︱

GovernanceFoundation of Sustainability Management ︱Corporate Governance
Basic Philosophy

Sanki Engineering Corporate Governance Guidelines (revised on June 27, 2022)

https://www.sanki.co.jp/en/corporate/governance/guideline.html

Corporate Governance System⨋ Institutional Design

Corporate Governance
Report (in Japanese)▍Status of Directors and Officers (as of June 23, 2023)
Number of Persons
Chairperson of the Board of Directors

External director

Directors (women)

11 (1)

External directors (independent directors)

5 (5)Executive officers (women)

35 (0)

Those also serving as directors

4

Auditors (women)

5 (0)External auditors (independent auditors)

3 (3)▍Frequency of Major Meetings (FY2022)
Meeting

Corporate Governancehttps://www.sanki.co.jp/corporate/
governance/report.html

GovernanceWe adopted a Company with Board of Company Auditors system with dedicated,
full-time auditors as our form of corporate governance. Under this structure, theauditors and the Board of Auditors exercise oversight over the execution of duties
by directors, the accounting auditors auditing the financial statements and otherdocuments as well as the Board of Directors responsible for making decisions onmaterial issues. In addition, to increase management efficiency and simultaneously
speed up the decision-making process, we employ an executive officer system
in which we divide management functions between the Board of Directors
responsible for decision-making and supervisory functions, and the executive
officers responsible for the execution of business affairs.

Foundation of Sustainability Management

We established the Sanki Engineering Corporate Governance Guidelines to clarify the Sanki Engineering Group’s basic
philosophy and policy on corporate governance. Once a year, we review the status of our compliance with the Corporate
Governance Code and revise it as needed. We are also taking appropriate action to comply with revisions made to
the Corporate Governance Code in June 2021, and while maintaining the standards set by the Tokyo Stock Exchange
Prime Market and making improvements, we will continuously strive to achieve sustainable growth for the Group andstrengthen its corporate value over the medium to long term.

Average Attendance ofExternal Officers

Frequency

Board of Directors

13*1

99.0%

Board of Auditors

8*2

100%

Advisory Committee on Nomination
and Remuneration

4*3

100%

Management Meeting30

96.7%*4*1 M s. Tamami Umeda was appointed
external director, and Mr. Kunihiko
Tachi was appointed auditor of SankiEngineering in June 2022 and they
have therefore attended 11 out of 11
meetings.
*2 M r. Kunihiko Tachi was appointed
auditor of Sanki Engineering in June
2022 and has therefore attended 6
out of 6 meetings.
*3 M s. Tamami Umeda was appointed
external director of Sanki Engineeringin June 2022 and has therefore
attended 2 out of 2 meetings.
*4 Attended only by the chair of theBoard of Directors (full-time external).

SANKI REPORT 2023

73

︱

GovernanceFoundation of Sustainability Management ︱︱Corporate Governance

Board of Directors

Exchange of opinions,establishing common awarenessLiaison Meeting of External
Officers
5 external directors
3 external auditors

Accounting Auditors

11 directors* including
5 external directors
Consultation

Appointment/
Dismissal(Ernst & Young ShinNihon LLC)

Discussion
and reporting

Internal Finance Control
Committee

President

Management Meeting
Discussion, andreporting onimportant matters

ReportingExecutive officers
Leadership and supervision

Auditing

Sections, centers, headquarters, research institute,business division, business departments, branches
and branch offices, subsidiaries

Risk Management Committee

The board consists of directors and is currently chaired by an external
director. It meets at least once a month to decide on important mattersand supervise the status of execution of business affairs.

The committee consists of members of the Management Meetingand chairpersons of subcommittees, appointed by the executive
officer in charge of risk management, and the head of the Internal
Audit Office. Currently, the executive officer in charge of risk
management is the president. The committee meets four times ayear and oversees risk management for the entire Group.

Board of Company Auditors
The board consists of auditors, by and from whom a chairperson is
selected. In principle, it meets at least eight times a year to monitor
the status of governance and audits the execution of duties bydirectors as an independent body entrusted by shareholders.
Members attend board and other important meetings, review thestatus of operations and assets, and maintain close contact with theaccounting auditors, Internal Audit Office, and Accounting Division. A
supplementary external auditor has been appointed to fill any future
external auditor vacancies.
Internal Audit Office

Executive Officer Committee
Consisting of executive officers and presidents of the Group
companies, the committee meets at least four times a year tocommunicate the policies expressed by the president and executive
officers responsible for departments, report on the status ofbusiness execution by each executive officer and Group company
president, and discuss initiatives for achieving the medium-term
management plan.

Supplementary
Principle 3-1.3
Supplementary
Principle 4-1.1

Principle 4-9

Guideline*1

Report *2

Article 10

P. 22

Article 9
Article 18

P. 22

Article 14

P. 23

Article 16

P. 23

Article 32 PP. 24-25
PP. 1,
24–25
PP. 7–8,
9, 24–26(ii) Basic views and guidelines on corporate governance

Article 2(iii) P olicies and procedures for determining the remuneration for
executive managers and directors

Article 31(iv) P olicies and procedures for selecting or dismissing executive
managers, and nominating directors and candidates for auditors

Article 18
Article 20
Article 21
Article 22
Article 24
Article 25

PP. 9,
24–26(v) Reasons for selecting or dismissing individual executive managers,
and reasons for nominating individual directors and auditors

Article 23

PP. 3-4, 6

Initiatives on the sustainability of the Company

Article 13 PP. 27-28

Overview of the scope of matters delegated to management

Article 18

Independence standards for external officers

Basic policy on the independent composition of committees fornomination and remuneration, their authority and roles, and otherrelated matters
Supplementary Basic policy on balancing the overall knowledge represented by the
Board of Directors, diversity, and scope, and policies and procedures
Principle 4-11.1
for combining and selecting the skills and other qualities of directors
Supplementary Current status of concurrent positions held at other listed companies
Principle 4-11-2 by directors and auditors
Supplementary Overview of analysis and evaluation results of the board’s
Principle 4-11-3 effectivenessSupplementary
Principle 4-10.1

PP. 9,
28-29(Appendix)
Independence
standards PP. 29-30
for external
officers
Article 24

PP. 4-5, 8,30

Article 19

P. 31

Article 26

PP. 3–4,
6, 32

Article 29 PP. 32–33

Supplementary
Principle 4-14-2

Training policy for directors and auditors

Article 30 PP. 32, 34

Principle 5-1

Policies on systems and initiatives for promoting constructive
dialogue with shareholders

Article 32 PP. 10, 34

The department conducts internal audits of the execution ofoperations by business execution departments in accordance with the
Auditing Plan for that fiscal year. It verifies the internal management
system including its appropriateness and efficiency. As necessary, it
exchanges opinions with the Accounting Division and makes proposals
concerning improvements or the correction of a problem. The
department also reports the results of its audits to the president andauditors.

