Governance System and Risk Management

Governance System Diagram

Governance System Diagram
1. Board of Directors The Board of Directors is composed of 10 directors (excluding directors who are Audit and Supervisory Committee members) and four directors who are Audit and Supervisory Committee members. The Board of Directors makes decisions regarding management policies, important management issues, and matters mandated by laws and regulations. It also supervises the execution of business operations.
2. Audit and Supervisory Committee The Audit and Supervisory Committee is composed of four Audit and Supervisory Committee members (three of whom are outside directors). Based on the audit policy established by the Audit and Supervisory Committee, it audits the execution of duties by the directors.
3. Nomination and Compensation Committee The Nomination and Compensation Committee is composed of two internal directors (excluding directors who are Audit and Supervisory Committee members) and three outside directors. It deliberates on matters related to the appointment and dismissal of directors and executive officers and their compensation.
4. Executive Committee The Executive Committee comprises the company’s three representative directors. It conducts preliminary deliberations on such matters as resolutions to be put to the Board of Directors, and, within the scope of the authority assigned to it by the Board of Directors, discusses important matters relating to the execution of the duties of the directors.
5. Executive General Managers Committee The Executive General Managers Committee is made up of 11 executive general managers and regional general managers. This committee discusses policies, plans, and governance related to operations in each division to maintain efficient operations.

The Operation of an Internal Control System

The Board of Directors passed a resolution on the basic policies of TS TECH’s internal control system to meet the requirement to formulate regulations on internal controls stipulated in the amendment to Japan’s Companies Act in 2006. Since then, the Board of Directors has reviewed the implementation of this system each fiscal year and passed resolutions on changes to these policies as necessary at Board of Directors’ meetings. Additionally, in accordance with Japan’s Financial Instruments and Exchange Act, the TS TECH Group has established an internal control system to ensure the reliability of its financial reporting. The effectiveness of this system is maintained and internal control is enhanced through regular evaluations of improvements and operations and corrective actions as needed.

Group Governance Structure

The TS TECH Group has established a sound corporate governance system. It includes a Group-wide commitment to the vision statement and mission statement that comprise the TS TECH Philosophy, a basic policy on corporate governance, and a three-year medium-term management plan. Affiliated companies also have their own effective, efficient corporate governance systems that are based on the laws of their respective countries and their respective businesses.

Important management issues at affiliated companies must be reported to and approved by TS TECH in advance based on the standards stipulated by TS TECH. Affiliated companies must also report business plans, sales results, and financial status.

Furthermore, affiliated companies participate in routine compliance and risk verification measures known as the TS TECH Corporate Governance (TSCG) self-verification system. This ensures that the entire TS TECH Group acts as one in promoting compliance and reducing risk.

TS TECH’s internal audit department conducts audits of affiliated companies and works with internal audit departments set up at the head offices in each region to enhance the internal audit structure of the entire TS TECH Group.

Compliance Framework

Based on the TS TECH Philosophy, the Group established the TS Standards for Conduct (TS TECH’s norms and ideals as an organization) and TS Guidelines for Conduct (expectations for day-to-day conduct for individual executives, officers, and employees). Regular education is provided to ensure the entire Group is familiar with these concepts.

A director is appointed as a Compliance Officer in order to promote compliance initiatives, and steps are continually taken to prevent legal violations before they occur through regular TSCG self-verifications and deliberations of important ethics and compliance issues by the Ethics and Compliance Committee.

We have established a whistleblower hotline called the TS Corporate Ethics Compliance Consultation Office, which enables employees to bring issues before compliance officers, who respond with rapid, effective investigations and corrective guidance in the event of a problem. Including affiliates in and outside of Japan, the Group receives around 100 ethics and compliance inquiries a year, which includes consultations and other cases handled by the TS Corporate Ethics Compliance Consultation Office. In fiscal 2023, the Group had a total of 94 cases. Continuous operation of this framework promotes internal self-improvement.

Ethics and Compliance Issues Number of Issues Recorded (Consolidated)

Number of ethics and compliance issues received
  • Investigations into each case found no violations of laws or regulations that would have a significant impact on our business activities.

Risk Management

Important management issues are carefully deliberated upon by TS TECH’s Executive Committee as well as various advisory committees. Through these discussions, TS TECH makes every effort to avoid and mitigate business risks.

In addition, a Risk Management Officer is appointed from among the representative directors and placed in charge of risk management. The Global Risk Management Committee, comprising directors and other officers, has been Established to deliberate regularly on the results of TSCG self-verifications and discuss responses to serious risks affecting management that have been identified, ensuring that efforts are continually made to mitigate potential risks.

Findings obtained through TSCG self-verifications are shared with internal audit departments so that they can be applied in risk approach auditing.

Global Risk Management Committee

The Global Risk Management Committee was established as an advisory committee to the Executive Committee to help ensure appropriate identification and control of the various risks affecting global business activities in the 13 countries around the world where TS TECH does business, and to solidify the sustainability and stability of the business.

In addition, by forming regional risk management committees in each region, risks specific to those geographic segments are identified and risk mitigation measures are promptly advanced. TS TECH has also worked to conduct emergency response training that anticipates a range of risks, such as the most frequently occurring natural disasters in each geographic region, or the outbreak of an infectious disease.

In fiscal 2023, TS TECH identified four major risks and pursued the appropriate corresponding risk mitigation measures.

Four Major Risks

  • Crisis Management in Emergencies

    • [Target]

      Communicable & infectious diseases/virus/wind or flood damage/ earthquake/conflict/riots or terrorism
    • [Main measures]
      • Preparation and enhancement of initial response task list at place where event occurred
      • Continuous implementation of natural disaster response training

  • IT Security

    • [Target]

      Leakage or loss of information and cyberterrorism
    • [Main measures]
      • Review of all companies’ critical systems backup methods
      • Survey status of compliance with IT policy and guidelines
      • Cybersecurity countermeasures
        (Enhanced monitoring systems, education about dealing with suspicious emails, etc.)

  • Stoppage of Parts Supply

    • [Target]

      Raw material supply shortages/supplier bankruptcy/trade-related, import-export issues
    • [Main measures]
      • Understand and manage the status of the supply chain for stable procurement of components
      • Enhance monitoring of supplier-side financial risks

  • Fires

    • [Target]

      Fire sources:Welding/electric leakage or current surge/hazardous materials
    • [Main measures]
      • Inspection based on Group-wide integrated items and crosscutting management by the department responsible
      • Formulation of management standards based on past incidents and implementation of on-site education
Corporate Governance Governance System and Risk Management Board of directors