The ENEOS Materials Group established the Basic Policy on Internal Control Systems, and in accordance with this policy, we create internal control systems to ensure the appropriateness of business operations and conduct independent internal control activities for each company division and main Group companies. Also, the Executive Council and the Board of Directors periodically confirm the results of internal control measures throughout the Group and implement ongoing corrective measures to address any issues.

Internal Control System Diagram

• Basic Policy on Internal Control Systems

The scope of the materials business is broad, and we are aware that interruption of our business activities would have significant social impact and that we must fulfill our responsibilities to stakeholders, and for these reasons, it is essential that we enhance our business continuity capabilities. Preventing major crises from occurring and minimizing the impact on business activities in the event that a crisis does occur are key management issues, and we conduct risk management with a bird's-eye view from the perspectives of both risks and opportunities.

We established the Environmental, Safety and Quality Committee, Corporate Ethics Committee, and Sustainability Project under the ESG Management Promotion Meeting. The president, who is the head of the Meeting, bears ultimate responsibility. The Meeting is responsible for risk management and also functions as a Security Measures Headquarters. The Corporate Ethics Committee promotes compliance including compliance with laws and regulations. Measures for achieving carbon neutrality are carried out under a project-based structure.

We implement ENEOS Group-wide risk management techniques tailored to the characteristics of the ENEOS Materials Group.
The ESG Management Promotion Meeting identifies material risks and designates the responsible department. Under the responsible department, individual departments incorporate major risk countermeasures into their work and manage risks through the PDCA process to ensure effective internal control without omission so that business processes can be properly implemented as countermeasures against the material risks. The responsible department promotes risk countermeasures, and the ESG Management Promotion Meeting performs periodic monitoring.

1. 1.Risk identification work in individual departments*
   • A series of tasks to identify, analyze, and evaluate risks that may have an impact caused by a department or Group company, including potential material risks for the ENEOS Materials Group
2. 2.The ESG Management Promotion Meeting Administrative Office organizes the risks reported in 1. and selects proposed ENEOS Materials Group material risks
3. 3.The ESG Management Promotion Meeting approves the ENEOS Materials Group material risks and specifies responsible departments.
4. 4.Individual departments or Group companies incorporate the identified risks into internal control systems (the Risk Control Matrix; "RCM") and manage those risks.
5. 5.Responsible departments promote countermeasures.
   • Responsible departments check the progress of countermeasures to address ENEOS Materials Group material risks as necessary and take action to mitigate risks.
   • Risks that were not selected as ENEOS Materials Group material risks are positioned as "department management risks" of the individual departments or Group companies, and the individual departments mitigate those risks in their day-to-day risk management activities.
6. 6.The ESG Management Promotion Meeting Administrative Office reports on the previous progress of risk management to the ESG Management Promotion Meeting.

Risk Assessment Matrix

The Audit and Internal Control Headquarters takes the lead concerning specific internal control activities within the ENEOS Materials Group and is creating systems for appropriate operation of internal controls in accordance with the Companies Act and Financial Instruments and Exchange Act and the internal controls of individual departments. The internal control systems of each department are designed in line with the COSO Framework, and this mechanism enables each department to take autonomous action. The Company has introduced and operated these mechanisms since fiscal 2022, the year that the Company was established, and we conduct internal control activities that link companywide risk management with internal control systems to ensure that we do not overlook any material management risks.

Internal Control Reporting System

BCM by ENEOS Materials is intended to clarify guidelines for establishing and operating systems to minimize the interruption of business activities, even in the event resources are greatly limited due to a major disaster or accident.
We have established a system in which we set up a headquarters to broadly divide the time axis into the initial response phase and the emergency response phase, and have formulated a BCP.

The ENEOS Materials Group does not just comply with laws and regulations in accordance with the ENEOS Group Code of Conduct, ENEOS Group Compliance Activity Basic Rules, ENEOS Materials Corporate Ethics Guidelines, and the ENEOS Materials Corporate Ethics Hotline Rules, it also conducts business activities in accordance with social norms and corporate ethics. Compliance is an indispensable foundation of the execution of the Group's business for us to gain social trust through fair and highly transparent business activities. To ensure strict compliance and continuously strengthen our compliance systems, the Group established the Corporate Ethics Committee, headed by the president. At regular meetings, which are held twice annually, each Company department and Group company reports on the status of compliance and the use of internal reporting systems. The Corporate Ethics Committee evaluates risks, such as legal violations, and if any deficiencies are identified, takes corrective measures, and the results are reflected in the identification of issues and the formulation of training plans for the following fiscal year.

The ENEOS Materials Group (the "Group") is well aware that ensuring a high level of information security is a crucial management issue and implements necessary measures. In line with this, we established the Basic Policy on Information Security and strive to properly handle, manage, protect, and maintain information, including our business partners and contractors.

ENEOS Materials started conducting employee awareness surveys in fiscal 2022.
We use the survey results to improve any identified issues so that we can be a company that employees and their families feel an attachment toward and pride in.