Annual Financial Report

RNS Number : 9102I

Reckitt Benckiser Group PLC

06 April 2020

 

6 April 2020

RECKITT BENCKISER GROUP PLC

("RB" or the "Company")

2019 Annual Report and Notice of the 2020 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 2019 ("2019 Annual Report")

· Notice of the Annual General Meeting 2020 to be held on 12 May 2020 ("2020 AGM Notice")

In compliance with LR 9.6.1, the following documents have also been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism:

· 2019 Annual Report

· 2020 AGM Notice

· Form of Proxy for the 2020 Annual General Meeting

In compliance with rule 6.3.5R 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 who have elected to receive paper communications on 6 April 2020.

The Company's 2020 Annual General Meeting will be held at 3.00pm on Tuesday 12 May 2020 at 103-105   Bath Road Slough, Berkshire, SL1 3UH.   In light of the evolving situation regarding the outbreak of the COVID-19 virus, on 23 March 2020 the UK Government instructed that people should not leave their homes, except in very limited circumstances.  We therefore strongly recommend that shareholders refrain from attending the AGM in person. Shareholders and their proxies are asked, and strongly encouraged, to utilise the option to vote by proxy in advance of the AGM without attending in person. Details of how to vote by proxy are set out in the 2020 AGM Notice.

It is our current intention to live-stream the AGM so that Shareholders will be able to follow the meeting remotely. However, this will be kept under review and subject to the Government guidance in place at the time of the AGM. Details of the web-access link to the meeting will be available at www.rb.com/investors/your-shareholding/agm/. Please note that the web facility will be provided for information purposes only and will not be a formal part of the meeting. 

Shareholders may submit written questions in advance of the AGM if they wish.  If you have any such questions, please send them either by post to the Company's head office at Reckitt Benckiser Group plc, 103-105 Bath Road, Slough SL1 3UH or by e-mail to  [e-mail]   to be received no later than 5 May 2020, the fifth business day preceding the date of the AGM.  Please ensure that your shareholder details are included with your communication.  We will endeavour to answer a representative selection of any questions received in advance at the AGM.

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 27 February 2020. That information, together with the information set out in the Appendix below, which is extracted from the 2019 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 2019 Annual Report. Page numbers in the extracted information below refer to page numbers in the 2019 Annual Report.

For further Information:
Rupert Bondy

Company Secretary

Tel [phone]

John Dawson

SVP, Investor Relations

Tel. [phone]

Reckitt Benckiser Group plc's LEI code is 5493003JFSMOJG48V108

About RB

RB* is driven by its purpose to protect, heal and nurture in a relentless pursuit of a cleaner, healthier world. We fight to make  access to the highest-quality hygiene, wellness and nourishment a right, not a privilege, for everyone.

RB is proud to have a stable of trusted household brands found in households in more than 190 countries. These include Enfamil, Nutramigen, Nurofen, Strepsils, Gaviscon, Mucinex, Durex, Scholl, Clearasil, Lysol, Dettol, Veet, Harpic, Cillit Bang, Mortein, Finish, Vanish, Calgon, Woolite, Air Wick and more.  20 million RB products a day are bought by consumers globally.

RB's passion to put consumers and people first, to seek out new opportunities, to strive for excellence in all that we do, and to build shared success with all our partners, while doing the right thing, always is what guides the work of our 40,000+ diverse and talented colleagues 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 contains 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 2019 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 2019 Annual Report and 2020 AGM Notice.

The information below, which is extracted from the 2019 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 released on 27 February 2020. 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 2019 Annual Report.

Page and note references in the text below relate to pages and notes in the 2019 Annual Report.

