Presentation l Implementing ERM 1 COSO ERM Framework

Presentation. l. Implementing ERM 1

COSO ERM Framework Internal Environment • What is the internal philosophy and culture? Objective Setting • What are we trying to accomplish? Event Identification • What could stop us from accomplishing it? • How bad are these events? Risk Assessment • Will they really happen? Risk Answer • What are our options to stop those things from happening? Control Activities • How do we make sure they don’t happen? Information and Communication • How [and from/with whom] will we obtain information and communicate? Monitoring • How will we know that we’ve achieved what we wanted to accomplish? Source: Committee of Sponsoring Organizations of the Treadway Commission www. coso. org. Used with permission. 2

A COSO Implementation l. Multinational program: Corporation ERM • 800 Business Risks. Consolidated into 20 categories: • 2100 Common Risks Group-wide exposures. 3

Results of Business Risk Consolidation - Business risks in the external environment, operational processes, and internal environment External environment Country-specific risks Natural disasters Laws and regulations Operational processes Business partners Customers Technic Subcontractor Supplier al s s partners Delayed technological development Manufacturing Lack of differential technology Increasing competition due to competitors' products Falling market prices Dependence on specific business partners Inadequate business partner handling R&D Failures to respond to changing customer needs Marketing & Sales Delayed production Failures of sales channel strategies PL and quality issues Cost increases (increasing inventory, soaring material costs, declining yield) Delayed collaboration due to insufficient linkage between divisions Internal environment Information Organization Human resources Internal infrastructure and organization operations Staff allocation and development Insufficient manufacturing reforms and IT innovations Structural reformrelated issues Competitors Failures of sales promotion

Business Structure Segment Global and Group Head Office AVC Networks Home Appliances Business domain AVC Panasonic AVC Networks Company Fixed-line communications Panasonic Communications Co. , Ltd. * Mobile communications CISC Panasonic Design Company R&D divisions Sales division Systems Panasonic Shikoku Electronics Co. , Ltd. * Home appliances, household equipment, healthcare systems Matsushita Home Appliances Company, Matsushita Refrigeration Company* Healthcare Business Company Lighting Company Matsushita Ecology Systems Co. , Ltd. * Lighting Overseas divisions MEW and Pana. Home JVC Semiconductor Company Display devices Matsushita Battery Industrial Co. , Ltd. * Batteries Panasonic Electronic Devices Co. , Ltd. * Electronic components Motor Company Motors Solutions Panasonic Automotive Systems Company Panasonic System Solutions Company Environmental systems Components and Devices Panasonic Mobile Communications Co. , Ltd. * Automotive electronics Semiconductors Head Office Business Domain Companies and Group Companies FA, Corporate e. Net Business Division Others Panasonic Factory Solutions Co. , Ltd. *, and others Matsushita Electric Works, Ltd. *, Pana. Home Corporation* Victor Company of Japan, Ltd. *

Group-wide Risk Management System for General Control (2) Establish a G&G Risk Management Committee to address the current problems After the Committee's establishment Establishing and improving Group-wide RM system Instructing risk assessment <Roles of the Committee> [1] Establishing and improving Group-wide RM system [2] Conducting Group-wide risk assessment [3] Reporting to the President, and Board of Corporate Auditors [4] Studying possible measures to prepare for major risks; suggesting such measures to President and Corporate Functional Divisions [5] Improving Group-wide support systems against emergencies Committee Corporate Functional Division A G&G RM Committee Domains Support Subsidiaries Committee Corporate Functional Division B Support Corporate Functional Division C Results of Groupwide risk assessment Secretariat Corporate Regional Management Divisions / Regional HQs Collecting risk information from across the Group 6

Clarify Sections Responsible for Each Risk (4) Information systems 1. Disasters and accidents Earthquakes, typhoons, tsunamis, floods, and other natural disasters General Affairs Group, Overseas Security management Office Fires, explosions, airplane crashes, terrorist attacks, and other major destructive or violent events General Affairs Group, Corporate Personnel Group, Overseas Security Management Office 2. Politics, economy, and society Shutdown or malfunction of information systems and communication networks General Affairs Group, Corporate Information Security Division Unauthorized use of information systems General Affairs Group, Corporate Information Security Division Inadequate security measures related to information systems General Affairs Group, Corporate Information Security Division (5) Environment Wars, civil wars, conflicts, etc. General Affairs Group, Overseas Security Management Office Environmental pollution Corporate Environmental Affairs Group Corporate threats, abduction, and violent civil unrest General Affairs Group, Overseas Security Management Office Waste treatment Corporate Environmental Affairs Group Environmental regulations Corporate Environmental Affairs Group 　 (6) International relations 3. Operations (1) Quality, CS, and intellectual property PL and recall issues, other quality problems Corporate Quality Administration Division Failure in complaint-handling Corporate CS Division Intellectual property right infringements Corporate Intellectual Property Division (2) Sales and procurement Violation of security export control Corporate Legal Affairs Division Trade issues Corporate Legal Affairs Division (7) Finance Bad loans and business partner bankruptcy Corporate Accounting Group Tax and accounting system changes Corporate Accounting Group Exchange rate fluctuations Corporate Finance & IR Group Violation of antitrust (competition laws) Corporate Legal Affairs Division Interest fluctuations Corporate Finance & IR Group Bribery Corporate Legal Affairs Division Stock price fluctuations Corporate Finance & IR Group Violation of Subcontractors Act Corporate Procurement Division Corporate Accounting Group Soaring raw material prices and unavailability Corporate Procurement Division Impairment of long-term assets and deferred tax assets (8) Labor issues 　 (3) Information Human rights issues, including sexual harassment Industrial Relations Group, Corporate Personnel Group, Overseas Security Management Office Corporate Information Security Division Employment Corporate Personnel Group, Industrial Relations Group Information security incidents related to products and services Corporate Information Security Division Industrial accidents Industrial Relations Group Health issues such as infectious diseases Insider trading General Affairs Group Industrial Relations Group, Overseas Security Management Office Trade secret leakage Corporate Information Security Division Private data leakage and violation of privacy 7