Corporate Ethics Committee

Advisory Committee on Nomination and Remuneration

The committee consists of the chairperson, president, and executive
officers. It is chaired by the president and meets four times a year,
assuming a central role in Group-wide control, including deliberationand decision-making concerning important matters regarding
internal controls for financial reporting.

Diversity of Board of
Directors• Appointed one female external director

Discussion for promoting
the Medium-Term
Management Plan Phase 3• Pursued medium- to long-term human resource development, including
promotion of women and utilization of senior human resources, as a key
management strategy

Sustainability Committee

Enhancement of training
for directors and auditors• Provided opportunities to participate in external seminars and visit
construction sites and corporate bases, made further enhancements

Verification of risk
management system• Exchanged opinions during a meeting of the Board of Directors on
selected topics for verification, in addition to issues identified by theeffectiveness assessment• Discussed verification of the risk management system by the Board of
Directors

The committee is chaired by an external director and consists solely of
external directors. It meets as needed to deliberate on the nominationof candidates for directors and the system of remuneration.
Management Meeting
The meeting consists of directors and executive officers nominatedby the president and, in principle, meets twice a month. As a decisionmaking body for fundamental and key matters related to the executionof business affairs, the meeting deliberates and makes decisions fromthe standpoint of overall management.

SANKI REPORT 2023

The committee consists of the chairperson, president, and executive
officers, and is chaired by the president. The executive officers
responsible for corporate ethics and nominated by the president
oversee all matters related to corporate ethics. The committee meets
twice a year to deliberate on implementation plans for the pervasionand observance of the Code of Conduct and Action Guidelines.
Internal Finance Control Committee

The committee, consisting of the president and representative
director and the directors, decides on key issues and measuresrelated to sustainable management.

*1 C ompany’s Corporate Governance
Guidelines*2 C ompany’s Corporate Governance
Report (June 27, 2023)

Sanki Engineering Corporate
Governance Guidelines

https://www.sanki.
co.jp/en/corporate/
governance/guideline.
html

Corporate Governance

Board of Directors

Principle
Policies on cross-shareholdings and concrete standards forexercising voting rights
Procedures for preventing conflicts of interest with regard totransactions between related parties
Current status and targets for ensuring diversity with regard toassignments and other treatment of core personnel
Details of efforts in terms of personnel and management tofulfill functions as the owner of corporate pension assets, andmanagement of conflicts of interest(i) The Company’s aspirations (business principles), businessstrategies, and business plans

Principle 3-1

Internal Audit Office*1 The Articles of Incorporation stipulate that the number of directors shall not exceed 16.
*2 One of the auditors possesses a considerable degree of knowledge of finance and accounting.

74

Governance

GovernanceMonitoring, guidance, support, and education

Principle 2-6

Election, dismissal,
and supervision

Sustainability Committee

Policy Meeting

Principle 1-4

Supplementary
Principle 2-4.1

Advisory Committee on
Nomination andRemuneration

Appointment/Dismissal

Leadership andsupervisionCorporate Ethics Committee

Social▍Principle Requiring Disclosure of Certain Matters (Tokyo Stock Exchange)

Principle 1-7

Reporting

Reporting

Risk Management Committee
Executive Officer Committee

Accounting auditing

1*2(one substitute auditor)

Environment

Foundation of Sustainability Management

Appointment/Dismissal

Business auditing
Accounting auditing

5 auditors including
3 external auditors

G

We disclose information in accordance with each principle of the Corporate
Governance Code, as follows.

General Shareholders’ Meeting

Board of Company Auditors

S⨋ Disclosure Based on Principles of the Corporate Governance Code▍Corporate Governance System (as of June 23, 2023)

Appointment/
Dismissal

E

Corporate Governance Report(in Japanese)

https://www.sanki.co.jp/
corporate/governance/
report.html⨋ Strengthening the Effectiveness of the Governance System

We are strengthening our system in line with the Sanki Engineering Corporate
Governance Guidelines.
▍Major Initiatives in FY2022 (Addressing Issues Identified in FY2021)

SANKI REPORT 2023

75

︱Foundation of Sustainability Management ︱Governance︱Corporate Governance

External
Director• Evaluation items(1) Composition, responsibilities, and management of the Board of Directors(2) Effective use of effectiveness assessment(3) Risk management(4) Effectiveness of Advisory Committee on Nomination and Remuneration

2. Discussion by the Board of Directors• Results of individual interviews and third-party evaluation were reported at
the Board of Directors meeting• Held discussions on identified issues and future initiatives
External
Auditors• E ffectiveness of management of particularly important risks was discussed at
Board of Director meetings, with the participation of related sections
2. Discussions by the Board of Directors• D iscussed medium- to long-term management strategies• T opics to be discussed(1) Issues related to digital reform and medium-term initiatives(2) Discussion on securing, nurturing, and utilizing human resources(3) Discussion on growth investment(4) Management with due consideration of capital costs and share price(5) Ideal R&D structure, and other themes

Years
ServedReasons for Selection

Yukiteru
Yamamoto

●

9
years

Mr. Yukiteru Yamamoto has served in positions including representative director and president of Mitsui Life
Insurance Company Limited (currently Taiju Life Insurance Company Limited) and executive member of the Policy
Board of the Japan Business Federation. He thus possesses abundant operational experience and broad knowledge
regarding corporate management. The Company selected Mr. Yamamoto as an external director for his experienceand insight developed through this background.

Kazuhiko
Kashikura

●

5
years

Mr. Kazuhiko Kashikura has served as an executive officer of Sumitomo Mitsui Banking Corporation and has
managed several of its group companies as a top executive. He thus possesses abundant experience and broad
knowledge regarding corporate management. The Company selected Mr. Kashikura as an external director for his
experience and insight developed through this background.

Keiji
Kono

●

2
years

Mr. Keiji Kono, as a financial specialist, has held managerial positions in major departments of the Bank of Japan. He
has also served as an executive officer at Chugai Pharmaceutical Co., Ltd., where he managed the IT management
department as the head of the division and promoted social contribution activities overseas. He thus possesses awide range of knowledge and experience in those fields. The Company selected Mr. Kono as an external director for
his experience and insight developed through this background.

AkihikoMatsuda

●

2
years

Mr. Akihiko Matsuda has served as an executive officer of Tokyo Gas Co., Ltd. and has managed several of its groupcompanies as a top executive. He thus possesses abundant experience and broad insight across all aspects ofenergy-related businesses. The Company selected Mr. Matsuda as an external director for his experience and insightdeveloped through this background.

Tamami
Umeda

●

1
year

Ms. Tamami Umeda is a licensed physician and has held positions such as director-general counsellor, Ministryof Health, Labour and Welfare, and director-general, Environmental Health Department, Ministry of theEnvironment, and she thus has abundant experience and broad insight on domestic and international public healthadministration and hygiene and organizational management. The Company selected Ms. Umeda as an external
director for her experience and insight developed through this background.