(i)  OUR APPROACH TO INTEGRATED RISK MANAGEMENT AT RB (pages 64 to 77)

Risk management occurs at different levels in RB with identification and assessment performed at the functional, business unit, corporate and Group levels to provide both a 'top-down' and 'bottom-up' three-dimensional view of risk and is implemented as follows:

	Functional risk assessments	Business unit/corporate risk assessments		Group principal and emerging risk assessment		Board oversight	Annual Report
	Consolidation and critical challenge by Internal Audit		Reviewed by business unit/corporate function leadership teams		Principal and emerging risks identified through the Group Risk Assessment are disclosed in RB's Annual Report
What	· Identifies and monitors risks impacting the operation of each function or functional area · Controls are mapped to the three lines of defence · Detailed management action plans are developed to address control gaps	· Identifies and monitors risks with the potential to impact each business unit and the corporate centre · High-level control strategies and action plans are documented for each risk. Supporting functional risks are referenced		· Identifies the most significant principal and emerging risks with potential to impact the Group · Principal and emerging risks are disclosed in the Annual Report		· Oversight across each principal risk provided by a nominated Board Committee
When	· Completed annually, reviewed quarterly with updates provided to the Audit Committee	· Completed annually in advance of the business unit strategic planning process		· Completed annually in advance of the business unit strategic planning process		· Periodic reporting and risk deep dives occur with input from the risk owner
How	· Risks identified through a series of 1:1 interviews with management · Workshops build out and stress test input from interviews · Formal sign-off by functional Head with Group CFO	· Risks identified and assessed through a series of 1:1 meetings with business unit leadership · For corporate functions, the functional risk assessments are reviewed and challenged		· 1:1 meetings are held with all Executive Committee (EC) members, Group functional and assurance heads, external advisors and Non-Executive Directors (NEDs) · Synthesised output formally reviewed and signed off by the EC and thereafter by the Board
Who	· Initial exercise facilitated by Internal Audit · Risk assessment owned by functional leadership team · Functional risk owners assigned to each specific risk, controls and action plans · Quarterly reporting to the Audit Committee on actions taken to address the top functional risks	· Business unit/corporate management teams led		· Internal Audit led · Executive owners assigned with principal and emerging risks circulated to the Board for final review and sign-off		· Executive member

Our approach to principal and emerging risk assessment

The Group principal and emerging risk assessment is an integral part of the integrated risk management framework above, identifying the principal and emerging risks with the greatest potential to impact the Group. The assessment is completed annually in advance of the business unit and corporate strategic planning process as follows:

Identification of risks	Control strategy	Assessment of net risk and prioritization	Management action
What could impact RB and the achievement of its objectives?	What are we doing to manage the risk?	How comfortable are we with the level of risk?	What more do we need to do?
· What could impact RB and the achievement of its objectives? · Identifies the most significant principal and emerging risks with potential to impact the Group · 1:1 meetings are held with all Executive Committee members, Group functional and assurance heads, external advisors and Non-Executive Directors · Functional, business unit and corporate risk assessments feed into this process · Identifies sources of risk, key drivers and areas of impact · Completed annually in advance of the business unit strategic planning process	· What are we doing to manage the risk? · Control strategy is appropriate and reviewed to establish if it is operating as intended · Where we identify control gaps, what more do we need to do?	· Considering the controls we have in place to manage each risk: o  What is the probability that the risk will materialise? o  If it did, what would the likely impact be? o  How comfortable are we with how the risk is being managed? · Assessment identifies those risks and controls where management should focus its effort · The decision to act will be based on which risks are no longer acceptable	· Having identified areas of highest risk that require attention, action plans are developed by management to: o  address any control gaps identified o  improve the effectiveness of existing controls, thereby reducing the probability and impact to an acceptable level · Executive owners assigned, with principal and emerging risks circulated to the Board for final review, sign-off and ongoing monitoring · Principal and emerging risks are disclosed in the Annual Report

 

