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Basic Policy on the Design of Internal Control Systems

As a partner that enables society and industry to move ahead, NTT Group companies will not only provide services that support the safety and security of people around the world, but will also rise to the challenge of creating new value to make people's lives more comfortable and prosperous through continuous innovation, and the challenge of realizing of a global sustainable society.

In meeting these challenges, it is essential that the Company not only comply with laws and regulations, social norms, and internal policies both in each country and region, but also conduct our business with integrity and efficiency and high ethical standards.

We have established a basic policy to achieve the above. The President, as the chief executive officer, shall be responsible for the design and operation of the internal control systems in accordance with this Basic Policy.

  1. System to Ensure that the Execution of Duties by Directors, etc. and Employees Complies with Laws and Regulations and the Articles of Incorporation
  2. Policies and Other Systems Related to Risk Management
  3. System to Ensure the Efficient Execution of Duties by Directors, etc.
  4. System for Retaining and Managing Information Related to the Performance of Duties by Directors, etc.
  5. System to Ensure the Proper Business Activities of NTT Group
  6. Matters Relating to Employees Engaged to Assist Audit & Supervisory Board Members in the Performance of Their Duties and Matters Relating to the Independence of Such Employees from Directors, etc.
  7. System for Reporting to Audit & Supervisory Board Members by Directors, etc. and Employees and System for Ensuring Effective Conduct of Audits by Audit & Supervisory Board Members

1. System to Ensure that the Execution of Duties by Directors, etc. and Employees Complies with Laws and Regulations and the Articles of Incorporation

The Company shall take the following actions to ensure that it not only complies with laws and regulations but also conducts its business with high ethical standards:

  1. Corporate Ethics and Compliance
    1. ①The NTT Group Corporate Ethics Policy shall be established to lay out the basic principles of corporate ethics and provide specific guidelines for ethical behavior for all NTT Group Directors, etc. and employees.
    2. ②The Corporate Ethics Committee, chaired by a Senior Executive Vice President, shall be established to clarify the responsibilities of corporate ethics, promote corporate ethics, foster compliance awareness, maintain discipline, and conduct investigations and reviews of whistleblowing reports. In addition, to prevent harassment at the workplace, the Company shall establish an anti-harassment policy and prescribe the measures to be taken.
    3. ③The Company shall conduct corporate ethics training, etc., to continuously raise the awareness of Directors, etc., and employees regarding corporate ethics and compliance. In addition, the Company shall conduct awareness surveys, etc. to evaluate the effectiveness of these initiatives.
    4. ④The Company shall stipulate in an employment policy, etc., the obligations of employees to faithfully comply with laws, regulations, internal policies, and notices and to devote all efforts to the performance of their duties to operate the business properly and efficiently.
    5. ⑤The Company shall establish a disciplinary policy, etc., and shall deal with any violations of laws, regulations, or internal policies in accordance with such policy.
  2. Whistleblowing

    The Company shall endeavor to foster a more open corporate culture and shall establish a Corporate Ethics Help Line in each of NTT Group companies and an external Corporate Ethics Help Line contact point throughout the Group, staffed by lawyers, to receive whistleblowing reports, whether anonymous or named. The Company shall also establish an independent reporting channel to Audit & Supervisory Board Members. Whistleblowers shall be protected from any disadvantages because of making a report to the Corporate Ethics Help Line and/or to Audit & Supervisory Board Members.

  3. Internal Audit
    1. ①In order to promote the efficient and effective internal audit activities, the Company shall formulate an internal audit policy, which shall determine the fundamental matters concerning the conduct of internal audits, and establish the Internal Audit Department as an independent organization under the direct control of the President. The Internal Audit Department, whose mission is to increase the value of NTT Group and to contribute to the achievement of its business objectives, shall evaluate the adequacy and effectiveness of governance, risk management, and internal control processes and make recommendations from an independent and objective standpoint in accordance with the internal audit policy.
    2. ②The Internal Audit Department shall report the internal audit plan to the Board of Directors and Audit & Supervisory Board Members and shall periodically report the results of internal audits to the Board of Directors and Audit & Supervisory Board Members.
  4. Disclosure
    1. ①The Company shall make reasonable efforts to ensure the reliability of its reports prepared in accordance with the Financial Instruments and Exchange Act and other applicable laws and regulations.
    2. ②The Company shall formulate an internal policy that establishes disclosure control procedures for important management information of the Company to provide timely, fair, and impartial disclosure of information of NTT Group and to facilitate appropriate investment decisions by investors, etc. The Company shall also formulate and disclose a Disclosure Policy as its fundamental policy for disclosure of information to investors, etc. and investor relations activities.
    3. ③The Company shall make disclosures in accordance with relevant domestic and foreign laws and stock exchange rules and will proactively endeavor to disclose such information as the Company believes may be useful in promoting shareholders' and investors' understanding with respect to NTT Group.
  5. Sustainability

    The Company shall establish a Sustainability Committee and manage the action policies and progress of sustainability initiatives across the entire Group.

2. Policies and Other Systems Related to Risk Management

The Company shall take the following measures to effectively manage risks:

  1. The Company shall establish a risk management policy, which defines fundamental policies concerning the risk management for appropriate and efficient business operations.
  2. The Company shall establish a Business Risk Management Committee, chaired by a Senior Executive Vice President, to ensure that risk management functions effectively and strongly throughout the Company. The Business Risk Management Committee shall oversee overall risk management and establish policies for identifying and managing enterprise-wide risks.

