter and its branches.
- 3An audit of payment control at both NYK and domestic group companies was made to check whether cash flow is adequately controlled.
Audit of overseas companies
Internal auditors belonging to the four group regional headquarters conduct periodic internal audits of approximately 240 group companies overseas (implemented at 32 companies in fiscal 2020).
Findings that audits identify are reported not only to the officer responsible at the headquarter who provides direction and oversight but also to the regional heads overseas to help raise the overall level of internal control in each region.
The staff of the Internal Audit Chamber and the internal auditors overseas contribute to enhancement of the internal control of the NYK Group as a whole by conducting the audits based on the same philosophy and rules and in accordance with the Fraud Risk Assessment* programe.
- *Fraud Risk Assessment:
This assessment makes use of anonymous replies collected from employees to identify the probability of risk associated with each potential fraud case by analyzing the possible financial impact and the likelihood of occurrence. Management shares the results and supports the preparation of related fraud-prevention measures. After conducted fraud risk assessments, we amended the code of conduct, revised individual operational procedures, and had compliance officers conduct training on fraud prevention.