Our principal and emerging risks, as at 31 December 2019

Key to principal risks

Category	ID	Risk title	Risk statement
Strategic	1	Innovation	The current innovation pipeline does not meet the changing needs of our consumers and new go-to-market channels and is not sufficient to achieve organic growth ambitions and drive gross margin accretion.
	2	Disruption	Inability to respond, adapt and evolve both our products and processes to disruptive market forces including e-commerce, digital and new formats, impacting our ability to effectively service our customers and consumers with the required agility.
Operational	3	Product safety	Risk of robust process, systems and culture for the development and assessment of product safety not being in place or operating effectively, leading to safety risk to consumers.
	4	Supply disruption	Disruption to the continuity of supply as a result of inability to procure critical ingredients and reliance on single factories that supply key markets without actively qualified alternative manufacturing sites in place.
	5	Cyber-security	As a global complex organisation, there is a risk that RB falls victim to increasingly sophisticated cyber-attacks aimed at causing disruption to our information assets by circumventing confidentiality, integrity or availability controls.
	6	Fatality/major employee safety incident	Work accidents leading to death, injury or illness on RB premises or premises under RB supervision, in case of outsourced operations.
	7	People	Failure to achieve strategic objectives as a result of significant management churn and inability to attract and retain top talent.
	8	Sustainability	We do not increase the sustainability of our environmental and social footprint across the immediate and longer term impacting market share and increasing the risk of longer-term climate change related impacts such as extreme weather events and water shortages.
	9	Adherence to product Quality Standards	Non-compliance with applicable quality regulations, guidelines, internal/external standards across the product lifecycle governing how we produce and supply product.
Compliance	10	Tax disputes	Risk of significant unprovisioned cash outflows as a result of tax authority challenge to filed tax positions in territories.
	11	Product Regulations	Risk of non-compliance with product classification regulations, guidelines, internal standards and/or registrations across the supply chain and throughout the product life cycle.
	12	Legal & Compliance	Risk that we are not fully compliant with relevant laws and regulations, including anti-corruption laws, data privacy laws and global competition laws.
	13	South Korea Humidifier Sanitizer (HS)	Financial and reputational risk as a result of the health issues caused by consumers inhaling Oxy Sac Sac (a humidifier sanitizer sold by Oxy, which RB acquired in 2001).
Other	BS	Black Swan event	Multiple brands impacted by unforeseen reputational incident(s).

 

1  Innovation* Risk movement: No change Oversight accountability Executive ownership resides directly with the President of each business unit. Board oversight is provided by the main Board.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
The current innovation pipeline does not meet the changing needs of our consumers and new go-to-market channels and is not sufficient to achieve organic growth ambitions and drive gross margin accretion.	Failure to understand and effectively meet the needs of our consumers, and adapt our products for new channels, may result in loss of market share to small entrepreneurial companies leveraging new channels and digital media. Inability to execute innovation may result in failure to achieve the necessary innovation rate hurdles (in terms of growth contribution and GM accretion), impacting organic top line growth.	The R&D organisation has been split between dedicated innovation teams that focus on delivering innovation for key global brands and operational teams focused on local brands. Front line resources have been deployed in-market to drive proximity to consumers. Resources dedicated to deliver on e-commerce first focused innovations. Our external partnership capability has been strengthened through internal initiatives to drive greater co-creation of innovations. In 2019 we opened our Centre for Scientific Excellence in Hull, a world leading R&D facility for the healthcare portfolio. In China, we have established the Hygiene Home Innovation Hub to fast-track new innovation across key segments.	Continued focus on building technical capability across priority areas through internal and external initiatives. Base business innovation is driven through a three-year pipeline and resource allocation. Investment in cross-functional teams to assess and participate in new growth platforms and whitespace partnership with manufacturers. Consumer data and insights team focused on insight generation and idea validation through new digital tools for faster and more accurate innovation modelling.	It is expected that further enhancement of our innovation pipeline monitoring and reporting will focus on identifying root causes of execution slippage. We will continue to strengthen our innovation and consumer data and insights capability to help better identify and respond to emerging trends, product and other opportunities. Target rating from current Amber to remain Amber at the end of 2020. This is a multi-year deliverable to build and embed the significant actions required

2  Disruption* Risk movement: Decreasing Oversight accountability Executive ownership resides with the President of each business unit. Board oversight is provided by the main Board
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
Inability to respond, adapt and evolve both our products and processes to disruptive market forces, including e-commerce, digital and new formats, impacting our ability to effectively service our customers and consumers with the required agility.	Share loss to insurgent brands that are more consumer-centric and leveraging 21st century technology. Failure to identify and exploit rapidly growing channels (i.e. e-commerce and discounters) means our products are not 'on the shelf', impacting top-line growth.	End-to-end structures and accountabilities implemented to drive disproportionate growth in key opportunity markets and categories. Significant investment in building our e-commerce and digital capability, with resourcing and technology strengthened in 2019. Success models rolled out to new markets.	Broader strategy under development but examples include category management reorganisation to provide the right mix between product life cycle and national brand support in store.	Internal and external initiatives will continue to increase capability and drive incremental growth across priority channels and segments. Target rating from current Amber to remain Amber at the end of 2020. This is a multi-year deliverable to build and embed the significant actions required.