Shozo
Fujita●5
years

Mr. Shozo Fujita has served as a public prosecutor and attorney-at-law, as representative director and president of
the Resolution and Collection Corporation, and as a director who serves as an audit and supervisory board member
at other companies. He thus possesses abundant experience and broad insight. The Company selected Mr. Fujita as
an external auditor for his experience and insight developed through his background to audit the Company.

Yutaka
Atomi

●

4
years

Mr. Yutaka Atomi has long been engaged in education and research at universities, serving in positions includingpresident of Kyorin University. He thus possesses deep insight and abundant experience regarding university
management. The Company selected Mr. Atomi as an external auditor for his experience and insight developed
through his background to audit the Company.

ToshiakiEgashira

●

4
years

Mr. Toshiaki Egashira has served in positions including representative director and president of Mitsui Sumitomo
Insurance Company, Limited. He thus possesses abundant administrative experience and wide-ranging knowledge
regarding corporate management. The Company selected Mr. Egashira as an external auditor for his experience andinsight developed through his background to audit the Company.

Name▍Skills, Careers, and Expertise*1 of Members of the Board of Directors and Board of Auditors (16 Persons)⨋ Training for Directors and Auditors

We conduct periodic training as part of our efforts to enhance the knowledge of ourofficers. In fiscal 2022, we particularly focused on visits to construction sites and the
Sanki Techno Center, a comprehensive training and research facility, to deepen theunderstanding of external officers of the Group’s business activities.

SANKI REPORT 2023

Governance

Site inspection by external officers

Independence Standards forExternal Officers(Appendix to the SankiEngineering Corporate
Governance Guidelines)

https://www.sanki.co.jp/en/corporate/
governance/guideline.html

Field

Number of Directors andAuditors(External Directors andExternal Auditors)

Management
experience*2

8 (6)Finance and capital
markets

6 (4)Engineering

6 (1)Risk management

5 (2)

R&D

1 (0)

Governance

5 (2)Overseas operations

3 (1)

Law

1 (1)

Field

Number of Directors andAuditors(External Directors andExternal Auditors)

Corporate Governance

1. Revision of risk management system•C onsidered revising the deliberation method of the Risk Management
Committee

76

SocialGovernance• Results
Self-assessment scores increased in many items compared to the previous
year. Third-party evaluation also showed that the effectiveness of the Boardof Directors had steadily improved under the chair served by an external
director.

⨋ Appointment of Directors and Independence of External Officers

Environment

Foundation of Sustainability Management

1. Individual officers were interviewed and evaluated by a third party• All directors and auditors were individually interviewed by a third party, andthe results were analyzed and evaluated

We identified the skills we expect members of the Board of Directors to demonstratein light of the management strategy, and the Board of Directors is composed of diverse
members to ensure that all these skills are covered. At least one-third of the members
are independent external directors.
The Advisory Committee on Nomination and Remuneration considers candidates
for directors and submits the results to the Board of Directors for deliberation, while
the nomination of candidates for auditors is deliberated by the Board of Directors after
obtaining the prior consent of the Board of Company Auditors. Appointments are
finalized by a resolution at the general shareholders’ meeting. We have establishedstandards on the independence of external officers to raise the objectivity of theiroversight of management.

G

Independent
Officer

Position▍Overview of Effectiveness Assessment for FY2022

Futureinitiatives

S▍External Officers’ Terms in Office and Reasons for Selection⨋ Assessing the Effectiveness of the Board of Directors

Once a year, the Board of Directors is given the opportunity to verify its process
for deliberating proposals and identifying areas for improvement, to analyze andevaluate the effectiveness of the Board of Directors as a whole and to use the resultsfor improvements. In principle, this is done through a questionnaire, while once every
three years we conduct interviews with individual officers instead of a questionnaire.
Interviews were conducted in fiscal 2022, and a third-party evaluation confirmed thatthe effectiveness of the Board of Directors was being ensured.

Content

E*1 T wo to three fields of particularstrength were selected.
*2 Experience as head of anorganization, such as chairperson orpresident of a company, chairpersonof an organization, or president of auniversity.

⨋ Officer Remuneration

Sanki Engineering has established the Advisory Committee on Nomination andRemuneration under the Board of Directors, to nominate candidates for directors andto deliberate on remuneration. To strengthen the transparency and neutrality of thecommittee, we revised the composition in fiscal 2020, from a structure consisting of thepresident and external directors to one consisting of external directors only.
The remuneration for directors comprises, within the limits adopted by our generalshareholders’ meeting, of fixed remuneration, bonus, and restricted stock compensation.
We abolished the stock compensation-type stock option system and introduced a restricted
stock compensation system in fiscal 2022. Each fiscal year, we decide on amounts, with due
consideration for balancing each of the elements, in order to raise the level of motivation for
maximizing corporate value in tandem with the long-term interests of shareholders.

SANKI REPORT 2023

77︱Foundation of Sustainability Management ︱︱GovernanceCorporate Governance▍Elements and Procedures for Remuneration for Directors and Auditors (as of June 23, 2023)
Fixed
Remuneration

Bonus

Restricted Stock
Compensation

Directors (excluding
external directors)

◯

◯※1

◯

Category

◯

ー

◯

◯

ー

◯

External auditors

◯

ー

◯

Determined by the Board of
Directors following deliberationby the Advisory Committee on
Nomination and Remuneration
Determined through consultation
among auditors

Persons Receiving
Payment

Directors (external directors)

12 (5)

590 (89)

Auditors (external auditors)

6 (3)

101 (36)

SocialGovernance

Executives of the Sanki Engineering Group (as of June 23, 2023)⨋ Directors- President- Directors appointed by thepresident and committee
members as necessary•F ixed remuneration:
paid according to rank andscope of responsibilities• Bonus:
portion linked to performance
during the period

Hirokazu Ishida
Representative Director and President

Joined the Company in 1975. He has
many years of experience in the division
management of the Facilities Construction
Business and Sales Administration Division.
He assumed the post of representative
director and president in 2015 and has
served as representative director andchairman since 2020.

Joined the Company in 1983. He engaged in the
Facilities Construction Business for many years.
In 2018, he served in the key post of generalmanager of the Management Planning Office.
He was appointed representative director andpresident in 2020 and has devoted his efforts tostrengthen the management foundation andpromote the “Century 2025” long-term vision.

Eiji Mitsuishi

Masayuki Kudo

Director

Director

Joined the Company in 1972. He has many years ofexperience in operation and division managementof the Facilities Construction Business. Since 2017, hehas served as general manager of the Mechanical &Electrical Contracting Headquarters and has madea focused effort to promote work style reform andprevent industrial accidents at construction sites.
He also leads the Labor Safety, Health, Quality
Management & Environment Promotion Office.

Joined the Company in 1985. He gained
abundant experience as an engineer in the
Facilities Construction Business, including
many overseas assignments. He was appointed
general manager of the Facility Systems
Division in 2014 and general manager of the
Sustainability Promotion Division in 2022,
and has been devoting his efforts to promotesustainability.

•R estricted stockcompensation:
granted according to rank as along-term incentive*1 E xcluding non-operational executive
officers.
*2 The number of officers covered
includes one auditor who retired at
the conclusion of the 98th Annual
General Meeting of Shareholders on
June 23, 2022.

