Annual Financial Report

RNS Number : 3107J

Reckitt Benckiser Group PLC

28 March 2018

 

28 March 2018

RECKITT BENCKISER GROUP PLC

("RB" or the "Company")

2017 Annual Report, 2017 Sustainability Report

and Notice of the 2018 Annual General Meeting

RB confirms that the following documents are today published and are available on its website: www.rb.com:

-   Annual Report and Financial Statements for the year ended 31 December 2017 ("2017 Annual Report")

-     Notice of the Annual General Meeting 2018 to be held on 3 May 2018 ("2018 AGM Notice")

-     2017 Sustainability Report

In compliance with LR 9.6.3, the following documents have also been submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/nsm:

·     2017 Annual Report

·     2018 AGM Notice

·     Form of Proxy for the 2018 Annual General Meeting

In compliance with rule 6.3.5(3) of the Disclosure Guidance and Transparency Rules the documents can also be downloaded in pdf format from the Company's website at www.rb.com, and will be posted to shareholders on 3 April 2018.  The Company's 2018 Annual General Meeting will be held at 11.15 a.m. on Thursday 3 May 2018 at the London Heathrow Marriott Hotel, Bath Road, Hayes, Middlesex, UB3 5AN.

A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in RB's preliminary announcement of annual results released on 19 February 2018. That information, together with the information set out in the Appendix below, which is extracted from the 2017 Annual Report, constitutes the material required for the purposes of compliance with DTR 6.3.5R. This announcement is not a substitute for reading the full 2017 Annual Report. Page numbers in the extracted information below refer to page numbers in the 2017 Annual Report.

Enquiries:           Tel: [phone]

Investors/Analysts:        

Rupert Bondy, SVP, General Counsel/Company Secretary

Richard Joyce, SVP, Investor Relations

Media:                         

Patty O'Hayer, Director, External Communications & Affairs

103-105 Bath Road, Slough SL1 3UH

Registered in England and Wales, No. 6270876 

Reckitt Benckiser Group plc's LEI code is 5493003JFSMOJG48V108

About RB:

RB is the global leading consumer health, hygiene and home company. Driven by a purpose of providing innovative solutions for healthier lives and happier homes, RB has operations in over 60 countries.  From the foundations of wellness and infant nutrition, to the fundamentals of a hygienic home, its global brands help people live healthier, happier lives.

RB has world leading Powerbrands which include household names such as Enfamil, Nutramigen, Nurofen, Strepsils, Gaviscon, Mucinex, Durex, Scholl, Clearasil, Lysol, Dettol, Veet, Harpic, Cillit Bang, Mortein, Finish, Vanish, Calgon, Woolite and Air Wick.

RB's unique culture is at the heart of its success.  Its drive to achieve, passion to outperform and commitment to quality and scientific excellence is manifested in the work of over 40,000 employees worldwide. 

For more information visit www.rb.com 

*RB is the trading name of the Reckitt Benckiser group of companies

Cautionary note concerning forward looking statements

This announcement and the Annual Report and Financial Statements contain statements with respect to the financial condition, results of operations and business of RB (the "Group") and certain of the plans and objectives of the Group that are forward-looking statements. Words such as ''intends', 'targets', or the negative of these terms and other similar expressions of future performance or results, and their negatives, are intended to identify such forward-looking statements. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including targets for net revenue, operating margin and cost efficiency, are forward-looking statements. Such statements are not historical facts, nor are they guarantees of future performance.

By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including many factors outside the Group's control. Among other risks and uncertainties, the material or principal factors which could cause actual results to differ materially are: the general economic, business, political and social conditions in the key markets in which the Group operates; the ability of the Group to manage regulatory, tax and legal matters, including changes thereto; the reliability of the Group's technological infrastructure or that of third parties on which the Group relies; interruptions in the Group's supply chain and disruptions to its production facilities; the reputation of the Group's global brands; and the recruitment and retention of key management.

These forward-looking statements speak only as of the date of this announcement. Except as required by any applicable law or regulation, RB expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Any information contained in the 2017 Annual Report and Financial Statements on the price at which shares or other securities in Reckitt Benckiser Group plc have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance.

APPENDIX

The primary purpose of this announcement is to inform the market about the publication of RB's 2017 Annual Report, 2017 Sustainability Report and 2018 AGM Notice.