3  Product safety* Risk movement: No change Oversight accountability Executive ownership resides directly with the Group Chief SQRC Officer, who drives activity through each of the business unit executive leadership teams. Board oversight is provided by the CRSEC Committee.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
Risk of robust process, systems and culture for the development and assessment of product safety not being in place or operating effectively, leading to safety risk to consumers.	Consumer safety issues lead to reputational damage with consumers, customers or regulators. Significant financial losses could arise from supply disruption, product recalls, delayed launches, penalties and a loss of consumer trust, as well as possible criminal liability for senior management. Any gaps in the completion of our safety assessments and a lack of anticipation of new safety concerns could exacerbate any potential impact.	Several product safety related programmes completed or remain on plan for completion, piloting of a product lifecycle management system and establishing a global template for roll out is instrumental to improve compliance with internal processes and reduce manual intervention. Roll out of product safety training to all employees, as well as specific training for relevant employees to understand their role in ensuring safety, quality and regulatory compliance for RB products. Investment in consumer relations to improve consumer data insights and awareness of social media to identify emerging trends, themes and safety concerns.	A robust quality management system is underpinned with clear policies and supporting systems, which are subjected to comprehensive and independent regular audit review. A consumer safety and vigilance team monitor and reports on adverse events. Safety and vigilance is part of the SQRC (safety, quality and regulatory compliance) team which reports directly to the CEO and is accountable to the Risk, Sustainability & Compliance Committee (RSCC) and thereafter to the CRSEC Committee.	2020 will see the continued roll out of an upgraded product lifecycle management system to better enable compliance management throughout the life cycle. Target rating from current Amber to remain Amber at end 2020. This is a multi-year deliverable to replace current systems. By the end of 2020 the Product Integrity Review program will have completed, ensuring that all RB products have a refreshed evaluation and compliance review. Fully embed safety processes at all key stages of the product lifecycle to retain the product safety integrity of the remediation work.

4  Supply disruption* Risk movement: No change Oversight accountability Executive ownership resides directly with the Group Chief Supply Officer, with each business unit responsible for their respective deliverables. Board oversight is provided by the main Board.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
Disruption to the continuity of supply as a result of inability to procure critical ingredients and reliance on single factories that supply key markets without actively qualified alternative manufacturing sites in place.	Such disruption could result in supply shortages and importation barrier issues, leading to loss of sales and market share. Also, potential 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, including forecasting accuracy and capabilities.	Increased investment in manufacturing facilities to enhance reliability and continuity of supply. Factories have been assessed and those considered key or strategic have received investment to attain Highly Protected Risk (HPR) status by our insurers. In 2019 HPR certification achieved for all but one key ex-Mead Johnson Nutrition (MJN) manufacturing locations. Business Continuity Plans (BCPs) reviewed and strengthened to ensure that business continuity arrangements remain appropriate.	Continuous review of new and alternative suppliers of key ingredients. Procurement, manufacturing and supply services have defined manufacturing and quality control processes to ensure products are safe and meet all regulatory and legal requirements. Ongoing review of business interruption insurance policies to ensure adequate cover is in place.	Continued development of ingredient planning across specific brands and markets, alongside qualification of secondary manufacturing sites, will allow us to provide more robust BCP throughout the portfolio. Target rating from current Red to Amber by the end of 2020.

