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In line with the requirements of the Company Law of Japan, the Board of Directors of NEC Corporation adopted the Basic Policy on Internal Control Systems. As part of the policy, NEC Corporation has decided to effectively and comprehensively conduct risk management on the basis of an integrated, group-wide policy in accordance with NEC's Rules of Basic Risk Management.
To ensure that NEC Corporation engages in group-wide systematic risk management, NEC's Rules of Basic Risk Management stipulate that each division shall reinforce its risk management activities based on individual activities it has engaged in to date. These rules also state that every year NEC Corporation shall select risks that require group-wide priority countermeasures (referred to as "Priority Risk"), examine those risks, and implement countermeasures.
NEC Corporation has a Risk Control and Compliance Committee that deliberates important matters concerning risk management and supervises the implementation of risk management throughout the Group. NEC Corporation also fully deliberates the policy for responding to important risks related to NEC's management and other especially important risk-related matters by the Executive Committee.
The Internal Control Division provides necessary support, coordination, and instructions so that risk management at business divisions and corporate staff divisions is implemented systematically and effectively. The Division serves as the administrative office of the above Risk Control and Compliance Committee, is involved in selecting and monitoring the implementation of priority risk countermeasures, and is also responsible for the compliance promotion function.
The Internal Control Division provides instruction and support to subsidiaries worldwide
to ensure that they establish rules that conform to NEC Corporation’s Rules of Basic Risk Management and to implement
risk management activities in line with these rules.
These measures are intended to enhance the risk management capabilities of the NEC Group as a whole by requiring subsidiaries
to standardize and share information across the NEC Group about common definitions of risk management terminology,
basic structures and activities, while respecting the ability of subsidiaries to conduct their own risk management
activities in line with the nature of their business, the size of business operations, or unique circumstances.
NEC’s domestic subsidiaries completed the establishment of rules that conform to NEC Corporation’s Rules of Basic
Risk Management during fiscal 2010, and are implementing risk management activities based on a fully integrated policy
across the NEC Group. In addition, all major overseas subsidiaries including regional headquarters had completed the
establishment of such rules as of the end of fiscal 2011.
Every year, the Internal Control Division identifies group-wide important risks,
selected from the perspective of the need for countermeasures and magnitude of impact on business continuity,
on the basis of risk assessments for each organization obtained through a questionnaire-based risk management
survey and interviews, the risk management effectiveness evaluation by the Corporate Auditing Bureau, findings of
the corporate auditors and accounting auditors, and other information.
From among group-wide important risks, NEC Corporation selects priority risks following deliberations by the
Risk Control and Compliance Committee and the Executive Committee on risks deemed to require new countermeasures,
including improvement of existing countermeasures, and on risks that may significantly impact the NEC Group's continuity.
The division nominated by the Risk Control and Compliance Committee then takes the lead in devising countermeasures.
NEC Corporation verifies the status of risk management in all divisions using the above risk management survey.
Specifically, (1) with respect to the risks that each division prioritized in a given fiscal year, we verify risk countermeasures
and divisional self-evaluations of implementation status and (2) with respect to risk to be prioritized in the subsequent fiscal year,
we confirm scheduled risk countermeasures, including those already implemented or begun.
The Internal Control Division regularly feeds back the survey results to various divisions, with the aim of sharing
information on improving and enhancing risk management activities. The Division also interviews core divisions every six months
to verify the progress and effectiveness of measures reported in the risk management survey.
Furthermore, the Risk Control and Compliance Committee receives quarterly reports on the status of examining specific priority
risk countermeasures and progress of implementation from each division in charge. The committee supervises the group-wide
implementation of risk management by verifying the implementation status of countermeasures, related improvements and remaining issues,
schedules and other matters, and by issuing instructions as necessary on the direction of improvement measures.
NEC Corporation believes that one issue going forward is to continuously enhance the quality of risk management activities,
which vary across internal divisions and its subsidiaries.
Through the annual risk management survey for each division at NEC Corporation, questionnaires sent to subsidiaries in and outside Japan,
and interviews, NEC Corporation will strive to gauge the extent to which risk management is an integral part of each division,
while offering continuing support to divisions, including subsidiaries, chiefly by providing them with its extensive expertise.
In this manner, NEC Corporation aims to bolster the entire group's risk management capabilities.
