Internal Controls 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.
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
(7) 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.
(8) 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.
(9) 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
(1) 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 penetrate 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.
- We established our hotline for whistleblowers for public interest including a hotline accessible in both Japanese and English (for internal and external use), which operates 24 hours a day, 365 days a year, and put in place a system that enables early detection of and quick response to incidents etc., related to compliance by regularly providing employees with information on the hotline. In light of the revision to the Whistleblower Protection Act in 2022, we have improved the environment related to whistleblowing and strengthened systems to detect risks before they occur.
- 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.
- We explain legal considerations to Directors to ensure that they are aware of their duties, authorities, and responsibilities including the fiduciary duty of loyalty and the duty of care as a prudent manager. We provide education courses for employees, etc. to ensure that they acquire the necessary knowledge to perform their duties.
- 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 Audit Department regularly reports audit results to the Board of Directors.
- The Maintenance Audit Department conducts inspections to verify that maintenance work is performed according to laws, regulations, and internal rules.
- The Safety Audit Department checks safety-related deliberations, engagement, instructions, and other operations regarding management by attending Group Safety Enhancement Council meetings and checking materials submitted to the meetings according to the Safety Audit Plan. It also conducts internal audits of production divisions, the Corporate Safety and Security Division, and airports.
(2) We have developed a system concerning the preservation and management of information concerning the execution of the duties of Directors.
- We prepare, keep, and manage information (documents and minutes) and “Ringi,” official internal documents for circulation and approval, related to decision making of the Board of Directors and other important meetings according to laws and regulations as well as internal regulations.
(3) We have developed regulations and other systems concerning risk management of losses.
- In order to prevent the risk of losses from occurring, we operate and implement the PDCA cycle of preventive risk management. The results of these efforts are reported to the Group Risk Management Council and the Board of Directors for management evaluation.
- To improve the effectiveness of our business continuity plan, we established a branch office of the Operations Control Center in Osaka, and have been utilizing the knowledge of outside experts in expanding the plan and conducting training in preparation for contingencies such as an earthquake directly hitting the Tokyo area. In addition, we conduct periodic training as well as regular JAL group wide reporting drills to raise awareness of risk management and check the situation of staff quickly using a safety confirmation system.
- We continuously 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.
(4) We have developed a system to ensure that the duties of Directors are executed efficiently.
Through processes such as evaluation of effectiveness of the Board of Directors, we review administrative authorities and board operation methods and develop an environment for strategic discussions to achieve sustainable growth. In order to make appropriate and quick management decisions, we established the Management Committee and Group Earnings Announcement Sessions directly under the President. In addition, to advance ESG management toward achieving the SDGs, we established the Sustainability Promotion Council chaired by the President. In FY2023, the Customer Value Creation Council was established to solve fundamental issues related to customer value.
(5) We have developed a system to ensure that duties in the JAL Group are executed appropriately.
- We established JAL Group Business Management Regulations and Guidance for JAL Group Internal Control and the General Affairs Department plays the central role in monitoring the appropriateness of duties.
- Implementation of initiatives aimed at achieving targets are monitored through expanded Business Performance Reporting Meetings, and guidance and support are provided.
- We provide the General Affairs Department of each JAL Group company, through daily and regular coordination and information sharing, with guidance and support that contribute to strengthening the risk management systems.
- The Company and each Group company have concluded the basic agreement to make clear the basic relationship between the companies with regard to business operations.
- We guide directors and others involved in the management of group companies to reaffirm their own responsibilities and roles and to ensure fair and efficient management.
- The Audit Department conducts appropriate audits of group companies, and since FY2022, the Board of Directors has been regularly informed of the results of these audits.
- The Maintenance Audit Department conducts inspections at each subsidiary to verify that maintenance work is performed according to laws, regulations, and internal rules.
- The Safety Audit Department checks safety-related deliberations, engagement, instructions, and other operations regarding management by attending Group Safety Enhancement Council meetings in accordance with the Safety Audit Plan and checking materials submitted to the meetings. It also conducts internal audits of production divisions, the Corporate Safety and Security Division, and airports.
(6) We have developed a system concerning employees in case Audit and 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 and Supervisory Board Members to those employees are effective.
We established an organization independent from Directors and assign employees to serve as Audit and Supervisory Board Members to increase effectiveness of audits by Audit and Supervisory Board Members and execute audit duties smoothly. They receive work instructions and orders from and are appointed with the consent of Audit and Supervisory Board Members.
(7) We have developed a system concerning reports, etc. to Audit and Supervisory Board Members.
- Audit and Supervisory Board Members attend the Board of Directors meetings and other important meetings, read Ringi documents requiring approval from Directors and above, and audit the execution of corporate duties through interviews with the President, hearings with related departments, visits to internal departments, etc. Audit and Supervisory Board Members report to the Board of Corporate Auditors and the Board of Directors on issues etc., recognized in audits twice a year, and confirm the status of follow-up work.
- Audit and Supervisory Board Members exchange opinions and information regularly with Audit and Supervisory Board Members of Group companies and visit them.
- Audit and Supervisory Board Members check the development of systems to ensure that persons who have reported to them do not receive disadvantageous treatment for making such reports.
(8) We have developed a system for advance payment or repayment of costs arising from the execution of the duties of Audit and 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 and Supervisory Board Members are paid for appropriately.
(9) We have developed other systems to ensure that audits by the Board of Corporate Auditors or Audit and Supervisory Board Members are executed effectively.
Audit and Supervisory Board Members exchange opinions and information regularly with the Audit Department and auditing company and increase effectiveness of audits.
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