*See Viability Statement on page 77

5  Cyber-security Risk movement: Decreasing Oversight accountability Executive ownership resides directly with the Group Chief Information Technology Officer. Board oversight is provided by the main Board.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
As a global complex organisation, there is a risk that RB falls victim to increasingly sophisticated cyber-attacks aimed at causing disruption to our information assets by circumventing confidentiality, integrity or availability controls.	Significant business disruption, data theft, regulatory non-compliance, reputational damage and financial loss through theft, regulatory/legislative fines or inability to operate the business normally. This risk is heightened by increasing volume and types of sensitive personal data held, a strengthened regulatory environment including significant financial penalties for non-compliance and a growing number and complexity of connected systems. This includes third parties, cloud and digital service providers.	Assessment of enterprise cyber-security risks complete to identify, document and prioritise downstream risks. Implementation of first phase of cyber defence monitoring partnership (including end-to-end execution to detect and respond in a highly proactive and controlled way to identified cyber events). Deployment of external digital threat and risk monitoring and alerting capability.	Cyber-security risk working group will continue to govern, track and report on risk management activities and oversee control effectiveness testing. The Cyber Transform Programme (CTP) which was established to bring risk down by implementing relevant controls to achieve a better cyber risk posture is largely complete with a few activities due to close by end of Q1 2020. Continued investment, enhancement and optimisation of security controls and operating model to provide ongoing security controls, global awareness and continuous improvement. This includes the implementation of a cyber Governance Risk and Control (GRC) system and complete refresh of Cyber Security Policies and Standards.	Continuous monitoring of vulnerabilities and implementation of an advanced management service to continuously track and drive remediation of discovered system vulnerabilities will help to further strengthen our defences and reduce the risk associated with introduction of vulnerabilities into RB environments. Target rating from current Amber to remain Amber at end 2020. While a number of actions are completed, further significant actions are foreseen to remain current as the threat evolves. Enhancement of Identity and Access Management controls will continue to be a focus for the Cyber team in the first half of 2020. .

6  Fatality/major employee safety incident Risk movement: No change Oversight accountability Executive ownership resides directly with the President of each business unit. Board oversight is provided by the CRSEC Committee. The employee health and safety standards (EH&S) are set and audited against by a second line of defence compliance team within SQRC, accountable to the CRSEC Committee.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
Work accidents leading to death, injury or illness on RB premises or premises under RB supervision, in case of outsourced operations.	Impacts are wide ranging and variable in materiality; they may include loss of life, ongoing damage to brand/employer reputation, reduced operational efficiency from factory closure or significant supply disruption, impaired financial performance from lost sales, fines or remediation cost and possible criminal liability for senior management.	Extensive programme to embed heightened employee health and safety (EH&S) culture across the enlarged Group through rigorous auditing, culture days/surveys and training initiatives. Driver Safety Standard Programme deployed. Engineering standards and Global Engineering Compliance team for structural auditing now in place.	Policy and enhanced EH&S standards in place, audit compliance programme ongoing (including self-assessment, site visits, assurance of improvement actions, KPI tracking and culture surveys) and ongoing EH&S training including commercial offices. Oversight from Supply and R&D leadership teams as well as the Group RSCC and CRSEC Committees.	It is expected that the refreshing of Group minimum standards into Highly Protected Manual format, Group 18001 Certification across all RB sites, will be completed in 2020. We will continue to roll out the program of culture surveys and safety days to increase awareness. Target rating from current Amber to remain Amber at the end of 2020.

7 People* Risk movement: Increasing Oversight accountability Executive ownership resides directly with the Group Chief HR Officer, with each business unit responsible for their respective deliverables. Board oversight is provided by the main Board.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
Failure to achieve strategic objectives as a result of significant management churn and inability to attract and retain top talent.	Disruption to business performance as a result of churn across senior management positions and the risk of fatigue arising from a period of sustained business change.	Talent identification, mapping and calibration workstreams for critical senior management positions completed and reviewed periodically. This has helped to optimise both talent management and succession planning processes.	Succession plans for key management positions are in place. Retention risk analysis is undertaken regularly, including review of turnover rates. Continuous review of competitiveness of the total compensation programmes and Employee Value Proposition (EVP) set by management with focus groups undertaken at each business unit level. RB's DARE programme (to Develop, Attract, Retain and Engage talented women) continues, with the aim of increasing the retention rate of females from manager to senior management positions.	The current reward structure is kept under review to ensure it remains fit for purpose and appropriate targets are set for both external and internal stakeholders. Strategic workforce planning is in progress to understand the shape of the workforce and how it will change over the next three years to facilitate proactive intervention. Target rating from current Red to Amber by the end of 2020.

