Organizational Governance

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Internal Control System

Epson's Management Philosophy outlines the vital business principles to which the global Epson Group is committed, while Epson's Principles of Corporate Behavior describes the conduct required to live up to these principles. Epson takes actions to steadily improve internal control across the entire Epson Group.

Group Governance

The Epson Group is managed based on the concept: global consolidated responsibility of product-based divisions; and global responsibility of the Head Quarter (HQ) supervisory functions. The head of the business operations divisions take the responsibility for the business execution systems of subsidiaries, and the head of HQ supervisory sections take the responsibility for grouplevel corporate functions. With this system, Epson strives to streamline operations throughout the Epson Group, including subsidiaries.

Compliance and Risk Management

In March 2013, the Seiko Epson board of directors passed a resolution calling for the establishment of an internal organization intended to improve compliance and risk management. The highlights are the appointment of a chief compliance officer (CCO) and the establishment of a compliance committee and compliance office.

Under this new organization, the compliance committee, which is chaired by the CCO, acts as an advisor to the board of directors. The committee supervises operations related to compliance by deliberating important compliance activities and by giving reports and proposals to the board of directors. In addition, the Compliance Office 1) monitors compliance in general, making corrections and adjustments as necessary, and 2) takes action to mitigate risks by conducting regular monitoring of risks and overseeing risk management activities.

Meanwhile, the Corporate Strategy Council, which advises the president, strives to ensure the effectiveness of compliance and risk management by deliberating important matters related to compliance and risk management from various angles. When major risks become apparent, the president leads the entire company in mounting a swift initial response in line with Epson's prescribed crisis management program. The president periodically reports to the board of directors on important matters concerning the execution of compliance and risk management, and formulates appropriate measures to respond to these issues.

Epson has also installed a compliance hotline which has internal and external report windows and other advisory and support services to facilitate internal and external compliance-related inquiries and to ensure an effective whistleblower system.

Advisory and support service

Internal Audits

The Audit Office, which reports directly to the president, audits a total of 108 business units around the world, including operations divisions in Japan, 60 overseas subsidiaries, and 15 domestic subsidiaries. Audits are used to check compliance and the effectiveness and efficiency of their risk management, internal controls, and management methods. If issues are found, the Audit Office helps minimize business risks by conducting a follow-up audit to check the status of improvements. To ensure effective Group governance, the Office also centrally oversees internal audits conducted by auditors at regional headquarters in Europe, the Americas, China, and Southeast Asia.

Business units come up for audit once every three years based on the Audit Office's mid-range audit plan. In the 2015 fiscal year, the Audit Office performed 35 operational audits and 26 information system audits of Epson business units, and provided them with advice on correcting 280 items that required improvements.

Internal Controls over Financial Reporting

Every year, we audit internal controls to ensure the reliability of financial reporting (J-SOX). The Epson Group uses an autonomous distributed implementation system in which operations divisions and subsidiaries subject to external audits conduct a self-assessment on the design and operation of their internal controls, while the J-SOX Compliance Department ensures the validity of the assessment results. Operations divisions, subsidiaries, and affiliates not subject to external audits are required to independently assess their internal controls and make such improvements as are necessary.