P. 84
Whistleblowing System

Corporate Governance• Ensuring the Reliability of Financial Reporting
The Internal Finance Control Committee meets four times a year to conduct our
financial reporting in accordance with the internal control framework stipulated by the
Financial Instruments Exchange Act of Japan. Moreover, we promote the establishment
and appropriate operation of an internal control system to safeguard the reliability of
our financial reporting by having the committee deliberate on the assessment andresponse with respect to the accounting risks within each department and Group
company. A report is produced in adherence with the internal control reporting system
to ensure that internal controls related to financial reporting are being exercised
effectively. In the report for fiscal 2022, accounting auditors expressed their opinion that
our financial reports were presented in an appropriate manner in terms of all material
aspects.

Composition of Officer
Remuneration

Tsutomu Hasegawa
Representative Director and Chairman

Governance• Basic Policy and Systems for Internal Controls
Under its Basic Policy on Internal Control System, Sanki Engineering is developing
and operating a system to ensure the legality, soundness, and transparency of its
operational execution. Moreover, we have established a whistleblowing system thatcomprises contact points for corporate ethics in general, dedicated contact points forreporting violations of the Anti-Monopoly Act, and a system for reporting to the fulltime auditor as efforts to stringently enforce compliance.
The Board of Directors makes decisions on matters stipulated in laws, regulations,and the Articles of Incorporation as well as on matters related to the execution ofoperations while also supervising to ensure the proper execution of operations. The
Management Meeting is held to ensure the effective execution of duties in accordancewith the rules for discussion and reporting. Moreover, for the free exchange of opinions,the Liaison Meeting of External Officers, consisting of external officers, is convened to
exchange necessary information and share awareness of such information.
To ensure effective auditing, the auditors attend important meetings, offer theiropinions as necessary, receive reports from accounting auditors and the Internal Audit
Office, instruct that this office investigate and report on its findings if needed, anddiscuss matters as required.
In addition, the full-time auditor serves as the auditor of Group companies
and seeks to ascertain the status of internal controls across the Group by regularly
exchanging opinions with the Internal Audit Office and Group company presidents,
receiving reports from the accounting auditors, and exchanging information.

SANKI REPORT 2023

Environment• Individuals who provide
explanations:

Total Payment (Millions of Yen)

⨋ Internal Controls

78•C ommittee (report):
all external directors

G•M
 eetings held in FY2022: 4▍Remuneration for Directors and Auditors*2 in FY2022
Category

Composition of the Advisory
Committee on Nomination andRemuneration

S

Foundation of Sustainability Management

External directors
Auditors (excluding
external auditors)

ProcedureE

Chief Financial Officer

Kazuaki Iijima

Yoshio Kawabe

Director

Director

Joined the Company in 1984. Engaged in researchand development and in energy conservationrelated businesses. Appointed general managerof the Technology Research Institute in 2016 andGeneral Manager of the R&D Center in 2018. He
has served as general manager of the Plants &Machinery Systems Headquarters since 2021,
contributing to the development of the machinery
systems business and environmental systems
business.

Joined the Company in 1984. He engaged inaccounting and finance-related operations
and the promotion of internal control. He has
also served as a manager responsible for theadministration departments, including generalaffairs and human resources. He currently serves
as general manager of the Accounting Division.
Since 2020, he has concurrently served as chief
financial officer and has focused his efforts on
capital and financial policies.

SANKI REPORT 2023

79︱Foundation of Sustainability Management ︱Governance︱Corporate Governance

E

S

G

Environment

SocialGovernanceIndependent External Director⨋ Directors

Independent External Director

Yukiteru Yamamoto
External Director
Served in positions including representative
director and president of Mitsui Life Insurance
Company Limited and executive member of the
Policy Board of the Japan Business Federation. He
was appointed external director of the Company
in June 2014 and has also chaired the Board of
Directors since 2020.

Shozo Fujita

Chair of the Advisory Committee
on Nomination and Remuneration

Kazuhiko Kashikura
External Director
Served as an executive officer of Sumitomo Mitsui
Banking Corporation and as chief executive of
its group companies. Since 2018, he has been an
external director of the Company.

External Auditor

Yutaka Atomi

Became a prosecutor in 1976 and registered as alawyer in 2011. He served in positions including
representative director and president of The
Resolution and Collection Corporation and as adirector serving as audit and supervisory committee
member of other companies. He was appointed
external auditor of the Company in 2018.

External AuditorLong involved in education and researchat a university, he served as dean of thefaculty of medicine at Kyorin University andlater president, and is currently its honorarypresident. He was appointed external auditorof the Company in 2019.

External Director

Toshiaki EgashiraAkihiko Matsuda

External Auditor

External Director

Has served in positions including president andchief executive officer of Mitsui Sumitomo Insurance
Company, Limited, and is currently its special advisor.
He was appointed external auditor of the Company
in 2019.

Served as an executive officer and advisor of Tokyo
Gas Co., Ltd. and managed several of its groupcompanies as a top executive. He was appointed
external director of the Company in 2021.

Corporate GovernanceHeld managerial positions in major departmentsof the Bank of Japan. He also served as an
executive officer at Chugai Pharmaceutical Co.,
Ltd., heading the IT Supervisory Division andpromoting social contribution activities. He wasappointed external director of the Company
in 2021.

Governance

Keiji Kono

▍Members of Each Meeting (FY2023) and Attendance (FY2022)
Board of Directors
Category

Tamami Umeda

NameChairperson

External Director
Served in positions such as director-general
counsellor for medical policy and mental healthcare, Ministry of Health, Labour and Welfare, anddirector-general of the Environmental Health
Department, Ministry of the Environment, andaccepted the post of visiting researcher at the
National Center for Global Health and Medicine in
2021. She was appointed external director of theCompany in 2022.

Directors

Chair of the Board of Company Auditors

Kazuo Saito
Full-time Auditor
Joined the Company in 1974. He engaged in
the technical field of the Facilities Construction
Business. He gained experience in department
management and served as the manager oftechnical administration departments in the Facilities
Construction Business. After serving as generalmanager of technical administration starting in 2014,
he was appointed full-time auditor in 2020.

80

SANKI REPORT 2023

Kunihiko Tachi
Full-time Auditor
Joined the Company in 1983. Spent many
years in the accounting and financial divisions.
Served as general manager of the Internal Audit
Department, CSR Promotion Division since 2013,
focusing on legal compliance and other areas. He
was appointed full-time auditor in 2022.

