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Status of Internal Control System

Development of the Internal Controls System (Fundamental Policies)

To provide unparalleled service to the customers, increase corporate value, and contribute to the betterment of society, JAL Group has established the Fundamental Policies of Corporate Governance. To increase its effectiveness, we have established rules and organizations concerning the following systems and matters, and ensure that business operations are conducted appropriately in accordance with the Companies Act and Companies Act Enforcement Regulations. We evaluate and verify development and operation of the internal control system and implement corrective action when correction is required.

01. We have developed a system to ensure compliance with the Articles of Incorporation and laws and regulations governing the execution of the duties of directors.

  • We have established JAL Philosophy as behavioral guidelines of the Company. Directors and employees are encouraged to abide by these practices.
  • The Board of Directors decides the Fundamental Policies on the Internal Controls System and the General Affairs Department promotes development of the internal control system.
  • The General Affairs Department supervises compliance operations and monitors development and operation of relevant company regulations.
  • We have developed an audit system to ensure the duties of directors and employees are executed in compliance with applicable laws and regulations.

02. We have developed a system concerning the preservation and management of information concerning the execution of the duties of directors

We preserve and manage information concerning the execution of duties of directors in compliance with applicable laws and regulations and company regulations.

03. We have developed regulations and other systems concerning risk management of losses.

We have developed regulations and other systems for loss control.
In order to manage risks to JAL Group, we have established a Council for Safety Enhancement and a Risk Management Council, etc., and appropriately manage risks and proactively prevent loss. Further, we have established Guidance for JAL Group Internal Control, etc. and the General Affairs Department continuously monitors the appropriateness of duties.

04. We have developed a system to ensure that the duties of directors are executed efficiently.

  • We hold ordinary Board of Directors meetings once a month and extraordinary meetings when it is necessary to make important decisions regarding group management policies and plans. In addition, to ensure the duties of directors are executed efficiently, we have established meeting structures such as the Management Committee and Group Earning Announcement Session.
  • We have defined administrative authority, authority of managerial posts, division of duties, etc.in accordance with company regulations, and have segregated authority in order to ensure that duties are executed efficiently.

05. We have developed a system to ensure that duties in JAL Group are executed appropriately.

  • We have established JAL Group Business Management Regulations to ensure that each subsidiary has established a system to carry out management in a fair and efficient manner in accordance with JAL Philosophy. The General Affairs Department has also enacted Guidance for JAL Group Internal Control and continuously monitors the appropriateness of duties.
  • We have developed a system to report matters concerning the execution of the duties of directors of subsidiaries, etc. to the Company.
  • We have developed regulations and other systems for risk management of losses of subsidiaries.
  • We have developed a system to ensure the duties of directors of subsidiaries, etc. are executed efficiently.
  • We have developed a system to ensure that directors, etc., and employees of subsidiaries execute duties in compliance with applicable laws, regulations and the Articles of Incorporation.

06. We have developed a system concerning employees in case corporate auditors require the assignment of employees to support their duties, a system concerning independence of such employees from directors, and a system to ensure that instructions by corporate auditors to those employees are effective.

07. We have developed a system concerning reports, etc. to corporate auditors

  • We have developed a system for directors and employees to report to corporate auditors.
  • We have developed a system for directors, corporate auditors, employees or persons who receive reports from them to report to corporate auditors.
  • We have developed a system to ensure that persons who report are not subjected to disadvantageous treatment as a result of reporting.

08. We have developed a system for advance payment or repayment of costs arising from the execution of the duties of corporate auditors and the policy for processing of costs or liabilities arising from the execution of other duties.

09. We have developed other systems to ensure that audits by the Board of Corporate Auditors or corporate auditors are executed effectively.

Operation of the Internal Controls System

01. We have developed a system to ensure compliance with the Articles of Incorporation and laws and regulations governing the execution of the duties of directors and employees.

  • We established the JAL Philosophy and the JAL Group Code of Conduct, "Commitment to Society," and permeated and put them into action throughout the Group through education and other means.
  • We established Fundamental Policies on the Internal Controls System and Guidance for JAL Group Internal Control, and develop, operate and evaluate internal controls in accordance with the Companies Act and Financial Instruments and Exchange Act.
    In FY2021, we promoted initiatives to protect human rights, including the establishment of JAL Group Regulations on Respect for Human Rights, which stipulate the human rights due diligence system.
  • Whistleblower hotlines have been set up internally and externally, including a 365 days/24 hours reception desk and a contact desk which handles reports and consultations in both Japanese and English languages. Employees are regularly informed of the hotlines, and a system has been established to promptly detect compliance issues and take swift action.
  • We established Hot Lines for whistleblowers internally and externally to prevent violation of laws, regulations and internal rules, and regularly disseminate information within the Company.
  • We inspect attributes of new business partner candidates and conduct a review every three years as a regular inspection to verify whether there are any changes in attributes and/or information.
  • The Audit Department inspects the development and operation of the internal controls system stipulated by Guidance for JAL Group Internal Control according to the fiscal year plan, reports audit results of each audit to management, and regularly reports progress of audits and audit results to Audit and Supervisory Board Members.
  • The Maintenance Audit Department conducts inspections to verify that maintenance work is performed according to laws, regulations, and internal rules.
  • The Corporate Safety and Security Division holds meetings of the Group Council for Safety Enhancement and inspects deliberations, involvement, and instructions on safety by management through submitted materials according to the Safety Audit Plan. It also conducts internal audits of airports and flight surveys.

02. We have developed a system concerning the preservation and management of information concerning the execution of the duties of directors.

