FANCL Group has created an internal control system as a mechanism to ensure the efficacy and efficiency of operations, the reliability of financial reports, and compliance with laws an regulations.
In May 2022, we merged the Compliance Committee and Internal Control Committee to form the Group Risk and Compliance Committee with the aim of ensuring the adequacy of internal controls and improving Company-wide risk and compliance management. On December 20, 2024, in accordance with changes to the governance structure, the FANCL Executive Committee was established as the highest level meeting body in the FANCL Group, and the Group Risk and Compliance Committee and Sustainability Committee were placed under the FANCL Executive Committee.
Once a year, a review is conducted by these committees/conference bodies and related divisions, to identify "business and other risks," which are then decided upon by the FANCL Management Strategy Conference. The FANCL Management Strategy Conference reviews the measures taken to address the risks, verifying the feasibility of the measures, and taking further actions with regard to risks that have not been resolved.

The entire FANCL Group obtained external certification for the ISO 9001 international quality management standard in November 2000 and for the ISO 14001 international standard in November 2002. Although we have withdrawn from both certifications (ISO 9001: withdrawn in November 2015, ISO 14001: withdrawn in November 2014), we continue to maintain the risk assessment systems developed during this period, and have established and operate our own management system, including the implementation of quality audits.

We have established the Quality Control Working Group, Compliance Working Group, Internal Control Working Group (Financial and IT Controls), and IT Security Working Group as task forces under the Group Risk and Compliance Committee. Each Working Group analyzes and considers countermeasures for risks including changes in physical condition when using Group products, violations of laws and regulations within Group operations, and matters pertaining to quality assurance, finance and accounting, personal information and trade secret management, laws and regulations, legal action, bribery, and information security. Their findings concerning risk analysis, risk response, and the status of legal compliance are reported to the FANCL Management Strategy Conference by the Group Risk Compliance Committee through two regular reports per year, as well as when necessary.

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The Sustainability Committee was established in October 2021 with the purpose of placing sustainability at the core of management, and to enhance corporate value over the medium to long term by achieving the targets established to address key issues. To ensure the FANCL Management Strategy Conference can effectively supervise and monitor, it will:

• Conduct preliminary reviews of policies and strategies.
• Adequately manage and evaluate progress toward targets.
• Conduct individual reviews.
• Assess environmental risks and opportunities, including climate change.

We are also deliberating the status of the PDCA cycle, which involves identifying, evaluating, and implementing countermeasures. Important matters are reported to the FANCL Management Strategy Committee four times a year through the Sustainability Committee.