Basic Policy on Internal Control
SG Holdings Co., Ltd. (hereinafter called as the "company") has prescribed the Basic Policy of Internal Control (hereinafter called as the "basic policy") in order to establish a transparent management system which enables the company to fulfill expectations and trusts from all the stakeholders, under the SG Holdings Group (hereinafter called as "SGH Group") corporate philosophy of "Trust, Create, Challenge" as below:
1. The system to ensure that directors and employees execute their duties in compliance with the laws and regulations and the articles of incorporation
- (1) The company shall prescribe "Charter of Corporate Conduct" and "Code of Ethics and Conduct" of SGH Group in order to establish a corporate culture in which directors' and employees' business operations are conducted in compliance with the laws and regulations and the articles of incorporation. It is the President's responsibility to consistently communicate the spirit of "Charter of Corporate Conduct" and "Code of Ethics and Conduct" to directors and employees for penetration and educate them to place the utmost priority on compliance in every aspect of business operations.
- (2) The company shall prescribe policies and procedures, etc. in accordance with related regulations, and regularly review the basic policy, other policies, procedures, etc. to ensure that they are workable by addressing the changes, etc. in the management environment.
- (3) The company shall appoint outside director to enhance monitoring function over directors' execution of duties.
- (4) The company shall prescribe "Internal Whistleblowing Regulations" in order to prevent or facilitate early detection of fraud, misconduct, etc., within the SGH Group and establish "Compliance Hotline" - an internal whistleblowing system of SGH Group. In order to make the system workable, the company shall place contacts inside and outside the company to encourage the use of the system. The company shall take prompt and appropriate measures for the reports made through the system according to "Internal Whistleblowing Regulations".
- (5) In order to exclude antisocial forces that threaten the order and security of civil society, the company shall prescribe the "Exclusion of Anti-social Forces Regulations" and be fully committed to halting the development of any relationships with antisocial forces by rejecting to respond to undue claims, execute secret deals, provide funding, etc. Additionally, in cooperation with outside professional institution, the company shall address antisocial forces in an organized and legally-compliant manner and prioritize the security of directors and employees.
2. The system to retain and manage the information related to the execution of duties by directors
- (1) The company shall prescribe "Information Security Basic Policy" and establish information security management system in order to appropriately retain/manage information assets.
- (2) The company shall appropriately retain/manage significant information/decisions, etc. related to execution of duties by directors in compliant with laws and regulations and related policies.
- (3) The information described in (2) above shall be kept accessible for the timely use when in need.
- (4) The company shall appropriately manage personal information according to laws and regulations and "Personal Information Protection Regulations".
3. The policies and other systems to manage the risk of loss
- (1) In order to manage risks appropriately and efficiently, the company shall prescribe "Risk Management Regulations" and establish risk management system for the SGH Group, as well as responding appropriately to the events that may damage corporate management, business operations or corporate image, or that may pose significant impact to the society as a whole.
- (2) The company shall hold "Risk Management Meetings for the SGH Group" on a regular basis to minimize risks, to prevent realization of them and to mitigate loss from the realization of the risks, and enhance risk management system.
- (3) The company shall set forth Business Continuity Plan (BCP) to minimize the business outages and fulfill the social responsibility even in the face of emergencies, and establish/operate Business Continuity Management (BCM) system.
4. The system to ensure that the directors' duties are efficiently executed
- (1) Directors shall execute their duties based on the organizational structure and duties and authorities authorized by the Board of Directors. The Board of Directors shall monitor that the directors' duties are executed appropriately and efficiently.
- (2) The company shall discuss management issues among its directors and hold directors' /corporate auditors' meetings to share significant management information on a timely basis to make efficient management decisions in the Board of Directors Meetings.
- (3) In order to improve management efficiency, the company shall prescribe" and "Group Management Plan Administration Regulations", and authorize a mid-term business plan and a single-year budget in the Board of Directors Meeting, and directors shall execute their duties efficiently based on the plan/budget.
5. The system to ensure appropriateness of operations within SGH Group
- (1) The company shall prescribe the SGH Group's "Charter of Corporate Conduct" and "Code of Ethics and Conduct" and be fully committed to complying with them to share the common behavioral guidelines.
- (2) The company shall prescribe "Business Corporations' Management and Operation Regulations" and "Overseas Corporations' Management and Operation Regulations" to support business management in every business corporation, paying due regard to their independence in management.
- (3) The company shall hold "SGH Group Management Strategy Meetings" and "SGH Group Administration Department Managers' Meetings" on a regular basis and share SGH Group's management policies, significant decisions/reports, etc. to enhance the workability of guidance and control toward each corporation's business management in general.
- (4) The company shall prescribe "Duty and Authority Regulations" as SGH Group's Uniform Standards and manage each business corporation's significant decisions in their business operations are made with all the necessary preliminary discussions and reporting to/resolutions by the Board of Directors of the company.
- (5) In order to ensure reliability of financial reporting, the company shall prescribe "Accounting Regulations" and related procedures, manuals, etc. as the SGH Group standards. At the same time, the company shall consult external professionals for their opinions as necessary and establish a monitoring and auditing system.
- (6) In cooperation with business corporations' internal audit departments etc., internal audit department shall conduct internal audits on a regular basis and report the internal audit results to the company's Board of Directors. When remedial actions are necessary, internal audit department shall instruct the business corporations to take actions and conduct subsequent monitoring to check the progress.
6. Items related to the employees to assist corporate auditors' duties and their independence, etc. from directors, etc.
The company shall organize "Corporate Auditors' Office" to assist corporate auditors' execution of duties and place dedicated employees. The number, qualifications, etc. of those employees shall be determined based on the discussions with the Board of Corporate Auditors. Additionally, in order to ensure independence from directors, etc., and effectiveness of direction from corporate auditors, the personnel transfers, performance appraisals, disciplinary actions, etc. for those employees shall require a consent from the Board of Corporate Auditors.
7. The system for directors and employees to report to corporate auditors and other systems related to the reporting to corporate auditors
- (1) In addition to the items required by laws and regulations, directors and employees of SGH Group shall report following items to corporate auditors without delay:
-  The fact that may incur significant loss to the company
-  The result of internal audit
-  The status of reports made through the internal whistleblowing system
-  Other items related to the execution of operations that are requested by the corporate auditors to report
- (2) The company shall treat whistle-blowers, both directors and employees, appropriately so that they are not treated unfavorably for the reason that they made reports to the internal whistleblowing system or to corporate auditors.
8. Other systems to ensure that audits by corporate auditors conducted in a practical manner
- (1) Corporate auditors shall execute their authority prescribed in the laws and regulations, etc. and perform audit on the legality, validity and efficiency of the execution of duties by directors, in cooperation with accounting auditors, internal audit department and other organizations within the company.
- (2) Corporate auditors shall appoint external professionals such as lawyers, certified public accountants, consultants, etc. when such professionals are necessary for their execution of duties.
- (3) Corporate auditors shall attend the Board of Directors Meetings, as well as other significant meetings when necessary.
- (4) Corporate auditors shall hold regular meetings with President and accounting auditors to exchange information/ideas.
- (5) Upon request from corporate auditors, the company shall bear the expenses incurred for the execution of duties by the corporate auditors, unless it is regarded as not necessary for their duties.