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Arrangement of internal control system and risk management system

The Company engages in activities to enhance the internal control system in order to exhaustively understand and evaluate obstructive factors (business risks) concerning corporate growth and achievement of management targets, and in order to manage the same in a company-wide manner. The establishment of a system to ensure proper business operations in accordance with laws and regulations has been resolved by the Board of Directors and disclosed in the “Basic Policy for Establishing Internal Control System.” The Group, in accordance with this basic policy, will develop and appropriately operate an effective system of internal controls.

The Company undertakes activities focused on raising organizational awareness and fostering a corporate climate mainly through the Internal Control Committee and the Global Audit Department so that the maintenance of the internal control system may be linked to the enhancement of corporate value.

Following the establishment of the internal control system, the Group companies have also established internal audit divisions and assigned staff to the posts, embarking on assessment and auditing of their operations principally performed by these divisions.

In the event that the Company identifies inadequacies in its process of assessment and audit of the control of the management philosophy and ethics, accounting policies and procedures, IT infrastructure and business process in connection with the financial reporting operations, it takes appropriate measures to remedy the problems. As of March 31, 2016, the Company confirmed that the Group’s internal control system was functioning effectively, with respect to the control of company-wide management philosophy and ethics, accounting policies and procedures, IT infrastructure and business process in connection with the financial reporting operations. The Company attaches importance to fostering a progressively robust autonomous corporate culture. To this end, it concentrates on the enhancement of communication across the Group to increase awareness of this goal by all levels of staff.

The status of operations of the internal control system is reported each year to the Board of Directors. An outline of the status for the fiscal year ended March 31, 2016 is as follows.

  1. Status of initiatives relating to compliance
    1. The Corporate Ethics Promotion Committee plans, formulates and implements company-wide compliance measures. Specific measures included the mandatory submission of the “Anritsu Group Code of Conduct Confirmation Statement” by employees; educational and cultural activities through training according to positions and compliance promotion events; and implementation of a “Corporate Ethics Questionnaire” to check the familiarity with an established compliance system and the level of awareness of employees concerning ethics and the like. The Corporate Ethics Promotion Committee also conducted WBT (Web Based Training) on preventing bribery with all related employees both in Japan and overseas.
    2. Departments and committees involved in compliance conducted regular audits on departments involved in fair trade and export/import control.
    3. To prevent violations of laws and regulations, the Company, pursuant to the Rules for Whistleblowing, has established and operates “Helplines,” which accept internal reports and requests for consultation both from within and outside of the Company.
    4. The status of initiatives relating to compliance including the operations of the Helplines is reported regularly to the Board of Directors.
  2. Status of initiatives relating to the preservation and management of information
    1. The Company, pursuant to the Basic Policy on Information Management, has established and implements internal rules including the Information Management Basic Rules and the Information Security Manual in order to appropriately handle and protect information.
    2. The Company, pursuant to laws and regulations and internal rules (Trade Secret Management Rules), appropriately manages the minutes and other related materials of the general meetings of shareholders, meetings of the Board of Directors and the Management Strategy Conference.
  3. Status of initiatives relating to internal audits
    1. Pursuant to the Internal Control System Basic Rules, the Global Audit Department, which is involved in internal audits, coordinated with the Audit Committee and the Management Audit Department, which supports the Audit Committee, confirmed the status of internal controls of the Company, and coordinated with the internal audit divisions of the subsidiaries to conduct audits on the proper business operations of the subsidiaries. Additionally, the results of such audits were reported regularly to the Board of Directors.
    2. To ensure the appropriateness and reliability of financial reporting of the Anritsu Group, the Global Audit Department conducted internal control assessments based on implementation plans and confirmed the effectiveness of controls.
  4. Status of initiatives relating to risk management
    1. The Company clearly identifies who is responsible for the control of each type of risk and carries out risk analysis and evaluation. The Management Strategy Conference discusses risks when necessary and reports to the Board of Directors. Additionally, should an event with the likelihood of causing adverse effects on company management occur, the President shall gather the relevant parties, comprehend the situation thereof, and undertake relevant measures in accordance with the Basic Policy for Risk Management. At the same time, such matters shall be promptly reported to the Audit Committee.
    2. In addition to the routine risk management activities, the Company has established a disaster response system including a recovery plan to respond swiftly and appropriately in the event of a disaster.
  5. Status of initiatives to ensure the efficient execution of duties
    1. The Board of Directors was convened thirteen times during the fiscal year ended March 31, 2016. It deliberated and reported on matters required by laws, regulations and the Board of Directors Rules and confirmed the progress of the medium-term management plan and the budget, as well as supervising the execution of business by Directors. Additionally, Directors, including Outside Directors, together with Executive Officers held free discussions on a regular basis to discuss the Group’s management issues.
    2. At the Management Strategy Conference, Executive Officers in charge of subsidiaries give reports when necessary on the business results, financial condition and other important matters regarding the subsidiaries, in addition to discussing specific matters relating to Group strategies.
  6. Status of initiatives to ensure the effectiveness of audits conducted by the Audit Committee
    1. Following the transition to a Company with an Audit Committee in June 2015, the Audit Committee Members participated in the resolution of the Board of Directors as Directors. In addition, full-time Audit Committee Members attended the Management Strategy Conference, the strategy conferences of business divisions and other meetings. They also inspected important documents relating to business execution, including a request for approval, in order to monitor important decision-making processes and the status of business execution.
    2. During the fiscal year ended March 31, 2016, the Audit Committee was convened seven times to determine audit policies and audit plans, formulate audit standards, audit the execution of business by Directors and the status of compliance with laws and regulations and the Articles of Incorporation, and conduct reviews of financial statements. (The Audit & Supervisory Board prior to the transition to a Company with an Audit Committee was held twice.)
    3. The Management Audit Department was established in April 2015 as an organization for supporting the operations of the Audit Committee. The dedicated general manager of the Management Audit Department engaged in the Company’s audit activities together with the full-time Audit Committee Members.
    4. To ensure the execution of effective audits by the Audit Committee, rules on reporting to the Audit Committee and on communicating information were set forth. The system for reporting to the Audit Committee and the channels for communicating information were also clarified.
    5. Regular meetings of Audit Committee Members and Representative Directors were held to exchange opinions. Meetings with the accounting auditor were held to exchange opinions when necessary. The Company is fully aware that dealing with antisocial forces with a resolute attitude is requisite for sound corporate growth. In this light, the basic policy for the establishment of its internal control system clearly defines its basic stance; the Anritsu Group Code of Conduct clearly states how it will respond to antisocial forces, as follows.

“We take a firm stance and act resolutely against antisocial forces that threaten the order and safety of civil society. We will have no relationship therewith and will not commit acts that encourage their activities.”

Moreover, in order to block relationships with antisocial forces, the General Affairs Department, as a controlling department, responds to undue requests and other matters firmly in collaboration with specialized external institutions, such as the police and corporate lawyers.

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