Internal Control System

Basic views on the internal control system and the progress of system development

The information below explains SoftBank Group Corp. (“SBG”)'s system to ensure the appropriateness of its operations and its implementation status.

System to ensure the appropriateness of operation

System to ensure that the execution of the duties of directors and employees is in compliance with laws, regulations, and the Articles of Incorporation of SBG

SBG has established the SoftBank Group's Officer and Employee Code of Conduct to prescribe the code of conduct to be followed by all directors and employees to ensure that corporate activities are appropriate based not only on regulatory compliance, but also on high ethical standards, and has established the following structure to continuously reinforce the compliance system:

  1. A chief compliance officer (CCO) is appointed. In addition to proposing and carrying out measures required to establish and enhance SBG's compliance system, the CCO periodically reports to the Board of Directors on compliance-related issues and the status of addressing those issues.
  2. Internal and external hotlines (whistle-blowing system) are established for direct reporting and consultations by directors and employees, to quickly identify, rectify, and prevent the reoccurrence of any inappropriate issues in corporate activities. SBG ensures that persons who have reported or consulted using the hotlines will not be treated disadvantageously for having done so by prohibiting such treatment of persons on such grounds in the SoftBank Group's Compliance Rules.
  3. The Internal Audit Department carries out audits on the effectiveness of the systems for compliance with laws, regulations, and the Articles of Incorporation, and the results of those audits are reported to the CEO and director in charge. The Internal Audit Department also works in cooperation with the Audit & Supervisory Board members by providing them with the results of those audits.

System for the storage and management of information regarding the execution of duties by directors

SBG has established the following system to appropriately store and maintain documents and other important information related to the execution of duties by directors, including minutes and proposals of the Board of Directors meetings and requests for approval:

  1. SBG determines retention periods and methods and measures to prevent accidents based on the Information Management Regulations, and classifies and appropriately stores these documents according to their degree of confidentiality.
  2. SBG appoints a chief information security officer (CISO) as the person responsible for information security, and the CISO promotes the establishment and reinforcement of information security systems.

Regulations and systems relating to managing the risk of loss

SBG has established the following system to avoid or minimize risk and to implement necessary measures related to the variety of risks in its business operations:

  1. Responsible departments are designated to address various risks, manage risks in each responsible department, and work to reduce risks and prevent the occurrence of risk events based on the SoftBank Group's Risk Management Rules. In addition, when an emergency situation arises, an Emergency Response Department will be established according to the designated escalation flow, and efforts will be made to minimize the damage (loss) based on the instructions of the Emergency Response Department.
  2. The General Administration Department summarizes the status of risk evaluation, analysis and response at each responsible department, and periodically reports its findings to the Board of Directors.
  3. The Internal Audit Department carries out audits on the effectiveness of the risk management processes.

System to ensure the efficiency of directors in the execution of their duties

SBG has established the following structure to maintain an efficient management system:

  1. SBG sets out the Board of Directors Regulations to clarify matters to be resolved by and reported to the Board of Directors and the Internal Approval Regulations and other regulations relating to institutional decision-making to clarify decision-making authority.
  2. To strengthen functions for overseeing the execution of duties and enhance objectivity in management, the Board of Directors shall include external directors who are independent of the Company.
  3. To ensure that the directors, including external directors, can discuss matters fully at the Board of Directors meetings, SBG shall provide them with materials for the meeting in advance, and with additional or supplementary materials upon their request.
  4. The scope of operations, authority, and responsibilities necessary for operations are clearly defined in the Regulations on Segregation and Authority of Duties.

System to ensure appropriateness of the Company's operations

SBG has formulated the SoftBank Group's Charter to promote fundamental concepts and policies shared throughout the Company and the SoftBank Group's Company Management Rules, which spell out the policy and system of management of group companies. In addition, various regulations are set out to be complied with by group companies, as well as their directors and employees. Based on the regulations, the following systems have been established, giving consideration to the scale and materiality of group companies:

  1. A group compliance officer (GCO) is appointed to promote the establishment and reinforcement of group-wide compliance systems, as the person ultimately responsible for compliance throughout the Company. A Group Hotline has also been established to receive reports and provide consultation to directors and employees of group companies to quickly identify, rectify, and prevent the reoccurrence of any inappropriate issues in corporate activities. SBG ensures that persons who have reported or consulted on the Group Hotline will not be treated disadvantageously for having done so by prohibiting such treatment of persons on such grounds in the SoftBank Group's Compliance Rules.
  2. The group chief information security officer (GCISO) is appointed to promote the establishment and reinforcement of group-wide information security systems as the person ultimately responsible for information security throughout the Group.
  3. The representative of each group company must submit a Representative Oath pertaining to the financial reports submitted to SBG, thereby ensuring the accuracy of the annual securities report and other documents submitted by the Group.
  4. The Internal Audit Department comprehensively judges the results of past internal audits and the financial position of each group company, and carries out internal audits of group companies deemed as having a high risk.
  5. While each group company addresses risks in an effort to reduce and prevent any possible risks, in the event of emergency, each group company follows the escalation flow of SBG to minimize damage (loss) in accordance with SBG's instruction.