The information below, which is extracted from the 2017 Annual Report, is included solely for the purpose of complying with DTR 6.3.5R and the requirements it imposes on issuers as to how to make public annual financial reports. It should be read in conjunction with the preliminary announcement. Together these constitute the material required by DTR 6.3.5R to be communicated in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2017 Annual Report.

Page and note references in the text below relate to pages and notes in the 2017 Annual Report.

(i)   OUR FRAMEWORK FOR RISK MANAGEMENT (pages 42 to 51)

The following table provides a summary review of the principal strategic risks and uncertainties that are more likely to affect the Group, as identified by management and the Board.

RB operates a major risk assessment process to periodically identify, assess and mitigate

those risks it considers to be most significant to the successful execution of our strategy.

The following table sets out the principal strategic risks and uncertainties facing the Group at

the date of this report. They do not comprise all of the risks that the Group may face. Additional risks and uncertainties not presently known to management, or deemed to be less material at the date of this report, may also have an effect on the Group.

The Board retains responsibility for oversight of principal risks across RB and it considers the

appropriateness of the risk exposure to its appetite for risk as laid out in the annual strategic planning process. The Board delegates the day-to-day monitoring of risk to the Executive Committee (EC) and each principal risk has an EC owner. Principal risks are routinely reviewed not only at EC meetings but also by the appropriate Board committee (Audit or CRSEC) or by the Board itself. The Audit Committee holds responsibility for oversight of the

principal risk assessment process, and considering whether it is appropriate to the needs of the business and works effectively; the Audit Committee performs an annual review of this process. The principal risk assessment process is led and facilitated by the Group Head of Internal Audit & Risk Management under the direction of the Group CEO and CFO. The principal risk assessment process consists of the following key elements.

The most senior leaders of our business dedicate time each year, in a facilitated discussion with the Group risk team, to consider the risk environment for their particular functional or geographic area of responsibility and how their emerging or known risks could impact on the achievement of the Group's strategic objectives.

Similar sessions are held with the Group's external advisors and also with each Board member. The key content from these sessions is synthesised into the Group's principal risks, with an EC owner being accountable for overseeing the execution of the current control strategy and for preparing and executing a plan of mitigating actions to properly manage the

Group's exposure to an acceptable level for that risk. Progress is reviewed periodically and the summary output from the principal risk assessment process is formally submitted annually by the EC to the Board for its consideration and agreement. Through the course of each year, the EC, Board and Board Committees' agendas address each of the principal risks through specific 'deep dives' to ensure proper focus, resourcing and progress with mitigation.

Viability Statement

The Board conducted a Viability Review covering a five-year period. This period was selected

as it is the period covered in the Group's long-term forecasting process, which covers the introduction to market of the current new product pipeline.

The five-year Viability Review first looks at the Group's ability to continue in operation if it performs in line with the Group forecast. This assumes that normal market conditions continue and current trends remain.

The evaluation takes into account the Group's cash flow, historical Group planning accuracy, available banking facilities and interest cover ratios in connection with financial covenants. The analysis concluded that if RB performs in line with forecast it would have sufficient funds to trade, settle its liabilities as they fall due, and remain compliant with financial covenants.

The analysis goes on to consider the viability of the business should adverse unexpected events arise. To illustrate this, a sensitised view of the Group forecast was produced. The adverse assumptions are based primarily upon the realisation of key Group principal risks, which have the most relevant potential impact on viability (see risks marked '*' on the following pages).

The sensitivity assigns each adverse assumption an estimated annual monetary value and estimates the impact on interest cover ratios and headroom over available borrowing facilities.

The analysis concludes that even with the occurrence of key unexpected scenarios, RB would

still have sufficient funds to trade, settle its liabilities as they fall due, and remain compliant with financial covenants.

The Board has further considered the occurrence of a 'Black Swan' event: an event with sufficient potential impact to risk the future of RB as a strong and independent business operating in its chosen markets. The occurrence of a major issue could result in significant

reputational impact, a catastrophic share price fall, significant loss of consumer confidence, and inability to retain and recruit quality people. Such an event could have an impact on the viability of the business.

