Governance/Compliance & Risk Management: Executive Interview

Sakamoto: I believe that the ideal form of corporate governance is one that achieves both corporate growth and sustainability. To that end, I see myself as having three roles to fulfill. The first is to respond swiftly to changes in the business environment. The second is to strengthen mechanisms that ensure governance functions effectively throughout the Company. The third is to energize communication with stakeholders and convey SMAS’s value and appeal externally.

Kobayashi: In my concurrent roles as CCO (Chief Compliance Officer) and CRO (Chief Risk Officer), I see my mission as establishing a management framework that, from a broad and overarching perspective, removes factors that hinder sound growth. Among the elements of corporate governance, compliance is directly tied to enhancing corporate value. It not only protects the Company but also elevates employee awareness and contributes to improving the corporate culture. Moreover, when considering the Company’s sustainability, risk management is also a critical theme. In addition to business risks, we must address the diverse risks associated with ESG.

Sakamoto: When an issue arises that calls SMAS’s corporate stance into question, it is essential to have a structure that enables comprehensive judgment from a company-wide perspective and rapid, coordinated responses across all departments. The CCO and CRO are, precisely from a broad and overarching perspective, leaders who can coordinate across the entire organization and provide unified direction.

Kobayashi: Compliance at SMAS covers a broad scope, encompassing not only laws and regulations but also social norms, ethics, and morality. My primary role is to strengthen the supervisory and management framework that prevents violations and deviations before they occur. However, simply imposing unilateral demands for compliance can lead to organizational rigidity. I believe that education and information dissemination are also important to ensure that employees understand that compliance allows them to work with peace of mind and leads to positive evaluations from customers and society.
In terms of risk management as well, I believe it is essential to have the ability to assess risks properly. If we attempt to avoid all risks, this may constrain our very business activities. For example, when making investments, we must evaluate the risks associated with the investment target, but in certain phases of business growth, there are situations in which we should deliberately take on risk. I want to establish compliance and risk management frameworks as drivers of growth.

Sakamoto: We place importance on the perspective of not only protecting from or avoiding compliance and risk issues, but also on how to connect them to growth. At SMAS, we have established written documents such as the Compliance Manual and the Integrated Risk Management Rules to build a framework for appropriate responses, and we have also established the Compliance and Business Support Office.

Kobayashi: In the Compliance and Business Support Office, we provide regular education and training and manage the responsible departments so that employees understand the importance of compliance and are able to act appropriately. We have also introduced the Immediate Reporting upon Incident/Accident Occurrence system and the Compliance Desk system as mechanisms that mitigate the impact when an issue occurs and lead to resolution and improvement.
Under the Immediate Reporting upon Incident/Accident Occurrence system, when a matter arises that could affect management, the responsible department must immediately report it to the Legal Affairs Department and the Corporate Planning and Coordination Department. If it is judged to have an impact on management, it is reported at once to the Board of Directors, and if the Board determines that stakeholders may be affected, it is a system under which shareholders are notified.

Sakamoto: Alongside regular reporting to the Board of Directors and management during normal times, we have established a structure that can promptly detect adverse incidents and respond quickly. Occasionally, departments ask, “Does this matter fall under Immediate Reporting?” When that happens, my answer is, “If you are uncertain, report it immediately.”

Kobayashi: Above all, it is essential that matters are reported. Under the Compliance Desk system, we have four reporting channels: a hotline, designated attorney, the SC Compliance Office, and the SMFG General Affairs Department. If risks are addressed only once they materialize, responses tend to be reactive and delayed. Our objective is to begin investigating causes and implementing improvements at the earliest signs of emerging issues.

Sakamoto: In terms of internal controls, we have also established detailed operational rules. While these may initially be challenging for employees, I believe they serve to protect our staff and uphold customer trust. As a framework for maintaining organizational soundness, we are committed to continuing their thorough implementation.

Sakamoto: SMAS has long placed great importance on corporate governance, but it must be continually reviewed in line with changes in business and society. In particular, ESG management has become increasingly prominent, ushering in an era where social value and corporate responsibility are under close scrutiny.

Kobayashi: There have been a series of scandals at certain automotive companies, and I believe this is a time to treat governance as a personal responsibility, strengthening it while also considering the role we play in restoring trust in automobiles and fostering expectations. The value and uses of cars are also diversifying, and SMAS has begun exploring new mobility services such as data utilization and EVs.

Sakamoto: To seize new business opportunities by responding to market changes and to navigate the rough waves of change, it is essential to maintain a firm grip on compliance and risk management. Fortunately, we have the strengths of a solid management foundation, advanced technological capabilities, and excellent human resources. By exercising governance that makes proper use of these strengths, I believe it becomes possible to evolve into a Mobility Platform aiming for Sustainable Society.

Kobayashi: Moreover, our Company is supported by our shareholders: SUMITOMO CORPORATION, Sumitomo Mitsui Financial Group, and Sumitomo Mitsui Finance and Leasing. Each of these companies demonstrates top-level governance by global standards, and we are also expected to achieve a comparable level. This, when compared with our competitors, becomes one of our strengths as a leading company in the industry.

Sakamoto: In addition, the Company publishes securities reports and aims to maintain governance equivalent to that of listed companies. This high standard also contributes to enhancing SMAS’s corporate value.
Furthermore, the drive toward sustainability is accelerating, and we are seeing a growing number of inquiries regarding EV adoption from a decarbonization perspective. SMAS has established an organizational structure to integrate sustainability into business operations from an ESG management standpoint and has entered a phase of company-wide implementation. I believe that sustainable management will, in turn, further strengthen corporate governance.

Kobayashi: Our mission is to ensure that governance functions effectively and that awareness permeates throughout all employees. What is important in corporate management is the balance between defense and offense. Compliance and risk management represent the defense, but the key is how we ultimately connect them to the offense of enhancing corporate value; I want to continue pursuing SMAS’s unique approach to this challenge.