P.54 Corporate Governance (Skills of Directors)

54 02. Foundations for Accelerating Transformation

Corporate Governance

Skills of Directors

▍Types of Skills, such as knowledge, experience, and competencies, that the Board of Directors is required to possess

All Directors of the Company, regardless of whether they are internal or Outside Directors, are required to be honest in character, as well as highly insightful and capable, in accordance with their respective qualifications. Also, the Company raises “No. 1 in Each Field” as a theme under Medium-Term Management Plan 2026, and the Company is transforming its business portfolio by leveraging the strengths of individual businesses to reinforce them and strengthening people and organizations, which are the driving forces for growth. Through such initiatives, the Company will strive to enhance the Groupʼs competitive advantages and achieve growth by addressing social challenges. “Governance” and “Global perspective” are Skills that all Directors are required to possess, while we believe that the Board of Directors as a whole should possess the other seven Skills. Of these seven Skills, for Directors who are Audit & Supervisory Committee Members we place a particularly high priority on “Corporate Management,” “Finance/Accounting,” and “Legal/Risk Management.” As the Skills that the Directors are required to possess might vary according to business strategies or changes in the external environment, the Board of Directors will continue to discuss the skills required, make necessary changes, and disclose such changes.

Skills that all Directors are required to possess and the reasons why these Skills are necessary

Governance

We believe that in order to fulfill our mandate from shareholders while at the same time managing our business in the interests of all stakeholders, it is essential for all Directors to be well-equipped with a high level of knowledge regarding governance. The essence of corporate governance based on our view is defined in the Sumitomo Corporation Corporate Governance Principles as “improving management efficiency” and “maintaining sound management,” as well as “ensuring management transparency.”

Global Perspective

From the perspective that the Company conducts business transactions and investments throughout the world, we believe that all Directors should have keen insight from a global perspective. We view that this Skill entails the ability to plan and implement an optimal business strategy that combines caution with flexibility even under extremely uncertain situations, taking into account different cultures, different industrial structures, the latest geopolitical developments, and so forth. We also view that this Skill includes the ability to appropriately supervise the execution of related management duties.

Skills that the Board of Directors as a whole is required to possess and the reasons why these Skills are necessary

Corporate Management

The Company engages in a range of business activities, aiming for stable and sustainable increases in its corporate value. The Board of Directors is the body that sets the overall direction of management, exercises effective oversight of management execution from a broad and diverse perspective and makes decisions on the Companyʼs important business matters which may affect company-wide management. It also implements an optimal business strategy for creating value in accordance with the Companyʼs Management Principles while also meeting our stakeholdersʼ expectations in a constantly changing operating environment.

Finance/Accounting

To enhance its corporate value sustainability, the Company endeavors to achieve medium-to long-term earnings growth and increase its returns to shareholders while maintaining a healthy balance between investment for growth and a solid financial position. To enable us to make appropriate decisions and properly inform the Companyʼs initiatives to stakeholders as we work forward toward these goals, we need to provide accurate, timely financial reporting.The Board of Directors also oversees these matters.

Investment/M&A

The Company invests in a diverse range of business domains. To identify investment opportunities that align with the Companyʼs strategy and oversee their progress, we place particular importance on skills in investments and M&As. These skills include identifying investment themes, assessing alignment with the Companyʼs strategy, appropriately valuing investment targets, monitoring investments after execution, and determining the optimal timing for asset replacement. Based on these skills, the Board of Directors makes and oversees key decisions relating to investment projects.

Legal/Risk Management

We consider three goals to be of key importance in ensuring that the Company achieves sustainable, robust growth: stabilizing performance, strengthening our financial base, and maintaining our corporate reputation. To achieve these goals, we conduct appropriate risk management using various means. These include assessing and analyzing the risks that accompany commercial transactions, business investments, and other business opportunities; keeping the Companyʼs total Risk-weighted Assets to within our buffer (shareholdersʼ equity); and maximizing Risk-adjusted Return. To this end, the Board of Directors oversees management execution by reviewing and monitoring transactions as well as investment and financing matters, considering compliance, legal risk, and other risk management factors.

IT/DX/Technology

As accelerating technological advancements transform societies and industrial structures, the Company will continue to create value by responding with agility to such change, by anticipating change to pursue business innovation, and by creating new businesses. We will also reform our own business foundation by making effective use of new digital technologies such as AI in our business activities in line with our own values. The Board of Directors is responsible for making key decisions in these areas and overseeing their implementation.

HR Management & Development

Regarding human capital as its most important form of business capital, the Company provides each individual with opportunities for self-disciplined growth and self-realization and strives to upgrade its HR management cycle. Through such efforts, we are maximizing the performance of our diverse talents and the organization as a whole, thereby creating new value. We particularly emphasize DE&I, which we recognize as the core enabler for value creation, innovation, and competitiveness. The Board of Directors is responsible for making these important decisions and overseeing them.

Sustainability

Having identified certain important challenges that need to be prioritized as Material Issues, and placed these issues at the core of its business management, the Company always pays attention to whether its businesses are contributing to society. We are pursuing sustainability management, which entails anticipating long-term changes in our operating environment relating to social issues and allocating management resources strategically to contribute to a sustainable society and achieve sustainable growth for the Company. Taking into account the awareness of international trends and an understanding of the relevant issues, the Board of Directors supervises the implementation of sustainability management.