CSR Report 2008-Governance/Accountability

Themes of Activities in Fiscal 2007

In fiscal 2007, our governance activities were centered on two themes: advancing CSR activities in the NEC Fielding Group, and continually enhancing activities aimed at Zero Risk.

Results of Activities in Fiscal 2007

In fiscal 2007, we carried out two measures aimed at Zero Risk: we updated our risk management table, and we checked and organized the status of our insurance from the perspective of risk management. We also introduced a contactless room-access control system from the perspective of information security.
In addition, we conducted business-continuity training exercise envisioning a large-scale earthquake, with our sites nationwide linked via our teleconferencing system and radios. We used the exercise to confirm whether our business continuity plan (BCP) will function effectively.

Future Challenges

	We believe that in fiscal 2008, we must work to enhance our CSR activities throughout the NEC Fielding Group. In order to conquer this challenge, we have built a framework for sharing our CSR activity scheme with four subsidiaries in Japan and one international subsidiary, as we work to improve the corporate value of the group as a whole.

Our company has a board of directors and a board of corporate auditors. In October 2001, we instituted a scheme of corporate officers. This expedites decision-making and reinforces the supervisory and monitoring capabilities of the board of directors.
The board of directors holds provisional meetings when needed as well as regular monthly meetings, and we conduct a flexible decision-making. In addition, to clarify the management responsibilities of the board members, we reduced their tenure to one year effective June 2004. In the decision-making process, which is centered on the board of directors, in order to ensure fair and appropriate management decisions, important issues are discussed in advance at meetings such as the Corporate Officers Meeting. Meanwhile, the board of corporate auditors meets once every other month and Ernst & Young ShinNihon (*) was selected as the independent public accountant.
Auditors, the independent public accountant, and the internal auditing division (CSR and Internal Auditing Division) work in close connection with each other, which includes exchanging information regarding management activities and internal audits.
* Changed to KPMG AZSA & Co. in June 2008.

* Corporate Governance

Ensuring Governance at Subsidiaries

We send directors and corporate auditors to our subsidiaries, and provide guidance and support relating to creating legal-compliance schemes, in order to ensure governance at our subsidiaries. Our internal audit division (CSR and Internal Auditing Division) also audits our subsidiaries, providing guidance and recommendations for improvements as necessary.


	Visit our website of CSR Activities for more information about "corporate governance setup" (Japanese version only).

We have created various types of internal control system, including a risk management system and information security system, in accordance with the Basic Policy on Construction of the Internal Control System prescribed by Paragraph 5, Article 362 of the Corporation Law of Japan.


	Click here for more information about " the Basic Policy on Construction of the Internal Control System" (Japanese version only).

Establishing the Basic Policy on Construction of the Internal Control System

	Pursuant to Paragraph 5, Article 362 of the Corporation Law of Japan, we have determined our basic policy on construction of the system for internal control, in order to ensure and maintain fair and appropriate business operations.

1.	System to assure that the execution of duties by the directors and employees is in compliance with laws and the articles of incorporation
2.	System for the preservation and management of information on execution of duties by the directors
3.	Rules and other systemic elements related to risk management
4.	System to assure efficient execution of duties by the directors
5.	System to assure the propriety of work in the corporate group comprised of the Company as well as its parent company and subsidiaries
6.	In the event that auditors seek instatement of an employee to assist their work: system concerning said employee and items related to his or her independence from the directors
7.	System for submission of reports by the directors and employees to auditors, and submission of other reports to auditors
8.	System to assure the efficient execution of inspections by auditors

Introduction of block system

In October 2007, we introduced a block system for our business-line groups, which created a more efficient organizational structure extending beyond the boundaries of single branches.
The block system centralizes administrative staff functions - once existing at the branch level - into "blocks," enabling operations to be performed faster and more efficiently, as well as enhancing governance by ensuring close collaboration with administrative staff divisions at headquarters.

Block System

It is vital to earn the trust of all stakeholders in order to continuously operate our businesses while fulfilling our corporate social responsibility. One element in earning this trust is ensuring the reliability of our financial statements, and we have established an organizational scheme that guarantees that financial reporting is carried out in accordance with legal accounting standards and internal regulations.

Using reviews to prevent improper business dealings

The NEC Fielding examining division pre-checks the details of business negotiations with our customers in order to prevent improper business dealings, and check trading conditions and the like.
This division also reviews contacts from our sales divisions and Business Compliance Centers, requests for confirmation, and the like, in order to ensure that individual orders and sales are processed and accounted for properly and in accordance with legal accounting standards and internal regulations.

Ensuring the independence of the Sales Governance Division

As part of our efforts to enhance compliance and risk management, in March 2007 we moved sales management from the Business Promotion Group to Corporate Staff, creating the Sales Governance Division.
The new Sales Governance Division operates independently and is responsible for pre-checking business transactions and preventing inappropriate business dealings, and appropriately processing orders, accounting for sales, and then handling billing, based on individual corroboration in accordance with the law and internal regulations.
Additionally, our Sales Governance Division regularly meets with the CSR and Internal Auditing Division, Comptroller Division, Purchasing Division, and other departments to exchange information, improving operations (e.g. revising our sales system on the PDCA cycle, and control with IT), and strengthening internal controls.

In April 2006, the processing of orders, sales, and deposits at locations such as branch offices and sales offices was removed from the sales location. By concentrating the work at the Business Support Center (9 sites in Japan: Sapporo, Sendai, Saitama, Tokyo, Nagoya, Osaka, Hiroshima, Takamatsu, and Fukuoka), we were able to create a system of mutual checks.
Taking the establishment of Sales Governance Division as an opportunity, and in order to further strengthen internal controls, the Business Support Center was renamed to the Business Compliance Center (referred to as the BC Center) in March 2007, and the mission of the center has been clarified.

Roles of the Business Compliance (BC) Center

We are committed to swift and highly controlled risk management. We have created a Risk Management Basic Policy, and have built a risk-management system for our CSR and Internal Auditing Division to control overall risk.

Risk Management Basic Policy

(1)	Increase risk management transparency and expand the risk management system
(2)	Provide measures to follow up and reduce existing risks
(3)	Identify new risks and provide measures to prevent them
(4)	Decide supervision departments to manage recognized risks and debate collateral measures (such as insurance)
(5)	Conduct periodic risk assessments

The above policy intends to avoid management crisis.

Risk Management System

Identifying Insuring Status

One risk-management measure is obtaining insurance against risk. Between fiscal 2006 and 2007, we confirmed and organized the status of all active insurance policies at NEC Fielding company-wide.
We clarified the insuring status of each risk by having the Crisis Management Committee organize information about active insurance policies owned by each division, and matching them up against the portion of risk identified for NEC Fielding, from the perspective of risk management.
Starting in fiscal 2008, we plan to take additional measures, including taking out new insurance policies for risks believed to be inadequately insured, and enhancing our risk-management measures.

Examples of risks in fiscal 2007 and our responses

At NEC Fielding, as information-security measures we prohibit employees from using their privately owned computers for company work; erase company-operational data from privately owned computers; and require that our employees not use p2p file-sharing software on their privately owned computers. Unfortunately, however, in fiscal 2007 there was one information leak due to a virus infection caught via a p2p file-sharing program.
The leaked information was a file created with a New Year's greeting card program meant for sending New Year's cards to NEC Fielding employees. Although no customer information was leaked, we take this incident very seriously. The employee was punished in accordance with our employment regulations, and all employees checked for and deleted company operational data from privately owned computers and all IT devices (including CDs and USB memories) on personal encouragement by meeting with their superiors.