Auditors

Advisory Committee on
Nomination and Remuneration
Chairperson

Attendance/
No. of meetings

Board of Auditors
Chairperson

Attendance/
No. of meetings

Tsutomu Hasegawa

13/13

−

−

Hirokazu Ishida

13/13

−

−

Eiji Mitsuishi

13/13

−

−

Masayuki Kudo

13/13

−

−

Kazuaki Iijima

13/13

−

−

Yoshio Kawabe

12/13

−

−

13/13

4/4

−

4/4

−

Yukiteru Yamamoto⨋ Auditor

Attendance/
No. of meetings●

Foundation of Sustainability Management

Chair of the Board of Directors●

Kazuhiko Kashikura

13/13

Keiji Kono

13/13

4/4

−

Akihiko Matsuda

13/13

4/4

−

Tamami Umeda

11/11

2/2

−

Kazuo Saito

13/13

−

Kunihiko Tachi

11/11

−

6/6

Shozo Fujita

13/13

−

8/8

Yutaka Atomi

12/13

−

8/8

Toshiaki Egashira

13/13

−

8/8

●

8/8

SANKI REPORT 2023

81

Ishida • We have appointed Mr. Yamamoto, who is
an independent director, as Chairman of the Board of
Directors to strengthen its supervision functions. He also

Ishida • Sanki Engineering has grown on the strengthof its technological capabilities, and I place the highest
priority on utilizing the human capital that supports

President

External Director

Dialogue between President Ishida
and External Director Umeda

A Governance Structure that
Supports Sustainability Management
President Ishida and External Director Umeda exchanged views on governance and the future direction of
the Sanki Engineering Group in pursuit of sustainable growth through sustainability management.

Governance Structure that Invigorates Diversity and
Dialogue

How do you view Sanki Engineering as anexternal director?
Umeda • In the year since becoming an external
director, I have realized that in many of the buildings I’ve
been in, there are facilities installed by Sanki Engineering,so I can now see my connection with the Company
had been closer than I’d thought. As I learned more
about Sanki Engineering’s business, I increasingly feltthat it deserves greater public recognition. For example,
its contribution to achieving a decarbonized society
through its SANKI YOU Eco Contribution Point system* isa unique and wonderful initiative.
*See page 51.

Ishida • Our business is linked to carbon neutrality
in a number of ways, and our operations lead tosustainability from different perspectives. However, asa B to B business, we may not have been sufficiently
communicating this to the general public.
Umeda • I was also given the opportunity to tour

82

SANKI REPORT 2023

Opening New Pathways into the Future with
the Power of People and Technology

Finally, what are your expectations for the
Sanki Engineering Group in the years ahead?
Umeda • Continuing to achieve sustainable growth
in an era of such rapid and dramatic social change will
require being a company that accurately grasps theneeds of society while responding with innovativeideas and technologies. Sanki Engineering’s mostappealing aspects are its honest corporate culture
and down-to-earth management, and I expect it will
improve these strengths by fully realizing the potentialof the technology it has cultivated to develop business,enhance value creation, and open up new pathways into
the future.
Ishida • As global issues continue to evolve, I believe
the time has come to reevaluate our response as a total
engineering company. While there is no doubt about
the value of the unique technologies we have cultivatedover nearly a hundred years and the relationships oftrust we have forged with our stakeholders, the times
require us to address social issues with a willingness
to participate in open innovation and other forms ofexternal collaboration. To that end, I want to pay evencloser attention to the opinions and suggestions of ourboard members, who come from diverse backgrounds.

SANKI REPORT 2023

Dialogue between President Ishida and External Director Umeda

What would you emphasize as being effective
for utilizing Sanki Engineering’s management
capital?

Tamami Umeda

GovernanceHow do you evaluate the effectiveness of
the Board of Directors and the governancestructure?

Hirokazu Ishidathis growth. In terms of investing in that, our policy is tospare no effort to ensure appropriate profits and improve
the working environment so that our employees canwork with a strong sense of purpose and motivation.
Today, with the increasing diversity of life planning,
we must continuously think about how we can makeemployees happy.
Umeda • I have the strong impression that SankiEngineering employees are working diligently as theunsung heroes of society, but they may not be keenly
aware that their daily work is directly connected toresolving social issues and contributing to sustainability.
I think you could further raise their awareness andencourage each of them to demonstrate theircapabilities by entering sustainability-related awards
and other contests for the sake of gaining external
recognition, and by communicating both internallyand externally the value of government verification
projects for resolving social issues in which the Company
participates.

Foundation of Sustainability Management

drainage disposal and other facilities, and I gained astrong sense of the Company’s efforts to add greater
value to critical social infrastructure, such as actively
introducing energy-saving facilities and effectively using
sludge. When I toured the Sanki Techno Center, efforts
to creatively change behavior were clearly evident
throughout the training facility in addition to its focus
on conveying safety-related skills and knowledge. The
enthusiasm people seemed to have for their work gave
me a powerful impression of a diligent company.
Ishida • We provide our external directors with
opportunities to visit our facilities and construction sites
to meet with employees face to face. I think you can gain
insight into our corporate culture by directly interactingwith employees in the field.

attends the Management Meeting and various policy
meetings and is responsible for setting appropriate
board meeting agendas and proceedings from a highlevel perspective with a sound executive understandingof the situation. Our external directors speak out fromtheir respective backgrounds, and I feel the Board of
Directors’ effectiveness has been significantly enhancedby the members engaging in dialogue stimulatedby their own opinions, which at times are promptly
reflected in management decisions. We have seen
increasingly vigorous discussion on potentially high risk
issues, such as sustainability.
Umeda • I have served in various administrative posts inhealthcare, environmental, and other fields and have also
been involved in international organizations and national
diplomacy related to international healthcare. I therefore
try to offer advice based not only on my field of expertise
but also on knowledge accumulated through first-handexperience in such areas as effective collaboration
between industry, government, and academia. Although
I’m an outsider to the construction industry, I feel quite
comfortable speaking up at the board meetings, andwhen I ask simple questions, the executives provide
detailed explanations. What’s more, I’m often inspiredby the comments made by other external directors, whobring a wealth of management experience, and I feel thatour discussions are very meaningful.
Ishida • An evaluation of the effectiveness of the Boardof Directors for fiscal 2022 was conducted through aninterview by a third party with expertise in corporate
governance. Over the past two years, the evaluation
had been conducted using a questionnaire, but since
the responses tended to converge on similar ideas, we
decided to use interviews this time to surface moredetailed information. Looking ahead, we will continue toexplore different methods to enhance the evaluations.
Umeda • The interviewer’s awareness of the issues wasreflected in questions following up on matters that hadcome up in past questionnaires, and it was clear that
PDCA improvement cycles were being implemented. As
for myself, the interviews provided a good opportunity
to reaffirm my responsibilities and role as an external
director.

83︱Foundation of Sustainability Management ︱Governance

E

S

G

Environment

SocialGovernanceCompliance▍Whistleblowing System

Basic Philosophy

Full-time auditor

Sanki Engineering Group Compliance Declaration, SankiEngineering Group Conduct Standards

https://www.sanki.co.jp/en/csr/policy/compliance.html#etc02

Sanki Engineering Group Code of Conduct and Action
Guidelines

https://www.sanki.co.jp/en/csr/policy/conduct-code.html

ReportOfficers responsible for corporate ethics
ReportReportIn-house hotline (Sustainability Promotion Division)

External hotline(consulting
attorney)Compliance Promotion System
We have established a Corporate Ethics Committee, chaired by the president, whonominates officers responsible for corporate ethics to oversee the committee’s
activities. The committee reviews, monitors, and provides guidance with respect
to compliance guidelines and action plans for the entire Group, and the Board of
Directors regularly verifies the effectiveness of its activities.