As there are a number of mitigating controls in place across the business, the occurrence of a Black Swan event is considered sufficiently unlikely that it has not been factored into the sensitivity analysis.

As a result of the Viability Review, the Board has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the five-year   period covered in the Viability Review.

Risk management framework

Compared with a year ago, the individual risks have evolved as follows:

·           'Delivery of RB 2.0' will provide greater risk balance for RB in the medium term, although there is shorter-term delivery risk associated. New and significant risks are also associated with 'Mead Johnson Nutrition (MJN) Integration'. These two risks are being managed through an integrated change management programme;

·           Strong early progress on the recently implemented Safety, Quality, Regulatory and Compliance (SQRC) governance structure has driven a reduction in the exposure for our consumers to potential 'Product Safety' issues, and of the RB business to 'Product Regulatory Non-Compliance' risks;

·           The 'South Korea' risk has stabilised although significant risk remains;

·           Due to developments during 2017 in the 'Department of Justice' case, this risk is now actively managed separately from the 'Legal Non-Compliance' risk;

·           RB also suffered 'Supply and Logistics' shortfalls, which were exacerbated by a significant cyber security breach just ahead of the half-year close, with resultant customer service impact. Significant management effort and resources continue to be applied to reduce these risks for both the short and longer terms;

·           Continuing below-par trading performance increases the risk of 'Loss of Management'; and

·           'Reputation' as a risk has been removed from the list, as it is considered that this is most appropriately managed through its constituent parts.

As such, the Group risk profile has slightly increased in aggregate from a year ago, with three

principal risks (numbers 7, 10 and 12) carrying a higher likelihood than in the previous year and one (number 2) carrying a lower likelihood, per the listing below. The potential impact assessed has risen for three risks (again, numbers 7, 10 and 12) and fallen for two (2 and 3) based on the experiences of 2017.

Overall, it is considered that the Group risk management framework has been further strengthened during 2017 through the combination of greater Board leadership and oversight with the embedding of the Corporate Responsibility, Sustainability, Ethics and Compliance Committee (CRSEC Committee) together with the associated executive management committees; also, the impact of the Safety, Quality, Regulatory and Compliance (SQRC) function, reporting directly to the Group CEO, and the channelling of additional resources to strengthen compliance assurance across the Group.

Exchange rate risk

While the foreign exchange risk is not considered to be a principal risk to the Group, the means used to mitigate this risk are considered in Note 14 to the Financial Statements.

