Nippon Steel has established an internal control system, in line with a standard framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The basic policy concerning the internal control system was resolved by the Board of Directors and subsequently the Basic Rules for Internal Control were stipulated, and as a result the internal control and risk management system was established and is managed as follows:

• We devise an annual plan for internal control and risk management (Internal Control Plan) and act accordingly.
• Nippon Steel regularly checks the Group-wide status of internal control by establishing measures to check and supervise matters related to internal control and risk management.
• The Board of Directors has established materiality of sustainability issues, such as safety and health, environment (including climate change countermeasures), disaster prevention, quality, human resources development, and diversity and inclusion, and each responsible division plays a central role in promoting initiatives. The status of these initiatives, including risks and opportunities, is reported to the Corporate Policy Committee and the Board of Directors after being deliberated by Company-wide Committees chaired by the Executive Vice President and other organizations for each purpose and field. With respect to overall internal control, including matters related to risk management in each field, the status of initiatives is deliberated and confirmed by the quarterly “Risk Management Committee” chaired by the Executive Vice President in charge of internal control, and important matters are reported to the Corporate Policy Committee and the Board of Directors. The status of internal control initiatives in general, in addition to the above issues, refers to the matters related to the formulation and implementation status of annual plans about internal controls, compliance with anti-monopoly law, laws and regulations related to the prevention of corruption, including bribery of public officials, compliance with company rules such as the “Nippon Steel Group Conduct Code”, and risk management related to harassment, human rights, financial reporting, information security, etc. Through these mechanisms, the Company's Board of Directors supervises risk management which is important to corporate management.
• Each division of the Company designates a person in charge of risk management, and each group company also designates a risk management official. This is to encourage each division and company to take initiative and share information about internal control and risk management within their organization through regular meetings and other means.
• The Nippon Steel Group clearly states in its internal rules a zero-tolerance approach to violations of laws and regulations, which include provision of cash, gifts, excessive entertainment, and benefits to government officials, politicians, national enterprises, public agencies, and others; briberies including personal embezzlement and provision of convenience; and corruption.
• Anticipating the possibility of natural disasters, such as earthquakes, and environmental accidents, we have developed a business continuity plan (BCP), regularly conduct drills, and prepare accordingly. We have also decided on countermeasures against occurrence of an accident, such as the urgent formation of an emergency control headquarters, to minimize operational impacts and secondary damage.
• As a whistleblower and consultation system, we have established and operate a Compliance Consulting Room both internally and through an outside specialized agency. These offices are available to officers and employees of our company and group companies, their families, and employees of business partners. They accept reports and consultations (including anonymous submissions) regarding violations of laws, company rules, and other matters including corruption. This system helps prevent legal and company rule violations and improve business operations. In fiscal 2023, the Compliance Consulting Room received a total of 441 reports and inquiries.
• As a general rule, when the Compliance Consulting Room receives a report or inquiry, the matter is reported to the General Manager of the Internal Control & Audit Division and, if necessary, a counseling staff interviews the informant and consulter to review the matter and the facts. In case an outside specialized agency receives a notification or inquiry, the agency organizes the matter and issue and reports them to Nippon Steel, which then works on resolving the issues in the same manner as internal reporting.
• We regularly review the compliance status of laws, regulations, the Employee Action Guidelines and others, by doing internal auditing of internal divisions and group companies, by using the whistleblowing and consultation system and questionnaires sent to all employees, and other measures. Based on those results, we also regularly review the effectiveness of the internal control system and reflect the results of this review in the internal control plan.
• In case of the occurrence of a violation of laws, regulations, or internal rules, we follow these response and control processes:
  • The Internal Control & Audit Division Department instructs and guides a division or a group company where such violation occurred, on how to initially respond, how to investigate facts and causes, and how to plan preventive measures against recurrence. Based on these, the division or group company concerned implements the measures needed.
  • The Internal Control & Audit Division reports the matter and facts, causes, and preventive measures against recurrence concerning significant violation of laws, regulations, and internal rules, to the Risk Management Committee. The Committee then evaluates the appropriateness of the response, effectiveness of the preventive measures for recurrence, responsibility of relevant persons, and other items.
  • The Internal Control & Audit Division shares information on significant violations of laws, regulations, and internal rules within the Nippon Steel Group, and encourages each division and group company to check and ascertain the appropriateness of its operations.