8 Sustainability* Risk movement: New risk Oversight accountability Executive ownership resides directly with the CEO and the SVP Corporate Affairs & Sustainability. Each business unit is responsible for their respective deliverables. Board oversight is provided by the CRSEC Committee.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
We do not increase the sustainability of our environmental and social footprint across the immediate and longer term impacting market share and increasing the risk of longer-term climate change related impacts such as extreme weather events and water shortages.	Failure to respond to increasing scrutiny on our sustainability practices from consumers, customers, NGOs and ratings/investment agencies may lead to resource inefficiency; loss of market share as consumers shift towards 'greener' products; omission from established sustainability indices impacting future investment and potential regulatory penalties. Continued deterioration of the global climate has the potential to significantly disrupt RB's operations through an increased number of extreme weather events, water crises and ecosystem loss.	We have focused on continuing to deliver and strengthen our processes, programmes and controls alongside our external stakeholder relationships, through partnerships with NGOs, academia, and critical opinion formers. Our sustainability and governance capability has been enhanced through the establishment of the Risk, Sustainability & Compliance Committee.	2020 will see the launch of our new Sustainability strategy and plan which will include revised sustainability targets. We continue to embed sustainability into the product development process, ensuring that the environmental and social footprint of our products can be reduced across the full product lifecycle.	Internal and external initiatives, along with greater transparency on non-financial sustainability indicators, will help to drive increased awareness of our sustainability agenda across our global network. Target rating from current Amber to remain Amber at the end of 2020. This is a multi-year deliverable to build and embed the significant actions required.

*See Viability Statement on page 77

9 Adherence to product Quality Standards* Risk movement: New risk Oversight accountability Executive ownership resides directly with the Group Chief SQRC Officer, who drives activity through each of the business unit executive leadership teams. Board oversight is provided by the CRSEC Committee.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
Non-compliance with applicable quality regulations, guidelines, internal/external standards across the product lifecycle governing how we produce and supply product.	Impacts are wide ranging and may include a consumer safety incident, regulatory failures, loss of sales (including product recall) and adverse reputational impact, a supply disruption or factory closure, or potential civil criminal actions against individuals. The risk is heightened by the increasing scrutiny, complexity, frequency and stringent audit requirements enforced on our factories by regulators.	We have made significant investment in ensuring the upmost quality of our products and compliance with all applicable regulations and standards. These measures include quality audit programs covering manufacturing sites and supplier facilities, compliance programs to ensure compliance with chemical control legislation, safety monitoring procedures for products during production and in-market, and transformation of our consumer relations function. Quality KPIs and metrics routinely presented and discussed at BU and by the Compliance Management Committee (CMC) & CRSEC Committee.	RB quality standards have been defined and communicated. Audit schedule (against defined expected standards) has been established and delivered against. Implementation of a systemised product safety and compliance program continues through the Product Lifecycle Management (PLM) project, due for completion in 2022. Our end-to-end quality review of the product portfolio is scheduled to be completed in 2020 alongside enhancements to our artwork labelling and approval systems.	We continue to look for opportunities to optimise our quality control processes and the use of quality data to drive continuous improvement across the product lifecycle. Target rating from current Amber to remain Amber at the end of 2020. This is a multi-year deliverable to build and embed the significant actions required.
10  Tax disputes* Risk movement: No change Oversight accountability Executive ownership resides at corporate directly with the Group CFO. Board oversight is provided by the Audit Committee. Material issues are communicated to the Board directly.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
Risk of significant unprovisioned cash outflows as a result of tax authority challenge to filed tax positions in territories.	If our filing positions around transfer pricing are not considered in any country to be compliant or our operating model is not sufficiently communicated, implemented and embedded, both internally and externally, tax authorities may successfully challenge our tax return filings with a potentially significant financial impact on the Group.	Ongoing timely and robust responses to progress outstanding disputes and continual monitoring of progression in relation to Advanced Pricing Agreements and subsequent operating model tax audits. Detailed and thorough documentation and technical support from advisors.	Ongoing review by RB Tax, country FDs and external advisors with central provisioning for anticipated exposures. Continuous monitoring of information on EC State Aid investigations and possible application to RB. Monitor impact of the BEPS initiative and other law changes to identify possible adverse impacts and put in place remedial strategies.	Timely and robust responses to progress outstanding disputes, continual monitoring of progression in relation to APAs and subsequent operating model tax audits and increased prioritisation of projects and senior management overview. Target rating to remain Green at the end of 2020.