Corporate Ethics Hotline
Fair Trade Hotline

If the person wants to report

Women’s
HotlineReport and Consultation

P. 74
Corporate Governance System

Compliance Promotion Activities
In order for all Group executives and employees to refresh their awareness of the
responsibilities they must fulfill in their respective positions and roles, complianceconfirmation sheets covering items such as observance of the Code of Conduct
and Action Guidelines, and eliminating antisocial forces, are submitted at the
beginning of each fiscal year.

⨋ Whistleblowing System▍Number of People Submitting Compliance Confirmation Sheets (Fiscal 2023)

Number of Reports
Corporate Ethics Hotline

10

Fair Trade Hotline

0

Women’s Hotline

0Consulting Office for Harassment and Other Concerns

1

Consultations

10

SANKI REPORT 2023

Sanki Engineering(Target Employees)
Compliance confirmation sheets concerning
performance of duties*1
Compliance confirmation sheets*2

E-mailhotline@eng.sanki.co.jp

Reporting and Consulting
Channels

https://www.sanki.co.jp/en/csr/
governance/hotline/

38

Group Companies(Target Employees)（38）

っs37 （37）2,027（2,063）

498（509）*1 D irectors and executive officers
submit compliance confirmation
sheets related to the execution ofoperations.
*2 I ndividuals who did not submit
compliance confirmation sheets
were unable to do so due to reasons
such as maternity leave and medical
treatment.

Compliance

The Internal Audit Office seeks to strengthen compliance by providing guidanceon audits. In fiscal 2022, internal audits were carried out at 20 worksites, including
16 in Japan and 4 subsidiaries in Japan and overseas. In addition, we conductedhearings with onsite staff by visiting Company sites and via web conferencing tofoster compliance awareness.

Governance⨋ Compliance Confirmation Sheets from All Executives and Employees▍Number of Reports and Consultations in Fiscal 2022

Poster promoting the whistleblowing
systemConsulting Office for Harassment andOther Concerns (professional counselor
outside the Company)⨋ Compliance Audit

We set up the Corporate Ethics Hotline for reporting on compliance-related issues,
the Fair Trade Hotline for reporting on violations of the Anti-Monopoly Act, theWomen’s Hotline for accepting consultations from women, and the Consulting Officefor Harassment and Other Concerns. All hotlines are open to all employees, andinformation is posted on the corporate website.
With regard to each hotline, we act swiftly to resolve the issues that are reported,with due consideration for the protection of anyone seeking consultation or providing
information in accordance with the Corporate Ethics Regulations. All reported
information is presented to corporate ethics officers , and important information isreported to the Board of Directors. At the Corporate Ethics Hotline, the reporter’s nameis handled in secrecy by corporate ethics officers and will not be disclosed to others
without the reporter’s prior consent. The reporter will not be placed at a disadvantage
for consulting or reporting to the hotline.
In fiscal 2022, there were 11 reported incidents (10 internally and 1 externally), andall incidents were handled appropriately.

84

ReportBoard of Directors

Foundation of Sustainability Management

The Sanki Engineering Group strives to maintain legally compliant behavior based on corporate ethics across all aspectsof its operations by upholding the Sanki Engineering Group Compliance Declaration, the Sanki Engineering Group Codeof Conduct and Action Guidelines, and the Sanki Engineering Group Conduct Standards.

⨋ Response to Antisocial Forces

We clearly state that severing relationships with antisocial forces is a condition
for doing business with our partners and ask them to submit a Letter of Intent
Regarding the Elimination of Antisocial Forces. As of March 31, 2023, we havereceived the letter from a cumulative total of 3,906 companies.
⨋ Training and Handbook for Ensuring Thorough Compliance

Sanki Engineering conducts training for all executives and employees on a regularbasis in order to ensure thorough dissemination of and compliance with the Code of
Conduct and Action Guidelines. Separate special training is provided for mid-careerhires when they join the Company and for new sales representatives when they start
their position.
We also distribute the Sanki Engineering Group Sustainability Handbook, a pocketsized reference on policies related to compliance and sustainability, including specificexplanations for practical situations and information on hotlines for reporting andconsultation.

Sustainability Handbook

SANKI REPORT 2023

85

︱Foundation of Sustainability Management ︱Governance︱Compliance

Risk Management▍Compliance-Related Training (FY2022)
Theme

TargetFrequency and Participation(Attendance Rate)
10 sessions
2,632 employees (99%)*

All Group executive
officers and employees
Mid-career hires

5 employees (100%)

Compliance with the Anti-Monopoly Act

Newly assigned sales staff

38 employees (100%)

Human Rights Policy, Environmental Policy

All Group executive
officers and employees

2,628 employees (99%)*⨋ Survey on Status of Compliance in the Workplace

We conduct a survey every fiscal year on the status of compliance in theworkplace, targeting all executive officers and employees. It incorporates
questions on compliance and human rights risks, including about issues related toharassment in the workplace, by customers and business partners. Survey results
are disclosed to all Group executives and employees.

Reinforcing Compliance with the Anti-Monopoly Act⨋ Ongoing Measures for Recurrence Prevention

The following are key measures on reinforcing compliance that we undertook to date.
In October 2022, we revised the Anti-Monopoly Act Compliance Manual. Applying theresults of the survey on compliance in the workplace, we will continue our Group-wide
effort to prevent violations of the Anti-Monopoly Act in fiscal 2023.

Q Do you think that complianceconscious behavior has
permeated our Group?
• Yes.
• Somewhat.
• I’m leaning toward “no” here.
• No.

37%
58%
4%
1%

Q Please choose all of the following
statements that apply to yourcurrent working environment.
(Multiple answers are allowed.)• I think that personal
relationships in the69%
workplace are relatively
good.
• It seems easy to take various
kinds of leave.

60%• Y our supervisor is willing tolisten to your opinions andsuggestions.

47%

Q What do you think is importantfor creating a workplace thatis less prone to complianceviolations? (Multiple answers
are allowed.)• I mproving personal morals
75%
and awareness• I mproving communicationin the workplace51%• E liminating work overload
and understaffing

48%

Risk Management Promotion System
The Risk Management Committee meets quarterly, and risks are managed through the
Risk Management Division and the subcommittees responsible for various risks.
The Risk Management Committee is attended by the risk management executive,
members of the Management Meeting, chairpersons of each risk management
subcommittee, and the general manager of the Internal Audit Office, with the full-time
auditor also participating as an observer. The president currently serves as the risk
management executive.
The Risk Management Division consists of representatives from each department
and Group company and is responsible for discerning changes in the environment ona daily basis to identify emerging risk factors and managing signs of risk manifestation.
The Risk Management Subcommittees monitor risks from a broader perspective andprovide cross-sectional supervision for risks raised by departments, and they also
consider and implement countermeasures. At each meeting, the Risk Management
Committee monitors and evaluates risks based on review sheets covering various risks
and reports from each risk management division and Risk Management Subcommittee,
and deliberates on how to control key risks identified in the process.