  • Information related to decision-making (documents and minutes) of Board meetings and other important meetings and Ringi documents are prepared, stored and managed in accordance with laws, regulations, and internal rules.

03. We have developed regulations and other systems concerning risk management of losses.

  • We regularly identify risks including the status of legal compliance across the entire JAL Group, while appropriately reviewing risk definitions, assessment methods, and response systems, in accordance with Guidance for JAL Group Internal Control and the Risk Management Manual, to enable us to respond to diversifying risks. With regard to risks of particular priority, we conduct control self-assessment (self-assessment and preparation of response plans through workshop) and consulting by the Risk Management Department to identify issues and establish measures for minimizing vulnerabilities. Furthermore, the content of these initiatives is reported to the Group Risk Management Council and the Board of Directors to strengthen the risk oversight responsibilities of management.
    In addition, the Group Safety Enhancement Council formulates important safety policies, takes steps to grasp the actual situation, and when necessary, reviews the organization, systems and various measures to ensure aviation safety of the entire Group.
  • We conduct regular JAL group-wide reporting drills to raise awareness of risk management and check the situation of staff quickly using a safety confirmation system to be prepared for contingencies.
  • We established an Operation Control Center branch in Osaka, assuming that an earthquake could directly strike beneath the Tokyo metropolitan area where Head Office central functions are integrated, and are improving on our Business Continuity Plan to make it more effective by applying the knowledge of outside experts and conducting drills.
  • We continuously strengthen our crisis management system and train care givers who take care of victims and bereaved families, and Accident Command Board members to conduct risk management quickly and accurately in case of an aircraft accident or incident.

04. We have developed a system to ensure that the duties of directors are executed efficiently.

  • The Executive Management Council and the Group Earnings Reporting Meeting have been established as executive meeting bodies directly under the President to make appropriate management decisions quickly. In FY2021, the Sustainability Promotion Council chaired by the President was newly established to promote ESG management in order to achieve the SDGs.
  • We clarify basic matters concerning the organizational structure of the Company and ensure the efficient execution of duties in accordance with Regulations for Meeting Structures, Regulations for Kessai and Administrative Authority and Regulations for Segregation of Duties.
  • We review administrative authorities and board operation methods and develop an environment for strategic discussions to achieve sustainable growth.

05. We have developed a system to ensure that duties in the JAL Group are executed appropriately.

  • We have established JAL Group Corporate Management Regulations and Guidance on JAL Group Internal Control, with the General Affairs Department monitoring the appropriateness of business operations. In FY2021, we reviewed the composition of the Board of Directors, educational programs and such of Group companies in order to strengthen internal controls of the JAL Group.
  • Implementation of initiatives aimed at achieving targets are monitored through expanded Business Performance Reporting Meetings, and guidance and support are provided.
  • We coordinate with the General Affairs Department of each JAL Group company daily and regularly, share information, and provide guidance and support, which contribute to strengthening the risk management system.
  • A basic agreement is signed between the Company and each Group company to clarify the basic relationship between the two companies with regard to business operations.
  • We established the JAL Philosophy and the JAL Group Code of Conduct, "Commitment to Society" and permeate and put them into action throughout the JAL Group through education and other means.
    Directors of each Group company are briefed on legal considerations and other matters to ensure that they are aware of their duties, authorities and responsibilities including the duty of loyalty and the duty of care. Employees are educated to acquire the knowledge necessary for performing their duties.
  • The Audit Department inspects the development and operation of the internal controls system stipulated by JAL Group Internal Control Guidance according to the fiscal year plan, reports audit results of each audit to management, and regularly reports progress of audits and audit results to Audit and Supervisory Board Members.
  • The Maintenance Audit Department conducts inspections to verify that maintenance work is performed according to laws, regulations, and internal rules.
  • The Corporate Safety and Security Department holds meetings of the Group Council for Safety Enhancement and inspects deliberations, involvement, instructions, etc. relating to safety by management through submitted materials, etc., in accordance with the Safety Audit Plan. It also conducts Safety Roving of airports and flight operation surveys.

06. We have developed a system concerning employees in case Audit & Supervisory Board members require the assistance of employees, a system concerning independence of such employees from directors, and a system to ensure that instructions by Audit & Supervisory Board members to those employees are effective.

We established an organization independent from directors and assign employees to serve as Audit & Supervisory Board members to increase effectiveness of audits by Audit & Supervisory Board members and execute audit duties smoothly. They receive work instructions and orders from and are appointed with the consent of Audit & Supervisory Board members.

07. We have developed a system concerning reports, etc. to Audit & Supervisory Board members.

  • Audit and Supervisory Board Members attend Board meetings and other important meetings, read Ring documents requiring approval by executive officers and directors, and audits the status of execution of duties relating to our company through interviews with the President, hearings with related departments, and visits to internal departments. Issues identified through audits are reported to the Audit and Supervisory Board and the Board of Directors twice a year, and ensuing action is confirmed.
  • Audit & Supervisory Board members exchange opinions and information regularly with Audit & Supervisory Board members of Group companies and visit them.
  • We established Hot Lines for whistleblowers inside and outside the Company and built a system to protect persons who seek consultation on compliance or report violations of laws, regulations and internal rules by organizations and individuals.

08. We have developed a system for advance payment or repayment of costs arising from the execution of the duties of Audit & Supervisory Board members and the policy for processing of costs or liabilities arising from the execution of other duties.

Necessary expenses for audits by Audit & Supervisory Board members are paid for appropriately.

09. We have developed other systems to ensure that audits by the Audit & Supervisory Board or Audit & Supervisory Board members are executed effectively.

Audit & Supervisory Board members exchange opinions and information regularly with the Audit Department and auditing company and increase effectiveness of audits.

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