11  Product regulations* Risk movement: No change Oversight accountability Executive ownership resides directly with the Group Chief SQRC Officer, who drives activity through the business unit executive leadership teams. Board oversight is provided by the CRSEC Committee.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
Risk of non-compliance with product classification regulations, guidelines, internal standards and/or registrations across the supply chain and throughout the product life cycle.	Non-compliance with a product classification regulation may result in a consumer safety incident, financial impact (including product recall), damage to company reputation and potential civil/criminal liability. Regulations impacting our products across the portfolio are continually evolving. If we do not anticipate these changes and be ready and to drive innovation and competitive advantage, we may see an increase in costs and a loss of market share to competitors. This risk is enhanced by the extensive range of product regulatory classifications across the portfolio, emerging regulations in key markets and fragmented IT systems lacking end-to-end integration.	A detailed review of the portfolio is ongoing with expected completion in 2020. The programme reviews critical compliance elements of the portfolio and covers all business units. The schedule follows a risk-based approach. Also, an upgraded Product Lifecycle Management (PLM) system is being developed and piloted.	Multiple control programmes in place to manage regulatory compliance risks, including: product integrity review (compliance with registration and/or regulatory requirements) and Company Core Datasheet updates. Strengthened Regulatory Intelligence process and system. Evolved Regulatory KPIs established and reported. The Risk, Sustainability & Compliance Committee structure ensures KPIs are reported from the top to all levels in the organisation. There is an appropriately resourced single system for consumer complaints in place and specialist audit teams providing independent assurance.	Completion of the first phase of the upgraded Product Lifecycle Management (PLM) system will enable compliance management throughout the life cycle. Focus on Artwork improvements and China regulations. Ensure that RB is positioned to credibly engage in regulation development and to assess impact and opportunities of future regulations to drive readiness, innovation and competitive advantage. Target rating from current Amber to remain Amber at the end of 2020. This is a multi-year deliverable to replace current systems.

12  Legal & compliance* Risk movement: No change Oversight accountability Executive ownership resides directly with the Group SVP General Counsel and Company Secretary, with each business unit responsible for their respective deliverables. Oversight by RB's Chief Ethics and Compliance Officer. Board oversight is provided by a combination of the Audit and CRSEC Committees to ensure full and appropriate coverage of the compliance programme.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
Risk that we are not fully compliant with relevant laws and regulations, including anti-corruption laws, data privacy laws and global competition laws. There remains some residual risk associated with the DoJ settlement, specifically further litigation from individual US states and investor class actions.	Damage to RB's reputation, significant potential fines and possible criminal liability for RB senior management. Increased data privacy risk due to new regulations in key markets (e.g. GDPR, CCPA) and as companies hold growing amounts of personal data. The acquisition and integration of MJN has increased our exposure with regard to anti-corruption laws, specifically Health Care Professional (HCP) interactions.	Advancement of RB Compliance Programme, including specific compliance risk assessments conducted in key markets. Development and roll out of online Compliance training mandatory for all employees and contractors incorporating the acquired MJN business. Project developed for monitoring and preventing any potential abuse of market position. Progression of data privacy readiness projects in key markets, including Europe and the US. Appointment of RB's Group Data Privacy Officer, establishment of RB's Privacy Office and the definition of broader privacy objectives to ensure that "privacy by design" is embedded across the Group.	Group compliance programme with dedicated Ethics and Compliance personnel in each Business Unit supported by internal compliance liaisons and external local legal experts as and when required. Launching of RB's new Policy regulating HCP interactions extended to cover the full portfolio of the Health Business Unit. Global Compliance online training modules required to be completed by all employees, with refresher deployment each year; core modules include code of conduct, anti-bribery, antitrust, data privacy and separately product safety. Group-wide Speak Up hotline operational, widely communicated and reinforced through robust independent investigation process and follow-up.	Relaunch of RB Code of Conduct to enhance levels of engagement in the organisation. Continue to embed the Ethics and Compliance function through activities including competition law targeted risk assessments and e-learning modules; delivery of core data privacy requirements. Data privacy transition from project management to business as usual. Target rating from current Amber to remain Amber at the end of 2020. This is an ongoing and dynamic programme for which significant new actions are expected as we respond to new situations and evolving legal requirements.