• R esolved to establish a comprehensive, Group-wide Anti-Monopoly Act Compliance Program at a meeting of the Board of Directors and ran/implemented the program• Assigned a compliance manager in each division and began supervising the process for deciding the bid amount for public works and operating a system of advanceapplication and reporting when attending a meeting with any companies in the same industry• I ntroduced regular rotations for sales staff assignments• Established a Compliance Risk Subcommittee within the Risk Management Committee• R econsidered membership in outside groups• B egan an in-house leniency system (voluntary reporting system)• Established the Fair Trade Hotline for reporting on violations of the Anti-Monopoly Act and sought awareness among employees

Training and Education• S ubmitted compliance commitment letters• R aised awareness of compliance-related hotlines• Top management visited all business bases to hold corporate ethics training sessions through direct exchange with all Group executives and employees• Held special training on the Anti-Monopoly Act for newly assigned sales staff and mid-career hires• Conducted e-learning on the Anti-Monopoly Act for all employees

86

SANKI REPORT 2023

• Members: M anagement meeting
constituent members
and persons nominatedby the chairperson• Roles:
1. Monitor important risks andformulate a control plan
2. Monitor risks reported bysubcommittees and divisions• Convenes: O nce a quarterin principle andadditionally as required

Board of Directors
ReportManagement Meeting
ReportReportPolicies and Manuals

Structural Reinforcements• Chairperson: R isk management
executive (president)▍Framework of the Risk Management System (as of June 23, 2023)

Internal Audit Office• Formulated the Sanki Engineering Group Compliance Declaration and Sanki Engineering Group Conduct Standards• Issued and revised the Compliance Handbook• Issued the Sustainability Handbook• Issued and revised the Anti-Monopoly Act Compliance Manual• C learly stipulated breaches of laws such as the Anti-Monopoly Act as grounds for disciplinary action

Risk Management Committee⨋ Management Based on the Risk Management Rules

Risk Management

We are working to prevent corrupt practices under the Sanki Engineering Group
Action Guidelines, which prohibits bribing public officials and providing benefits
such as excessive business entertainment. In addition to establishing a program
specifically related to bribery as part of our corporate ethics training, we provide
e-learning for all employees. Points to consider when making practical businessdecisions and points to keep in mind outside Japan are also explained in the SankiEngineering Group Sustainability Handbook.

Survey period: May and June 2023
Participants: all Group executive
officers and employees

The Sanki Engineering Group’s Enterprise Risk Management system consists of two pillars. Daily risk management isundertaken by the Risk Management Committee based on the Risk Management Rules, while the Business Continuity
Management System safeguards the effectiveness of business continuity planning in the event of contingencies,
including crisis management.

GovernanceInitiatives for Preventing Bribery

FY2023 Survey on Compliancein the Workplace

Basic Philosophy
Foundation of Sustainability Management

Compliance topics including the Codeof Conduct and Action Guidelines,
Anti-Monopoly Act, human rights, andpreventing bribery*Individuals who did not participate intraining were unable to do so due toreasons such as maternity leave andmedical treatment.

Risk Management Committee

Collaboration

ReportRisk auditing
Instructions

Instructions

Committees and Management System

Corporate Ethics Committee

Risk Management Division

Risk Management Subcommittees

All departments and Group
companies:
All offices, headquarters,
centers, business divisions,business departments,
branches and branch offices,and Group companies

Customer risk

Overseas risk

Supplier risk

Compliance risk

Labor risk

Climate change risk

Management review of EMS and QMS

Internal Finance Control Committee
Sustainability Committee

Legal risk

Quality risk

Central Safety and Health Committee

Finance risk

Safety risk

BCMS Promotion Committee

Information
security risk

Management(public relations) risk

SANKI REPORT 2023

87︱Foundation of Sustainability Management ︱Governance︱Risk Management⨋ Roles of the Board of Directors and Internal Audit Office

Coordination with BCMS

Expanded Risk Management
Committee

OutlineFlexibly manage the PDCA cycle of the Business Continuity
Management System (BCMS), which will be operational in fiscal
2022.
Hold an expanded meeting of the Risk Management Committee
by effectively utilizing the Executive Officer Committee toestablish risk management and BCMS across the Group.

Business Continuity Management System (BCMS)
To prepare against risks that could hinder business continuity, we have formulated
and put into place a business continuity plan (BCP) to ensure the safety of all related
persons, including employees, through the integrated efforts of all executives andemployees. In fiscal 2021, we began preparing to establish a BCMS as a mechanism
for the effective maintenance and management of the BCP, and began operating thesystem in fiscal 2022.
Under the BCMS, we laid out an annual plan to periodically review the BCP
through PDCA activities (business impact analysis, education, training, internal
audits, management review, review, and improvement) and by coordinating withrisk management undertaken by the Risk Management Committee. During thereview process, we conduct a business impact analysis, from the perspectives of risk
assessment and impact evaluation, to investigate and analyze the degree to which eachtarget operation will be impacted in the event a risk materializes and to take concretemeasures to strengthen corporate resilience.
Furthermore, to realize a system for rapid business recovery and maintenance,
we formulated risk-specific response guidelines based on the BCP Common Version,
which describes our basic response policy. The guidelines address the seven risksof natural disasters, infectious diseases, industrial accidents, cyberattacks, terrorism,
misconduct, and communication failure. Since fiscal 2023, the scope of the BCMS has

88

SANKI REPORT 2023

Governance•B usiness Operation Risks- Common to all construction
businesses• Securing human resources• Increase in materials and laborcosts and delays in delivery ofmaterials and equipment• Overseas business risks• A ccidents and disasters during
construction• Unprofitable construction- Facilities Construction Business• O verabundance of planned
projects and response to global
challenges• Increase in property size
- M achinery Systems Business• Decrease in capital investment• Decline in competitiveness- E nvironmental Systems
Business• Changes in market conditions• Long-term business risks- R eal Estate Business• Rent fluctuations• Decline in occupancy rate

• Financial and Other Risks- Customer credit risk

- Stock market fluctuations- Interest rate fluctuations- R isks related to litigation, etc.
- Seasonal fluctuations inbusiness performance- L egal violations- W ar, terrorism, and natural
disasters- C limate change- Infectious disease epidemic- Data security breach- System failure

Annual Securities Report forthe 99th Business Term (from
April 1, 2022 to March 31, 2023)(in Japanese)

https://www.sanki.co.jp/ir/library/doc/
securities_R4-4q.pdf

Natural disasters

Communication failure(earthquakes, typhoons, volcanic
eruptions, tsunami, etc.)