Corruption in Egypt Sample Project for Gb 699

2009 CPI Rank: 111 of 180 countries 2009 Score: 2. 8 Previous ranking: 115 Compare to: United States rank and score: 19 th, 7. 5 New Zealand rank and score: 1 st, 9. 4

A history of vast corruption… In 2008, the United Nations published the Egypt Human Development Report. The results called on the civil society to act as a “third pillar” in developing the country as they have been failed by both public and private administrations. As a result of the vast corruption, Egypt’s development has remained stagnant while the disparity between the wealthy and poor has increased.

l l l The World Bank says that poverty in the 2004 -2005 years is equivalent to that of 19951996. CPI dropped from 70 th to 105 th from 2006 to 2007. New York Times: 45 percent of Egypt’s population survives on < $2 per day.

The Corruption of Bread l l Bread, sugar and tea have been subsidized since WWII. Provisions are the most corrupt sector in Egypt. $2. 74 billion spent on subsidies -more than on healthcare, education Creates significant black market value.

As a result… Government sells flour $1. 50 per sack for a profit of $10 per sack. An inspector must certify that the baker has used flour properly for 3 months in order for baker to receive $1/sack refund. Inspector is bribed by baker with black market sales and inflated prices.

In a study by the Al Ahram Center for Strategic Studies, 28. 5 percent of respondents attribute inflation and increased prices caused by corruption. 88 percent blame it on low wages. After 20 years, the bakery inspector makes $55 per month to feed a family of ten.

"The state-businessmen relations in Egypt are an illegal and unconstitutional marriage. ” Abdel Khaleq Farouk, economist L. A. Times, March 1, 2009

Business Anti-Corruption Snapshot Executing a commercial contract requires and average of 42 procedures and takes 1, 010 days. It takes 6 years to settle business dispute in court. (Heritage Foundation, 2009) Corrupt police officials will buy shops and properties off of detainees. � 7. 3 percent of annual sales spent on bribing officials. No tenure for low level judiciary. Wages low and bonuses contingent on higher levels. Environmental ministry is lowest paid and has most high-level scandals in 5 years, with 10.

2006 Ferry Disaster 1, 035 people are killed when the ferry catches fire and sinks in the Red Sea.

Recovered bodies are put in unlabeled garbage bags. Only riot police are sent to assist concerned family members. An investigation finds that the ferry owner, Mamdou Ismail, a parliament employees is related to the owner of Egypt’s safety inspection company. The 600 page report indicates incompetence by authorities and neglect by the ferry owner. He flees to London and is acquitted. The incident symbolizes Egypt’s corruption.

A Corrupt Education. . “What remains is a decomposed corpse that yields nothing worthy of meaning and to the stench of which we have become thoroughly desensitized. ” Al Ahram, June 25, 2008 editorial

A Cycle of Poor Regulation: -June 2008: Daughter of Egyptian parliament member accused of selling national exams that are essential to determine college enrollment. Lack of proper oversight leads to an exam riddled with errors, impossibly difficult questions. Suicide is common for students that fail the exams. Students that pass can incur debt for private tutoring they need because of poor schools. Overcharging tutors are the same professors.

Babies Killed in Power Outage July 2008: 4 babies die when a hospital loses power for 3 hours and the generator fails.

l Outrage spreads in Egypt when a mobile phone captures doctors trying to resuscitate 5 infants at a hospital without power. l Healthcare and education are free in Egypt, however, public spending has been cut. In 2001, national spending was 2. 4 percent, in 2006, 1. 3 percent. Egypt has seen 7 percent economic growth, yet most goes to wealthy. l Doctors are paid $47 per month.

Optimism for future?

Transparency on the horizon. . l l Transparency is improving with rise in Internet popularity. Egypt uses 2 nd most Internet in Africa (8. 6 million users). 40 percent of population between ages 15 and 40. USAID-funded Nazaha website to raise awareness by reporting corruption from 23 sources. l l l Egypt signed UN Convention against corruption. 51% believe democracy will help. Established 4 councils: Committee of Integrity and Transparency, Administrative Authority Council, Central Auditing Agency, Public Funds Prosecution, Administrative Prosecution Authority.

Sources l l l New York Times New York Sun Times L. A. Times Reuters BBC Transparency International l Business Anti. Corruption Portal Politics. Online Al-Ahram