Compliance promotion

Cosmo Oil Group Corporate Ethics Committee

To foster the awareness of our Management Philosophy, Corporate Action Guidelines, and compliance, we have set up the "Corporate Ethics Committee" right under the Board of Directors, and designated the president as the chairperson. We also have established a "Corporate Ethics Promotion Office" as a sub-organization of the committee.

Cosmo Oil Group Corporate Activity Guideline

All the officers, employees, temporary staff members, and part-timers working for the Cosmo Oil Group must follow Cosmo Oil Group Corporate Activity Guideline.

• Cosmo Oil Group Corporate Activity Guideline

Assigning corporate ethics managers

To improve the awareness of corporate ethics and compliance in the workplaces, Cosmo Oil designates department managers, plant directors and the presidents of affiliates as corporate ethics managers.

Setting up the Cosmo Oil Group Corporate Ethics Consultation Helpline

Before the Whistleblower Protection Act was enforced in April 2006, we set up the Corporate Ethics Consultation Helpline where the internal or external individuals can have consultations about regulatory or ethical problems related to the tasks performed in the Group, or report such problems. We make sure that the consulter to the helpline remains anonymous so as not to cause problems, and we also set up a liaison with external attorneys.

Raising the awareness

We train all the personnel at all the sites every year and let them fill out a questionnaire to check for awareness of compliance. In FY2005, we published the "Cosmo Oil Group Corporate Activity Guideline Textbook" to ensure that all the staff members can familiarize themselves with the guidelines.

Information management

We have procedures to ensure that all the information that can be known in the course of our business are correctly handled and managed according to the regulations for information management, personal information, and etc.

Risk management system

Since FY2003, Cosmo Oil has conducted company-wide activities for identifying and evaluating risks, planning and implementing appropriate measures, and reviewing the results every year. The main purposes of these activities are to improve our internal rules, to work out preventive actions against risks, and discuss how to respond to emergencies. Concerning the last one, we set up the "Risk Management Committee" in July 2005 to draw up a company-wide business continuity plan for recovery from disasters (particularly large earthquakes).

Business Continuity Plan (BCP)

This plan defines the policies and organizations for recovery from a large-scale disaster assumed by Cosmo Oil. In the event of a large-scale earthquake occurring right under Tokyo, we shall make preparations for restarting our operation as soon as possible and supporting the local communities around our sites. From FY2006, the main affiliates started preparations for drawing up their own BCP.

Preventing Misconduct from Recurrence

We have defined "compliance" as one of the pillars of CSR management, in order to improve our system and the awareness of ethics in the company, but we encountered a series of improper procedures. Therefore, we now realize that it is important to establish a system and corporate culture in which no disgraceful affair recurs.
Though we are still continuing the internal investigation, our concrete measures already taken or soon to be taken are as follows.

We will take the necessary measures against all the problems found by the internal investigation, and will describe them in the next report.

Encouraging corporate ethics promotion activities

● Setting up the Refinery Compliance Committee

With our deep regret for a series of improper procedures, we set up the Refinery Compliance Committee (chairperson: refinery director) as a sub-organization of the Corporate Ethics Committee at each refinery, to improve awareness of compliance. The Corporate Ethics Committee supports and oversees the committee on a routine basis.

● Thorough Reeducation of corporate ethics in our refineries

The director of each refinery continues advocating the importance of compliance, and we again will provide an ethical education to all personnel.

● Reviewing our monitoring system from a company-wide point of view

We have conducted a questionnaire-based survey to grasp the extent to which corporate ethics and compliance take root in the company. However, we will review the survey, analysis, and verification methods from a company-wide point of view to understand the current status more precisely and to increase the effectiveness of these activities.

Strengthening our checking and monitoring functions

● Separating the production function and safety control function at production sites

To establish a system in which the opinions of the safety control function are effectively reflected in the operation and facilities control, we have revised our rules including work standards so that the Safety & Environment Office, the safety control function, can fulfill its duties independently from refineries. The director in charge of production used to oversee also safety control, but there is a clear separation between production function and safety control function: the managing director in charge of safety control, the Safety and Environment Control Department at the headquarters, and the Safety and Environment Control Office at each refinery.

● Reviewing the procedures in our refineries

We have reviewed and amended our procedures in order to ensure that the Safety and Environment Control Office at each refinery checks whether a regulatory request or notification is required by law for every engineering work, and the work is proceeded only when all the required regulatory procedures are completed.

● Ensuring for the refinery to send a notice to the nearest fire station

Immediately after an accident occurs, the refinery must inform the nearest fire station of it, and then inform our headquarters. To ensure that the fire station is notified, we now have two separate reporting lines and have defined our reporting procedures more in detail.

● Establishing a multiple internal audit system

In addition to the internal audit performed at each, the Safety & Environment Control Dept., Refining & Technology Dept. at the headquarters, the Safety and Environment control office, and Engineering section in another refinery regularly inspect what types of engineering works have been done at the refinery and whether all the procedures required by law have been completed. In addition, the Audit Office at the headquarters carries out internal audits. Through these serial inspections, we aim to ensure that the refinery runs properly and make its operation transparent.