Infectious diseases

Comprehensive Disaster Response Headquarters set up
during a drill

Misconduct(new Influenza strains,
infectious diseases,etc.)(bid-rigging, data
falsification, etc.)
Risks that Hinder
Business Continuity

Industrial accidents

Terrorism and conflicts, etc.

(fatal accidents, etc.)

Cyberattacks

Strengthening Risk Management in Overseas Operations
An Overseas Risk Subcommittee was set up within the Risk Management Committee
to analyze risks and consider countermeasures. To ensure the safety of employees
working outside Japan, we have formulated the Risk Management Manual for Overseas
Operations for the head office and overseas bases as well as the Manual to Ensure
Safety in Foreign Countries for overseas employees, those traveling overseas on
business, and their families. Compliance training sessions for local staff at overseas sites
have been conducted since fiscal 2021 to firmly establish governance across the Group.
In addition, our auditors concurrently serve as auditors of Group companies, and we areworking to improve our Group management system, including at overseas sites.

Initiatives on Information Security
We have established the Information Security Risk Subcommittee within the Risk
Management Committee to control information security measures across theGroup and manage risks. We are taking action to respond quickly to cyber attacks
by deploying information security software and installing software that constantly
monitors the intrusion of malware and other malicious software. In July 2023, werevised our information security measure guidelines regarding precautions for the useof generative AI services. We are also promoting the use of cloud services to addressrisks to construction site data storage involving many companies. In addition, we
provide ongoing training through e-learning on information security for all Company
employees and employees of subcontractors.

Risk Management Manual for
Overseas Operations• Response rules and procedures tobe followed by the head office andoverseas bases in the event of acrisis overseas• Risks to physical well-being and life,
violation of laws and regulations,
response to mass media, litigation,
etc.
Manual to Ensure Safety
in Foreign Countries• A practical guide on risk avoidanceand emergency response for
employees working overseas• Actions required in the eventof a terrorist attack or disaster,
prevention of damage from crimeand other risks, compliance with
anti-corruption and other laws,
personnel/labor management oflocally employed staff, religion, andother related matters

Risk Management

PolicySocialGovernance▍FY2022 Operational Policy for Risk Management

Environment

Foundation of Sustainability Management

Major issues discussed in fiscal 2022 are summarized below.
•R ecognize large-scale communication failures as a new risk and guide the developmentof countermeasures in coordination with the Business Continuity Management System(BCMS)• Reinforce the monitoring of rising materials and equipment costs and delays in delivery• Reinforce the monitoring of work conditions in response to Japan’s revised Labor
Standards Act• Guide the development of risk control measures related to specific construction projects
and monitor progress• Coordinate with special discussions on risk governance conducted by the Board of
Directors• Continue monitoring risks associated with COVID-19

G▍Seven Major Risks that Hinder Business Continuity
Major Business Risks⨋ M ajor Issues Discussed by the Risk Management CommitteeS

been expanded to include domestic Group companies. In addition, to prepare forcontingencies, we continue to provide BCMS training for directors and employees,
conduct periodic drills, and add to our emergency supplies. In particular, we began
conducting new drills for industrial accidents, cyberattacks, and misconduct, in addition
to drills for natural disasters, to strengthen our response capabilities.

The Risk Management Committee reports on the results of its deliberations to theBoard of Directors, which ensures effective risk governance by verifying the adequacyof the risk management system and the effectiveness of controls over material risks.
The status of risk management at each department is ascertained and verified by
the Internal Audit Office during regular internal audits.

Risk Management Activities

E

Information Security Rules
and Standards• I nformation Security
Management Rules• I nformation System Usage
Standards• I nformation Security Risk
Management Standards• I nformation Security Risk
Countermeasure Standards

SANKI REPORT 2023

89︱Foundation of Sustainability Management ︱GovernanceDialogue with Shareholders
and Investors
Basic Philosophy
We clarified our basic approach to issues, including ensuring the rights and equal treatment of shareholders, appropriate
disclosure of information and transparency, and dialogue with shareholders, in the Sanki Engineering Corporate
Governance Guidelines, established in December 2015. We are resolved to fulfill our responsibilities to shareholders andinvestors by following these guidelines.
Sanki Engineering Corporate Governance Guidelines

https://www.sanki.co.jp/en/corporate/governance/guideline.html

Appropriate Information Disclosure and Constructive Dialogue
As stated in our Disclosure Policy, Sanki Engineering is committed to the timely andappropriate disclosure of corporate information. We proactively disclose information
beyond legal mandates when we deem it to be useful to shareholders and investors
and in order to ensure management transparency.
⨋ Status of Dialogue with Shareholders and Investors

In addition to livestreaming the general meeting of shareholders, we are striving toprovide greater convenience for shareholders and enhance information disclosureby accepting questions via the corporate website ahead of the general meetingof shareholders and providing videos of the president’s business reports on the
Company’s website. We engage our investors by holding results briefings foranalysts and institutional investors, as well as individual IR meetings throughout theyear (45 times in fiscal 2022). We also periodically conduct shareholder surveys, andthe needs and opinions identified through such dialogue with shareholders andinvestors are regularly presented to the Board of Directors and the Management
Meeting.
Major Dialogue with Shareholders and Investors
I n addition to questions and comments about business per formance and the businessenvironment, the following themes were discussed in the dialogue.

• Status of the Medium-Term Management Plan “Century 2025” Phase 3• Impact of the sharp rise in material, equipment, and labor costs on business performance• Response to and impact of overtime caps applied in 2024

External Recognition

Disclosure Policy

https://www.sanki.co.jp/en/ir/disclosure/

IR Meetings in FY2022• Personnel responsible- Director and chief financial
officer- General manager of theManagement Planning Office- General manager of Corporate
Communications Department- Staff in charge of IR•T arget shareholders andinvestors- F inancial institutions
13 meetings (7 companies)- Investment managementcompanies
21 meetings (14 companies)- Securities companies
11 meetings (5 companies)

Medium-Term Management
Plan “Century 2025” Phase 3(FY2022–2025)

https://www.sanki.co.jp/en/ir/policy/
doc/Medium-Term_Management_Plan_
Century_2025Phase3.pdf⨋ Received Top Rating in the ESG/SDGs Assessment Loan Scheme

Sanki Engineering received the highest rating of AAA for an ESG/SDGs Assessment
Syndicated Loan scheme in which the Sumitomo Mitsui Banking Corporation
extends loans based on an independent corporate evaluation conducted by theJapan Research Institute. We were recognized for achieving high marks in the areasof response to climate change, integrity in customer relationships, and sustainability
management.

Sumitomo Mitsui Banking Corporation ESG/
SDGs Assessment Loan

⨋ Nikkei SDGs Management Survey Rating of 3.5 Stars

In the 4th Nikkei SDGs Management Survey, Sanki Engineering was rated 3.5 on ascale of 5 stars. The survey comprehensively evaluates a company’s contribution torealizing the SDGs in the four categories of SDG strategy and economic value, social
value, environmental value, and governance.
Nikkei SDGs Management Survey

90

SANKI REPORT 2023