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 has established the basic concept of internal control of the entire group in the Basic Internal Control System Policy, and Epson takes actions to steadily improve that across the entire Epson Group.
The Epson Group is managed based on the concept: global consolidated responsibility of product-based divisions; and global responsibility of the Head Office supervisory functions. The head of the business operations divisions take the responsibility for the business execution systems of subsidiaries. And the head of Head Office supervisory sections take the responsibility for Group-level corporate functions. With this system, Epson strives to streamline operations throughout the Epson Group, including subsidiaries.
Compliance and Risk Management
Epson’s goal is to continuously create value that exceeds customer expectations while building trust with all stakeholders based on the company’s Management Philosophy. To maintain and strengthen this trust, Epson seeks to increase management transparency and fairness, ensure effective management through faster decision-making, and appropriately manage compliance and risk. Because of that, we conduct various types of monitoring and supervise activities under the following organization. There were no compliance-related issues that are subject to timely disclosure in the 2019 fiscal year.
Seiko Epson transitioned to a company with an Audit & Supervisory Committee after receiving approval for the move at its June 2016 general shareholders' meeting. The company revised the composition of its Compliance Committee and the role of its Chief Compliance Officer (CCO) in conjunction with this change.
Under the current organization, the Compliance Committee, which acts as an advisory body to the Board of Directors and is chaired by a Full-Time Audit & Supervisory Committee Member, discusses important compliance activities, reports and proposes compliance affairs to the Board of Directors, and supervises business affairs. The CCO supervises and monitors the execution of all compliance operations and periodically reports the state of compliance affairs to the Compliance Committee. In addition, a compliance control department and a risk management department monitor compliance in general, making corrections and adjustments as needed.
These compliance organization are defined in the Epson Group Compliance Basic Regulation.
Whistleblowing systems and reporting channels
Epson is committed to maintaining effective whistleblower systems and has installed internal and external compliance hotlines and other advisory and support services to facilitate the reporting of potential compliance issues. We have also provided reporting channels for use by our business partners, to quickly catch any potential compliance problems that could go undetected internally. The identity of whistleblowers is rigorously protected and reprisals of any type are strictly forbidden.
Counseling and support services in Japan
- Epson Helplines
- Harassment counseling
- Counseling related to overwork and long working hours
- Counseling for persons with disabilities
- Insider trading advisory service
- Antitrust (antimonopoly) advisory service
- Corruption (bribery) regulations advisory service
- Employee counseling
- Reporting contact for business partners
Whistleblowing systems have been installed in all Epson Group companies worldwide. The use of these systems is monitored, and usage data are reported to a corporate management body and to Group companies in an effort to increase system effectiveness.
Epson has taken steps to improve the comprehensiveness and effectiveness of the Epson Group's whistleblowing systems. As part of this, we have put in place an Epson Executive Compliance Hotline (a global whistleblowing system). This hotline can be used to report directly to Seiko Epson potential compliance problems involving individuals in executive management at Epson's overseas subsidiaries.
Risk Management Organization
The Chief Risk Management Officer in the Epson Group, including subsidiaries, is the president of Seiko Epson. Group-wide risks are managed globally by Head Office supervisory departments with the cooperation of the operations divisions and subsidiaries. Risks unique to an individual business are managed by the Chief Operating Officer of that business, including at subsidiaries consolidated under them. The SEC risk management department monitors overall risk management in the Group, makes corrections and adjustments thereto, and ensures the efficacy of risk management programs.
The Epson Group Risk Management Basic Regulation specifies the company’s risk management organization.
Epson identifies serious risks that could have significant consequences on the company.
-Risks that could have serious adverse effects on Epson Group management are considered “serious Group-wide risks.”
-Risks that could have serious adverse effects on business operations are considered “serious business risks.”
Epson drafts and executes plans to control both types of serious risks and monitors their progress. The company also strives to ensure control plan effectiveness by evaluating serious Group-wide risks and serious business risks on a quarterly and half-yearly basis, respectively, and by revising the plans as needed. The president of Seiko Epson reports important risk management affairs to the Board of Directors periodically.
Epson has a standing Crisis Management Committee. The committee is chaired by the president. The general administrative manager in charge of risk management serves as vice-chair. The rest of the committee is made up of the general managers of supervisory departments at the Head Office. An organization and a predetermined crisis management program are in place to enable us to rapidly mount a Group-wide initial response in the event of a crisis.
Epson's internal audit departments audit a total of 96 business units around the world, including operations divisions in Japan, 51 overseas subsidiaries, and 14 domestic subsidiaries. Audits are used to check compliance, 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 about once every three years based on the Audit Office's mid-range audit plan. In the 2019 fiscal year, the Audit Office performed 22 operational audits, and provided them with advice on correcting 69 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.