System for excluding organized crime and other criminal elements

SBG clearly states in the SoftBank Group's Officer and Employee Code of Conduct its policy of having absolutely no association with organized crime and other criminal elements that pose a threat to public order and safety. The General Administration Department is responsible for dealing with inappropriate requests from organized crime and other criminal elements and will firmly refuse those requests in a resolute manner in cooperation with the police and other external specialist institutions.

System relating to support staff that assist the Audit & Supervisory Board members, matters relating to the independence of the relevant employees from the directors, and matters related to ensuring the effectiveness of instructions given to the relevant employees

SBG has established the Assistant to Audit Department as an organization to support the work of the Audit & Supervisory Board members, and assigns dedicated staff to this department. Directions and instructions to the support staff are issued by the Audit & Supervisory Board members to ensure the effectiveness of the instructions, and any personnel changes, evaluations, or other such actions, require the agreement of the Audit & Supervisory Board members.

System for reporting to the Audit & Supervisory Board members

Directors and employees of SBG shall report the following matters to the Audit & Supervisory Board members:

  1. Important matters related to the management, finances, or business execution of the Company
  2. Matters related to the compliance system or use of the hotlines
  3. The development status of internal control systems
  4. Matters which could cause significant damage to SBG
  5. Matters relating to violations of laws, regulations, or the Articles of Incorporation
  6. Results of audits conducted by the Internal Audit Department
  7. Other matters that the Audit & Supervisory Board members deems necessary to be reported in order for them to execute their duties

Other systems to ensure that the audits by the Audit & Supervisory Board members are conducted effectively

  1. When the Audit & Supervisory Board members deem it necessary, opportunities shall be provided for them to interview directors or employees of group companies. In addition, the Audit & Supervisory Board members periodically meet with the independent auditor and the Audit & Supervisory Board members of major subsidiaries and other entities to exchange information and ensure cooperation.
  2. SBG ensures that persons who have reported or consulted with the Audit & Supervisory Board members will not be treated disadvantageously for having done so by prohibiting such treatment of persons on such grounds in the SoftBank Group's Compliance Rules.
  3. SBG shall pay expenses relating to the independent auditor, attorneys, and other professionals, and other expenses associated with the execution of duties by the Audit & Supervisory Board members.

Overview of the implementation status of the system to ensure the appropriateness of the operations

Matters concerning compliance

SBG continues to conduct compliance training for directors and employees of the Company, as well as having the GCO offer information and give advice, and so forth, as necessary to the CCO for enhancing the compliance system. In addition, SBG works to ensure the effectiveness of compliance of the entire group by establishing and operating hotlines so that directors and employees of the Company can report and consult directly. The effects of these measures are reviewed to make improvements as necessary.

Matters concerning risk management

Based on the SoftBank Group's Risk Management Rules, departments responsible for each risk at SBG manage risks and continuously work on reducing them and preventing their materialization. In addition, the General Administration Department summarizes the status of risk evaluation and analysis, as well as countermeasures and responses to risks implemented in each responsible department and periodically reports its findings to the Board of Directors. Group companies also manage risks individually and continuously work on reducing risks and preventing their materialization.

Matters concerning internal audits

The Internal Audit Department carries out audits on the effectiveness of the system for compliance with laws, regulations, and the Articles of Incorporation as well as the risk management process at SBG. In addition, the department continuously carries out audits of group companies deemed as having a high risk and reports the results of the audits to the CEO each time.

Matters concerning the execution of duties by directors and employees

SBG ensures efficiency in the execution of duties by its directors and employees based on internal regulations such as the Board of Directors Regulations, Internal Approval Regulations, and Regulations on Segregation and Authority of Duties. SBG also ensures an environment where matters can be fully discussed at the Board of Directors meetings by directors, including independent external directors.

Matters concerning the execution of duties by Audit & Supervisory Board members

The Audit & Supervisory Board members attend SBG's important meetings and arrange opportunities to interview directors and employees of the Company as necessary. In addition, they continue to enhance cooperation by holding regular meetings with the independent auditor and the Audit & Supervisory Board members and other personnel of major subsidiaries. Through these efforts, the Audit & Supervisory Board members ensure the effectiveness of audits.