3. System to Ensure the Efficient Execution of Duties by Directors, etc.

The Company shall take the following measures to ensure efficient business operations through an appropriate allocation of responsibilities and the oversight framework for Directors, etc.:

  1. The Company shall establish a policy of the Board of Directors. In principle, the Board of Directors shall hold meetings once each month to make decisions on important management matters based on applicable laws and regulations, the principles of business judgment and the duty of care of a prudent manager, and Directors, etc., shall also report regularly on the status of the performance of their duties.
  2. To strengthen the function of supervising the fairness of the performance of duties, the Board of Directors shall include outside independent directors.
  3. The Company shall adopt an executive officer system to clearly separate the management decision-making and supervisory functions of the Board of Directors from the business execution functions of the executive officers, thereby enhancing management flexibility.
  4. The Company shall establish an Executive Officers Meeting and committees under the Executive Officers Meeting in charge of the important business execution to ensure the smooth conduct of business operations delegated by the Board of Directors.
  5. The Company shall establish an organization policy that defines the structure of the internal organizations and the responsibilities of each organization, and an authority policy that defines the division of authority.

4. System for Retaining and Managing Information Related to the Performance of Duties by Directors, etc.

The Company shall take the following measures to manage information related to the performance of the duties of Directors, etc. and to contribute to the appropriate and efficient conduct of business:

  1. The Company shall establish a document policy to regulate necessary matters regarding the management of documents (including related materials and electromagnetic records. The same shall apply hereinafter.) and other information. In addition, such documents shall be retained for the period prescribed by laws and regulations or for the period necessary for business operations.
  2. The Company shall establish an information security management policy to define all fundamental matters related to the acquisition and management of information necessary for its business, and shall take information security measures to identify and prevent risks, and to minimize damage when a risk materializes.

5. System to Ensure the Proper Business Activities of NTT Group

The Company shall take the following measures to ensure that each of NTT Group companies complies with all applicable laws and regulations and, while fully respecting each other's independence and autonomy, conducts its business appropriately and efficiently and contributes to the growth and development of the Group as a whole:

  1. In order to oversee and coordinate NTT Group and promote efficient and effective group management, the Company shall establish a system for reporting from each company on matters necessary for NTT Group's business operations.
  2. The Company shall conduct education and training to employees to prevent fraud or misconduct in NTT Group.
  3. The Company shall formulate a business risk management manual to enable NTT Group to prevent and prepare for risks in advance, and to respond to risk events appropriately and promptly, and shall manage risks on a Group-wide basis.
  4. The Company shall establish NTT Group Information Security Regulations and provide the direction of essential principles and specific measures related to information security to be followed by the entire NTT Group.
  5. The Company shall conduct internal audits of NTT Group companies, etc. in a risk-based manner, taking into consideration their business conditions and other factors.

6. Matters Relating to Employees Engaged to Assist Audit & Supervisory Board Members in the Performance of Their Duties and Matters Relating to the Independence of Such Employees from Directors, etc.

The Company shall take the following measures with respect to employees assigned to assist the Audit & Supervisory Board Members in the performance of their duties, to ensure the effective performance of the audits by Audit & Supervisory Board Members:

  1. The Company shall establish the Office of Audit & Supervisory Board Members as an important structure under the Companies Act to provide dedicated employees to assist Audit & Supervisory Board Members in the performance of their duties.
  2. Employees assigned to the Office of Audit & Supervisory Board Members shall perform their responsibilities under the direction and orders of Audit & Supervisory Board Members.
  3. Decisions on the transfer of employees assigned to the Office of Audit & Supervisory Board Members, evaluations of such employees shall be made with due regard to the opinion of the Audit & Supervisory Board.

7. System for Reporting to Audit & Supervisory Board Members by Directors, etc. and Employees and System for Ensuring Effective Conduct of Audits by Audit & Supervisory Board Members

To ensure that audits by Audit & Supervisory Board Members are conducted effectively, the Company shall take the following measures, including the reporting to Audit & Supervisory Board Members by Directors, etc., and employees of important matters concerning the performance of their duties:

  1. (1) Directors, etc. shall report the following matters concerning the performance of their duties:
    1. ①Matters decided by the Executive Officers Meeting
    2. ②Matters that have caused or may cause material damage to the Company
    3. ③Monthly financial reports
    4. ④ Results of internal audits
    5. ⑤Matters involving a risk of violation of laws and regulations or the Articles of Incorporation
    6. ⑥Status of whistleblower reports to the Help Line
    7. ⑦Material matters reported by an NTT Group company
    8. ⑧Other material compliance matters
  2. Directors, etc., Independent Auditors and the Internal Audit Department shall exchange opinions with Audit & Supervisory Board Members on a regular or ad hoc basis.
  3. Audit & Supervisory Board Members may attend meetings of the Board of Directors and other important meetings.
  4. Audit & Supervisory Board Members may independently engage and obtain advice from external experts with respect to the performance of audit.
  5. Audit & Supervisory Board Members may claim expenses necessary for the performance of their duties, and the Company shall pay such expenses based on such claim.
  6. No person who reports to Audit & Supervisory Board Members shall be treated adversely because of such report.

Note: For purposes of this Basic Policy, "Directors, etc." means Directors, Executive Officers, and Senior Vice President of R&D.

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