Current Group principal risks

1.    RB 2.0 Delivery

2.    Product Safety

3.    Non-Compliance with Product Regulations

4.    Non-Compliance with GXP Regulations

5.    South Korea

6.    Fatality or Major Employee Safety Incident

7.    Supply and Logistics

8.    ERP/IT Systems Failure

9.    Cyber Security

10.   Legal Non-Compliance

11.   Major Tax Disputes

12.   Loss of Management

13.   MJN Integration

14.   Department of Justice Investigation

BS. 'Black Swan' Event

Principal Risk	Description	Mitigation Status	Ongoing 2018 actions
1. RB 2.0 Delivery*	Risk that implementation of the new RB 2.0 category-based organisation and accompanying ways of working causes short-term issues: • Heavy change programme. • Potential loss of key management. • Focus on operating performance. • Group control and compliance.	Board sign-off of all material aspects. Audit Committee routinely updated on progress to ensure proper risk and control maintained. Personal leadership of Group Chief Executive with direct Executive Committee (EC) oversight. RB 2.0 overarching project management team established and working effectively, with robust governance framework in place. Programme teams in place for each business unit and budgets allotted for end-to-end ownership. Programme Review Board meetings held monthly and chaired by Group CFO.	Detailed change programme execution plan and ongoing governance model maintained and updated by programme team, including: • Customer go-live across the world - to approach customers and manage relationships as two separate business units. • Legal entity restructuring - completion in-year of most critical markets. • Regulatory compliance plan for products in line with legal entity changes
2. Product Safety*	Risk of not having a robust process for assessment of product safety; this may result in: • Consumer safety issues. • Gaps in the completion of our safety assessment. • Reputational damage with consumers, customers or regulators. • Significant financial losses arising from supply disruption, product recalls, delayed launches, penalties, etc. • Possible criminal liability for Group companies and RB management.	A dedicated vigilance group monitors and reports as required adverse events and manages product safety risks. Safety team has been further strengthened during 2017. Base training for all employees, and advanced training for relevant employees to fully understand their role in fulfilling safety, quality and compliance standards for RB products. The Compliance Management Committee (CMC), established in 2016, continues to meet monthly, chaired by the Group CEO (the Group CFO since 1 January 2018). The CMC routinely reviews product safety governance and issues arising and escalates to the Executive Committee as necessary. Quarterly updates of product safety progress from the CMC to the CRSEC Committee.	Ongoing review of Product Safety Evaluation Records (PSERs) to ensure current availability for all products. Systems review to ensure that all product changes are satisfactorily tracked, controlled and updated. Development and integration of a crossfunctional Product Lifecycle Management (PLM) system (safety, regulatory, pharmacovigilance, quality, supply, procurement, etc.) to improve compliance at source and reduce manual intervention. Strengthen processes to ensure product release from factories is contingent on availability of a PSER.
3. Non-Compliance with Product Regulations*	Risk that non-compliance with regulations of relevant product classifications (e.g. medicinal products, medical devices, dietary supplements, food, cosmetics, general products, etc.)  results in: • Consumer safety issues. • Reputational damage with consumers, customers or regulators. • Significant financial losses arising from supply disruption, product recalls, delayed launches, penalties, etc. • Possible criminal liability for Group companies and RB management.	REGEX programme reviewed compliance of RB's medicine marketing authorisations. Ongoing Product Vulnerability programme (review of ingredients, formulations, stability data, etc. in Health portfolio). REACH compliance programme to enhance systems, processes and data to demonstrate compliance with REACH and other chemical control legislation. Product Integrity review programme (review product compliance against registration and/or regulatory requirements). Change management process optimisation to maintain product compliance. A Compliance Management Committee (CMC) meets monthly, chaired by the Group CEO (the Group CFO since 1 January 2018). This committee routinely reviews product regulatory governance and updates the Board CRSEC Committee quarterly.	Compliance programme for sexual wellbeing medical devices has commenced as part of product integrity reviews. Improve artwork and label approval process. PLM system development to replace ageing system and integrate RB and MJN to enable compliance management throughout the product life cycle.
4.  Non-Compliance With Good Manufacturing Practices (GXP) Regulations*	Risk of non-compliance with applicable regulations, guidelines, internal standards and/ or registrations across the supply chain and throughout the product life cycle governing how we produce and supply products. Non-compliance results in risk to: • Consumer - safety and efficacy. • Business disruption including site or business closures. • Possible criminal liability for Group companies and RB management.	The CMC (see principal risk number 2) is now in place to ensure KPIs are reported from the top through all levels in the organisation. Quarterly updates of quality compliance progress from the CMC to the CRSEC Committee. Independent audit team established and externally certified; first full-year programme executed. Minimum standards programme in place to monitor and measure performance. Health business unit compliance regularly audited by external parties and clear actions in place. Change management system deployed globally during 2017 to extend application to Hygiene Home business unit. External assessment of Quality Management System (QMS) and consumer safety completed, with remediation plans in place.	Verify compliance with QMS through corporate quality audits in base businesses and all supporting functions. Implement initial phases of integrated Global Consumer Relations function and process/ system to ensure appropriate signal detection by business unit. Integrate MJN and RB Quality Management team, to establish consistent standards globally. Establish and report new KPI metrics assessing compliance risk of QMS elements. PLM system development to upgrade system and integrate RB and MJN to enable compliance management throughout the product life cycle.
