HDP/HSP

Status of observations by HM Corporate Auditors

Responsible Area Completed On going Total

Production XX XX  5

Logistics XX XX 1

Administration & Finance XX XX 10

Total XX XX 16
HDP/HSP
Status of observations by HM Corporate Auditors

Responsible Area Completed On going Total

Production XX XX  5 Clark
Logistics XX XX 1 Pierluigi
Finance XX XX 4 Javier
HCG – General XX XX 1 Javier
HCG – Riesgos XX XX 3 Katy
HCG – Confidencialidad del
sistema XX XX 1 Cristian
HCG – Riesgos por leyes locales XX XX 1 Yolanda
Total XX XX 16
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

On the manufacturing floor, it was confirmed that wide-ranging ideas and During the 2017 will continue with
1 creative touches have been incorporated, with some of these operations the initiatives of Operating Efficiency   Production
leading to cost reductions. and Cost Down

■ 93Ki PRODUCTION COST EVOLUTION (US$)

(USD) 92ki 93ki 94ki (Units)
600 2500
1975
1800 1800 1680 1685 1800 2000
550 1510 1500
1410 1420 1340 1410 1320 1370 1410
1230 1260 1290 1380 1202 1500
1120 1000
500 486 1000
474
464 460
450 444 436 438 500
432 425 433
417 417 423 417 424 415 414 412 407 0
401 395 396
400 446 444 454
416 419 417 420 432 416 424 423 422 422 416 416 -500
405 405 409 405 400 391 391
350 -1000
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR ABR MAY JUN JUL AUG SEP OCT
2016 2017
Prod Cost Plan($) Prod Cost Real ($) 3W Monthly Production

During 93Ki period we have reach a total production cost down of US$ 32.00 by motokar.

Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

A Market Satisfaction Role was

created in charge of Production:
Regarding quality, it is recommended to establish control items by focusing -Feedback 3W/2W users voice
on quality from the customer’s point of view. In particular, given that the -Report Genba Information
7 three wheelers are products specific to Peru with annual sales of 16,000 -Inmediate actions for Quality   Production
units, the measures for further enhancing their quality are recommended. Problems
-Systematic Market Report
-Techical Support for Dealers

Nov 16 ~Oct 17 WC WC/UIW

250 0.48% 0.50%

0.42%
200 0.36% 0.38% 0.40%
0.36%
0.33%
0.29% 0.30% 0.31%
0.29%
150 0.25% 0.25% 0.30%
236
100 211 0.20%
182 178 186
165 146 151 153
126 127 142
50 0.10%

0 0.00%
16-11 16-12 17-01 17-02 17-03 17-04 17-05 17-06 17-07 17-08 17-09 17-10

After sales and service was transferred to Production since Sep’17, therefor increase more
problems in Genba.
Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

Analysis of the packaging of the CKD

Regarding the issue of packaging-related complaints, it is recommended to and if it is necessary to ask Factory to
examine specific measures for reducing losses focused on self-protection adjust the packaging according to the
29 for the company, such as making a request regarding the packages to the route and the logistic process, in   Production
Chinese side, the import source, for avoiding any future damage. order to guarantee a standard of
operation without reprocessing

Increase protection of critical parts.

Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

It was observed that some frames used in logistics operations were directly Improve 5S Operation.
placed on unpaved road surfaces, and there was insufficient management
30 regarding inventory control for power products, so it is recommended to Implement detailed control of assets   Production
in factory and set cycle of use and of
improve the quality control structure and operations for the inventory low
assets.

The area were released, logistic area established work standard to avoid place in other
places and they made a daily plan of dispatch to logistic centers.
Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

Regarding safety, it is recommended to ensure that the safety gear Strengthen the practices of the OSH
standards according to the working environment are established and System in each site: IQT, Callao, San
observed by all associates including contract workers. As for the storage of Isidro, Tarapoto and Pucallpa:
31 gas cylinders, it was found that some of them are stored in rather unstable -Clarify Committee Roles   Production
conditions, so confirming the safety standards once again and applying -Actualization of Hazards and Risks
them without fail is recommended. -Work plan

Reinforce the OSH System and improve the way of storage gas cylinders.
Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

A look at delivery packing styles for the parts, etc., delivered to HSP shows The packing and the handling manual
conspicuous damage to some of them, as if hit by something along the necessary for each type of product,
way. This would entail unnecessary measures for dealing with the will be checked, according to the
2 aftermath, such as carrying out quality inspections after unpacking and route and the logistic process: V3R,   Logistics
making claims for damages, etc. It is therefore recommended to examine CKD, CBU, in order to guarantee a
measures for improvements in transport packaging styles, and the logistics standard of operation without
channels and routes, etc. reprocessing.

Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

Although HDP and HSP are separate entities from a legal standpoint, they
Formalization of the Independent
are actually run as one company in daily operations. In line with the local Management of the companies (HDP
3 laws and regulations, etc., it is recommended to sort out which areas and HSP): Organizational Structure,   Adm. & Finance
should really be managed by each company as the responsible unit, and to
establish clear rules in this regard. Transfer Price by Shared Services.

