Risk and Compliance Management

System and Responsible Officers

Risk Management System

The Board of Directors is responsible for risk management across the entire Mitsui Chemicals Group.

*M-GRIP:
The abbreviation of “Mitsui Chemicals - Global Risk Management & Business Support Improvement Platform”.

First Line and Second Line

All our divisions (Head Office, Works, laboratories, branch offices and affiliates) conduct risk assessments in accordance with the risk model and procedures within the annual budget. Having identified the risks, they design and implement a management system to address the risks within the organization. The responsible officer for each business division is responsible for identifying and managing the risks. (First Line)

To ensure that risk management is fully implemented in each division, the risk management support divisions with specialized knowledge provide support to each division and may conduct audits or give guidance when necessary. (Second Line)

Each division reports information according to the type and severity of the risks to the Company-wide Strategy Committee, Corporate Sustainability Committee, Risk & Compliance Committee, Compliance Management Committee, and Responsible Care Committee. Each of these committees deliberates on how to address the risks and either issues their decision as the policy of the division or provides advice. The Management Committee collects information on the risks identified in the whole of the Mitsui Chemicals Group and uses it as material for management decision-making and decides on what action to take.

M-GRIP Deployment Chart

The headquarters functional divisions, the regional headquarters, the affiliates, and the Affiliates Coordination Division are working together, each playing its respective role.

Message from an overseas affiliate

We often hear the rule of law mentioned by leaders of countries. It is a governing principle. Merriam- Webster defines rule of law as: “a situation in which the laws of a country are obeyed by everyone.” The Mitsui Chemicals Group too has a set of governance and compliance rules, namely M-GRIP, which was officially launched two years ago. It is significant that the Global Policies (G/Ps) were used to standardize the risk response standards that had been independently established by each Group company. G/Ps help employees to keep their actions within those standards. Such G/Ps are indispensable in holding employees accountable for any conduct that is unreasonable. In addition, G/Ps help to identify non-compliance and ultimately help an organization to build a stronger culture by creating “One Team”! The launching of M-GRIP by the Affiliates Coordination Division was very well organized, especially with effective communication prior to the implementation. The challenge now is how to ensure each entity’s compliance with the G/Ps.

Third Line

The Internal Control Division independently audits operations in both the first and second lines and provides assurance to top management and the Board of Directors. The Internal Control Division conducts business audits and responsible care audits to maintain and strengthen the level of internal control in the Mitsui Chemicals Group and works to keep existing business risks at an acceptable level. At the same time, the Division conducts continual inspections and assessments of the design and operation of internal controls relating to financial reporting for the entire Mitsui Chemicals Group, as required under the Financial Instruments and Exchange Act, as the J-SOX assessment as a part of the statutory audit and directs its efforts to ensuring the correct and efficient execution of operations. The audit results are regularly reported directly to the Board of Directors and the Board of Corporate Auditors.

The business audit includes an internal audit process based on self-assessment of internal controls utilizing the compliance checklist. The compliance checklist includes items related to compliance with the competition law, prevention of bribery and corruption, insider trading and harassment, compliance with the securities export control regulations, appropriate handling of corporate and personal information, human rights, information systems security, risk management, credit management, fair accounting and tax administration, and organization and operation of appropriate internal controls. The checklist is revised every year. As process owners for each of the above items, the risk management support divisions are audited on the state of their operations. Additionally, audits are conducted based on a theme selected each fiscal year from the risk status both in and outside the organization.

From among the responsible care audits (environment & safety audit, occupational health audit, quality audit, and chemical safety audit), the Internal Control Division is responsible for executing the environment & safety audit and the occupational health audit. The Internal Control Division also audits quality audit and chemical safety audit conducted by the risk management support divisions have been executed appropriately. In addition to on-site audits, we have established a remote audit system that can be conducted even when it is difficult to visit our sites because of the COVID-19 pandemic.

Role of the Risk & Compliance Committee

The Risk & Compliance Committee has been created to develop and execute specific policies, strategies and plans to address concerns related to risk management and compliance.
Note that in 2022, the President was appointed as the chair of the Risk & Compliance Committee to make it clear that the President bears the ultimate responsibility for risk management and compliance.
External risks such as natural disasters, terrorism, riots and political insecurity, and in the category of internal risks, operational risks represented by violation of laws and rules, loss of credibility of financial reports, environmental pollution, plant accidents, major occupational incidents, product liability litigation, loss of supplier credibility, mental health issues, deterioration of labor management relations, information leaks and destruction of information communication systems, etc. are covered by the Committee's activities. The committee implements measures including information gathering and evaluation, issuing instructions to relevant divisions, development of the group-wide risk management policy, and reviewing countermeasures to specific risks. It also manages the whistleblowing (Risk Hotline) system. Policies, strategies, plans, and measures developed by the Committee and other important matters are approved by the Management Committee.

Composition of the Risk & Compliance Committee

Should there be an emergency^* that seriously impacts or is likely to impact our Group or society at large and conducted action becomes necessary, The responsible officer for the Risk & Compliance Committee coordinates action with the relevant directors and they jointly assess conditions. Based on the findings, a report is submitted to the President, who decides whether action should be taken by the company or whether a headquarters for corrective action should be formed. When a headquarters for corrective action is formed by a decision of the President, it will issue guidance and advice on the corrective action needed to resolve the situation.

*Examples of emergencies:

• Accidents or incidents in the Mitsui Chemicals Group that cause damage to the lives, health, property and living conditions of people or that are likely to have an impact on the environment in the surrounding area.
• An event causing grave losses of human and tangible assets or damage to the credibility of the Group and resulting in a significant decline in business performance or in serious claims for damages.

Role of the Compliance Management Committee

In order to implement compliance measures systematically and in a planned manner across the Group on a global basis, we have established the Mitsui Chemicals Group’s Compliance Management Rules and created the Compliance Management Committee under the Risk & Compliance Committee in fiscal 2022.
Dividing compliance management into four stages of prevention, detection, initial response, and permanent response, the Committee will implement measures for each stage across the entire Group, under the responsibility and authority of the chair of the Compliance Management Committee, and continue to implement the PDCA cycle for compliance management, including raising awareness of compliance.

Composition of the Compliance Management Committee

Goals and Results

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Having decided on the KPIs for VISION 2030, we state the incidence of major legal and regulatory violations, such as those that affect the Group’s social standing, business operations, earnings, and other key parameters. In fiscal 2021, there was one incidence of major legal and regulatory violation in our domestic subsidiaries. We are treating this incident very seriously. We will endeavor to thoroughly strengthen group-wide compliance, review internal control, and prevent any further incidents of this sort from recurring in Mitsui Chemicals Group.