5. South Korea	The Humidifier Sanitizer (HS) issue in South Korea is a tragic event. We continue to make both public and personal apologies to victims. While an appropriate provision was made at half year 2016 to cover the one-off costs of litigation, a compensation programme for certain victims, as well as some impairment, the risk of additional exposure remains. See Notes 17 and 19 to the Financial Statements.	Full public apology formally and repeatedly made by RB Korea to affected parties. Regular review meetings by RB Group, as owner of RB Korea, to review settlement progress and other issues as they arise. Financial modelling performed and updated to quantify risk and provide for financial exposure.	RB Korea continues to work closely with government and other stakeholders to progress settlement with claimants and to establish a viable ongoing model for the local operations. See Notes 17 and 19 to the Financial Statements.
6. Fatality or Major Employee Safety Incident	Risk of work accidents leading to death, injury or illness on RB premises or premises under RB supervision, in the case of outsourced operations, resulting in risks to: • Loss of life. • Company reputation - brand and Company image damage. • Operational efficiency - factory closures, significant supply disruption as issues are identified and rectified. • Financial performance - loss of sales, fines and cost of remediation activities. • Possible criminal liability for Group Companies and RB senior management.	Global Safety, Quality, Regulatory and Compliance (SQRC) structure and regional leadership. Policy and enhanced Employee, Health & Safety (EH&S) standards in place. EH&S intensive audit compliance programme in place, including self-assessment, site visits, assurance of improvement actions and culture surveys. Routine progress reporting to CMC, with quarterly updates of progress with safety governance and issues to the CRSEC Committee. Ongoing EH&S training and deployment of driver safety standard programme in 2017.	Continue to embed heightened EH&S culture through rigorous auditing, ongoing cultural surveys and training.
7. Supply and Logistics	Risk of product supply interruption resulting from unplanned disruptions in raw material supply or forced shutdown. Loss of competitiveness and profitability from service level deterioration arising from factory capacity constraints,  warehouse or transport set-up charges or insufficient change capability in factory and/or supply services. Risk that our business continuity plans (BCPs), including mono-sourcing (materials and products) do not adequately address all risks facing the Group, resulting in unforeseen business disruption.	Continued progress in ensuring principal key single-sourced manufacturing sites (Tier One) achieve and maintain FM Global certification as Highly Protected Risk (HPR) sites or otherwise have fully tested risk mitigation plan. BCPs in place at other key sites setting out alternative manufacturing locations, recovery times, etc. Continuous review of business interruption insurance policies to ensure adequate cover is in place with tested and proven product recall process. Raw material mono-sourcing risks and actions monitored on a bi-monthly basis. Tested and proven product recall process.	Extend HPR certification to all ex-MJN manufacturing locations acquired in 2017. Revisit all BCPs to ensure robust and functional documentation and mapping for each significant factory (e.g. by revenue stream) to confirm that business continuity arrangements remain sufficient.
8. ERP/IT Systems Failure	Risk of IT disruption or accounting error, due to legacy Enterprise Resource Planning (ERP) and IT systems, impacts business operations in a number of areas, e.g. through unavailability of key management information or disruption to transactional processing. There is an associated, additional risk that SAP deployment, to replace the existing legacy ERP, is delayed due to RB 2.0 project time frames and integration of MJN into RB.	Executive Committee strategically committing to Group-wide SAP roll out. SAP commercial and factory templates continue to be rolled out and are now live in five countries, 11 factories and two hubs, including recent deployments in Mexico and India, as well as across the newly acquired MJN estate; multiple deployment teams remain fully active in rapid rollout phase. Disaster recovery plans for key IT systems defined, regularly reviewed and tested under new outsource provider platform, providing improved systems integrity.	Execution of RB 2.0, including accelerated roll out of SAP commercial and factory templates and upgrading of the commercial functionality of the newly acquired MJN SAP template. Perform disaster recovery test for all Global/critical SAP systems and associated dependent systems.
9. Cyber Security*	Risk that RB is subject to increasingly sophisticated cyber attacks aimed at causing business disruption, capture of data for financial gain, and reputational damage. Note: RB was the collateral victim of the June 2017 virus attack via Ukraine, which disabled virtually all MS-based systems across RB over a number of days and including over the half-year end. Whilst a full recovery was made, an expert-led review of the incident has extracted extensive learning points to appropriately minimise impact from future attacks and mitigate both the immediate as well as the longer-term risk.	Transformation of IS hardware environment completed with security monitoring of key systems in place. Ongoing investment in system patching against cyber threats. Continuous cyber testing platform (vulnerability management) to identify cyber weaknesses as new threats emerge. Regular cyber security exercises. Cyber security awareness training for all staff. Solution in place for privileged access management. Global backup platform in place for data and systems recovery.	Implementation of cyber security transformation plan and strategy in light of the learnings from the June 2017 cyber attacks including: • 24/7 Cyber Defence Centre. • Removal of legacy platforms. • Increased IT security team headcount. • New cyber response playbooks and processes. • Advanced threat protection. • Continued improvements to system recovery speed and capability