No Audit Observation Countermeasure Status Responsible

Regarding HDP and HSP, it is recommended to confirm provisions of the

agreements (transaction agreement, etc.) concluded between the two
Formalization of the Independent
companies. It is also recommended to sort out once again what the Management of the companies (HDP
32 purpose of the two-company structure is, confirm that the structure for   Adm. & Finance
ensuring legal compliance is in place at each of the companies, and and HSP): Organizational Structure,
establish clear standards for the deliberations including the concept for the Transfer Price by Shared Services.
business structure on a consolidated basis.

Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

Regarding HCG self-assessment, it would be important for the whole

company to have a grasp of what actually happened and how for the Restore the HCG System: Committee,
problems identified, and to implement the measures for consistently Current Situation Diagnosis, Annual
5 raising the overall levels, including rollouts to other departments. Keeping Work Plan, Monitoring and Training   Adm. & Finance
up the activities for improving accuracy of the self-assessment process is Associates
recommended.

Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

The business plans as an individual company are firmly established, but Development of Plan Business and
there is a weakness in the linkages with the key measures of the Latin detailed Controls :
American Operations and the Honda Group. When establishing the Mid- -Logic Tree
6 term plan for the years 2017-2019, it is recommended to ensure linkages -Action Plan   Adm. & Finance
for the key measures and the control indexes and target values based on -KPI
them. Assumption of HSA goals

No Audit Observation Countermeasure Status Responsible

In establishing the Mid-term plan for 2017-2019, it is recommended to

ensure policy management with the goals linked to those of global Honda
policies and HM policies. It is also recommended to establish a clear Development of Plan Business and
business model to aim for, plan specific measures in line with the roadmap, detailed Controls :
37 and implement the measures in ways motivating all HDP and HSP -Logic Tree   Adm. & Finance
associates toward common goals. A breakdown of the information for the -Action Plan
measures linked to other organizations as stated above for establishing the -KPI
KPI is recommended. Especially for the three wheeler models, it is hoped Assumption of HSA goals
that the KPI would be established with a comprehensive approach, based
on a clear understanding of current competitiveness levels.

Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

Regarding HCG self-assessment, it is recommended to incorporate

information related to the domestic laws and regulations of Peru and any Define Domestic Laws and
changes in the business model into the HCG check sheet, so as to ensure Regulations Matrix according to
34 effective self-assessment without any omission of important information. It Honda business in Peru and Include   Adm. & Finance
is also recommended to reinforce checks of the HCG activities, in order to in HCG Self Assesment
further improve the accuracy of the self-assessment process.

Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

As for GCP, it was confirmed that the global policy has been duly
customized, and the activities have started to ensure full associate Identificar puntos donde SAP puede
35 knowledge of the policy. Given that the SAP system has been installed, it is ayudar a compliance de GCP.   Adm. & Finance
recommended to check once again whether there is compliance with the
security policy and clear rules concerning development control, etc.

Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

Clarify and formalize the Roles and

To further clarify the roles and responsibilities of the Compliance Officer Responsibilities of the Compliance
and Risk Management Officer, and ensure more widespread associate
Officer and Risk Management Officer,
knowledge of them, including the Compliance Officer and Risk as well as resume the Risk
4 Management Officer in the organizational chart is recommended. Also to   Adm. & Finance
further ensure legal compliance without fail, it is recommended to establish Committees on a systematic basis:
Committee, Diagnosis of Current
an organizational structure to enable checking local laws and regulations on Situation, Annual Work Plan, Follow-
a company-wide basis. up and Training to Associates

No Audit Observation Countermeasure Status Responsible

Regarding Officers, given that a Risk Management Officer is required to give Include in the structure of Risks to
Responsible for each Site. To clarify
the necessary instructions and respond to the situation at the spot when a and formalize the Roles and
33 crisis occurs, it is recommended for HSP to appoint its Risk Management   Adm. & Finance
Officer. Clearly defining the positioning and the roles and responsibilities of Responsibilities, as well as to resume
the Compliance Officer and Risk Management Officer is also recommended. the Risk Committees on a systematic
basis

Done On going
HDP/HSP
Status of observations by HM Corporate Auditors
No Audit Observation Countermeasure Status Responsible

Regarding the risk management structure, it is recommended to establish

without fail plans clearly showing the schedule and the roles allocated for Clarify and formalize the Roles and
Responsibilities of the Compliance
improving operational characteristics in ordinary times, in order to Officer and Risk Management Officer,
minimize risks, build the monitoring structure, and set recovery targets
36 regarding the manual for response measures and procedures including BCP, as well as resume the Risk   Adm. & Finance
Committees on a systematic basis:
in case of crisis occurrence. It is also recommended to conduct a Committee, Diagnosis of Current
reevaluation of individual risks for the following year, establishing a cycle of Situation, Annual Work Plan, Follow-
reviewing and revising the order of priority for the response measures each
year, and continuing to gradually improve the whole process. up and Training to Associates

Done On going