10. Legal Non-Compliance*	Risk that we are not fully compliant with relevant laws and regulation, including anti-corruption laws and global competition laws, resulting in damage to RB's reputation, significant potential fines and possible criminal liability for RB senior management (see Notes 17 and 19 to the Financial Statements for further detail). Increased risk has arisen from: • The acquisition and integration of MJN increasing our exposure with regard to anti-corruption laws, specifically health care professional interaction. • Data privacy exposure is increasing due to the need to hold Personally Identifiable Information (PII) and continuing changes in legislation e.g. General Data Protection Regulation (GDPR).	Group Compliance programme. Global Compliance Passport online training completed by all employees. Group Whistleblower Hotline operational, widely communicated and embedded. Dedicated compliance personnel in each business unit; supported by internal compliance liaisons and external local legal experts as and when required. SVP General Counsel and Company Secretary routine attendance at Board meetings. IFCN division with new policies for interaction with Health Care Professionals (HCPs) and process underway to integrate with Health business unit. Global Gift Register and enhanced due diligence checks developed during 2017. GDPR readiness project underway.	Ongoing proactive management of current and potential litigation. Delivery of GDPR readiness project ahead of effective date of new regulation in May 2018. Develop tool for ongoing monitoring to prevent potential abuse of significant market positions. Develop and rollout updated online training.
11. Major Tax Disputes	Risk of significant un-provisioned cash outflows as a result of tax authority challenge to filed tax positions (see Note 7 to the Financial Statements for further detail).	Governance Review Board monitors and drives compliance against operating model. Ongoing review and appropriate provisioning for anticipated exposures. Ongoing monitoring of progress of European Union State Aid investigations and their possible impact on RB. Also for Base Erosion and Profit Shifting (BEPS) initiatives.	Ongoing proactive management to progress formal Advanced Pricing Agreements (APAs) and proactive management of ongoing tax audits.
12. Loss of Management	Risk that RB cannot implement its strategies and meet objectives as a result of management leaving the business who cannot be readily replaced by equally high-calibre experienced/ qualified candidates. Ahead of RB 2.0 there was a concern that management turnover could rise.	'People' discussion is a standard agenda item at all Executive Committee meetings. Succession plans for key management positions are in place. Retention risk analysis undertaken regularly, including review of turnover rates. Continuous review of competitiveness of the total compensation programmes at RB. DARE (Develop, Attract, Retain, Engage talented women) programme continues to be driven hard; its objective includes the reduction in drop-off rate of females from manager to senior management positions.	The Group structures its reward programme to attract and retain the best people. The formal succession planning process continues to evolve with plans being reviewed and updated regularly for all key positions and individuals.
13.Mead Johnson (MJN) Integration	Risk that integration takes longer than expected and does not deliver the projected benefits within expected time frames: • The integration of MJN into RB continues to divert management attention from operating and delivering the expected results from its core business. • Existing RB management have limited experience in running and managing the risks associated with an Infant and Child Nutrition (IFCN) business.	IFCN operated as a separate division through 2017 with a dedicated Executive Leadership team (80% of which are previous MJN employees). Commercial performance and integration status progress reviewed monthly by the EC. Key MJN talent identified and retention programme in place. RB has strengthened IFCN commercial rigour through enhancements to the operating model, whilst retaining unique strengths of MJN R&D, Regulatory and Quality functions.	Detailed plan of full integration in place and aligned within RB 2.0 organisation change.
14. Department of Justice (DOJ) Investigation	Risks deriving from ongoing US DoJ investigation and related antitrust litigation relating to legacy pharmaceutical business include: • Potential criminal indictment of RB Group or RB individuals, with reputational impact, distraction and potential debarment which could theoretically have wider implications within the RB business. • Significant financial liability for RB from settlement or adverse court decisions in criminal or civil matters.	Ongoing close oversight by top management and Board, with independent advice from external counsel. Ongoing preparation of defences to any criminal indictment or civil action.	Continuing effort to engage to reach reasonable resolution of the investigation.
BS. 'Black Swan' Event	Risk of significant reputational impact as a result of a major product safety issue resulting in very serious adverse impacts to third parties or the viability of the business, possibly compounded by apparently negligent management behaviour. Extreme adverse press coverage and viral social media linking the RB name to consumer brands, leading to catastrophic share price fall, accompanied by collapse of consumer confidence and inability to retain and recruit highly capable employees.	A full and robust risk and control framework is in place and operating effectively across RB. This framework is overseen by the Audit and CRSEC Committees on behalf of the Board and is routinely reviewed by an independent Internal Audit function, which reports directly to the Audit Committee. Crisis management training programme and support tools in place.	The adequacy of the risk and control framework, together with Group policies, is reviewed annually by the Audit and CRSEC Committees. Incremental improvements are made each year to further strengthen RB's systems of internal control and risk management.
Routine Risks	We are subject to a range of compliance and routine risks as part of everyday business.	In order to manage the more numerous and routine risks, the Group maintains a complete and robust governance framework. This consists of a full set of policies, processes and systems covering all aspects of compliance, with international and local laws as well as with the Group's stated minimum control standards. Management provides primary assurance by driving risk compliance through their respective business unit, area, regional or functional responsibility. This is done through regular and detailed business and governance reviews. Secondary assurance is provided independently through a combination of Internal and External Audit covering all aspects of the Group's operations.	The adequacy of the risk and control framework, together with Group policies, is reviewed annually by the Audit and CRSEC Committees. A fundamental element of the MJN acquisition integration process has been to select the best combination of risk and control policies, processes and systems to further improve robustness for the enlarged RB 2.0 business.

(ii)  RELATED PARTY TRANSACTIONS (pages 152 and 163)

[NOTE] 26 RELATED PARTY TRANSACTIONS

RB & Manon Business Co. Ltd (Manon)

As part of the arrangements with the non-controlling shareholders of Manon, the parties are subject to symmetrical put and call options over the non-controlling Shareholdings, exercisable together after a period of six years, with possible extensions available at the agreement of the parties. The present value of the put option at year end was a liability of ￡105 million (2016: ￡94 million liability).

Indivior PLC

Indivior PLC is no longer considered to be a related party for the year ended 31 December 2017 following the resignations of Adrian Hennah (Reckitt Benckiser Group plc CFO) and Rupert Bondy (Reckitt Benckiser Group plc SVP General Counsel and Company Secretary) from the Indivior Board of Directors in May and September 2016 respectively.

For the year ended 31 December 2016, the Group recognised ￡5 million in other operating income in respect of operational services provided to Indivior PLC. Certain outstanding balances totalling ￡6 million relating to adjustments in the final UK corporation tax liabilities were also settled on behalf of Indivior PLC by Reckitt Benckiser plc in 2016.

Other

The Group has related party relationships with its Directors and key management personnel (Note 5) and pension schemes (Note 22).

[PARENT COMPANY NOTE] 12 RELATED PARTY TRANSACTIONS

Reckitt Benckiser Group plc has related party relationships with its pension schemes as disclosed in Note 26 of the Group Financial Statements.

In the prior year certain outstanding balances, totalling ￡6 million, were settled with Indivior PLC. These related to adjustments to final UK corporation tax liabilities settled on behalf of Indivior PLC by Reckitt Benckiser plc.

There were no other transactions with related parties other than wholly-owned companies within the Group.

(iii) DIRECTORS' STATEMENT OF RESPONSIBILITIES

The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for Shareholders to assess the Group and Parent Company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed on pages 52 to 55, confirm that, to the best of his/her knowledge:

•    the Parent Company Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company;

•    the Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU and IFRSs as issued by the IASB, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

•    the Strategic Report includes a fair review of the development and performance of the business and the position of the Group and Parent Company, together with a description of the principal risks and uncertainties that it faces.

Name                           Function

Adrian Bellamy              Chairman and Non-Executive Director

Rakesh Kapoor              Chief Executive Officer

Adrian Hennah               Chief Financial Officer

Nicandro Durante           Non-Executive Director

Mary Harris                    Non-Executive Director

Kenneth Hydon              Non-Executive Director

Pamela Kirby                 Non-Executive Director

André Lacroix                Senior Independent Director

Christopher Sinclair        Non-Executive Director, Chairman-elect

Judith Sprieser              Non-Executive Director

Warren Tucker              Non-Executive Director

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END

 

 

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