*See Viability Statement on page 77

13  South Korea Humidifier Sanitizer (HS) Risk movement: No change Oversight accountability Executive ownership resides directly with the Group General Counsel. Board oversight is provided by the main Board.	The Humidifier Sanitizer ("HS") issue in South Korea was a tragic event. The Group continues to make both public and personal apologies to victims.
The risk	Potential impact	Mitigation progress in 2019	Current control strategy	Activity impact for 2020
Financial and reputational risk as a result of the health issues caused by consumers inhaling Oxy Sac Sac (a humidifier sanitizer sold by Oxy, which RB acquired in 2001).	While a provision was made in 2016 to cover the initial government classification rounds and certain other costs, the risk of additional exposure remains. There is still some uncertainty around the number of outstanding claimants from the ongoing final government classification round, as well as from potential other injuries which may be designated by the Korean Ministry of the Environment and recent adverse legislative changes in South Korea.	RB South Korea has continued to work with the government, victims and other businesses to progress settlement with claimants, address legal claims, as well as to restore trust among consumers in South Korea.	Full public apology formally and repeatedly made by RB South Korea to affected parties. Regular review meetings continue with the Group, to oversee and guide settlement progress and other issues as they arise. Modelling continuously updated to quantify and monitor evolving risk and ensure adequacy of provisioning for financial exposure.	Continue to work with the government, victims and other businesses to progress settlement with claimants, address legal claims, as well as to restore trust among consumers in South Korea. Target rating from current Amber to Green by the end of 2020.

Emerging risks

The implementation of an effective risk management framework within an organisation remains a cornerstone of the corporate governance expectations contained within the 2018 revisions to the UK Corporate Governance Code.

A new requirement (for accounting periods starting 1 January 2019 or later) is described in Provision 28 as follows: for management to carry out a robust assessment of emerging risks as well as principal risks and explain in the Annual Report what procedures are in place to identify emerging risks, including how these risks are being managed or mitigated. We have defined an emerging risk as an event that has the potential to significantly impact RB's financial position, competitiveness and reputation, specifically;

· When the nature and value of the impact is not yet fully known or understood, giving the emerging nature of the risk; and/or

· With an increasing impact and probability over a longer time horizon (i.e. 5+ years)

2019 Emerging risks

Category	ID	Risk title	Risk statement
Strategic	1	Digital Capability	We lack strategic direction and investment in capability to succeed in an increasingly digital marketplace.
Operational	2	Change Execution (Health)	We do not execute the required changes to create an effective operating model and deliver the required improved performance across the Health business.
	3	China	Risk of economic uncertainty in China, changing regulations and changes in current or new partners impacting growth and business performance.

COVID-19

We are closely monitoring the outbreak of COVID-19, and how it will affect our operations in key markets. While the full scale of the disruption is still evolving, immediate impacts may include shortages of raw and pack materials, potential closure of supply sites and restrictions on the movement of people. Planning is underway in affected countries to ensure we are prepared for the impact of the outbreak on our people and supply chains, and appropriate contingencies put in place.

As an organisation, we are taking whatever steps we can to minimise any risk that we may contribute to the virus spreading.
These include restrictions on travel, providing up-to-date resources to all employees and guidance on working remotely where required.

1. Digital Capability

The risk: We lack strategic direction and investment in capability to succeed in an increasingly digital marketplace.

Potential impact

While we have made significant investment to build our e-commerce capability, continued investment in developing and executing our digital strategy is critical in order to enhance our digital solutions, protect market share and drive sustained growth across priority channels.

Mitigation

As we begin the next phase of transformation, understanding how we can both continue to build digital capability and increase the quality and efficiency of core processes through digital solutions, is a priority. We also plan to further develop our digital marketing and CRM capability. Chief among these projects will be the continued development of the Product Lifecycle Management (PLM) system, and enhanced integration of resource planning and reporting systems.

2. Change Execution (Health)

The risk: We do not execute the required changes to create an effective operating model and deliver the required improved performance across the business.

Potential impact

Failure to effectively execute the key change programs required across the Health business may result in cost overruns and inefficient use of resources, loss of key talent and distract us from future growth priorities.

Mitigation

By focusing on stabilising brand performance, simplifying the operating model and increasing productivity, we are working to return Health to outperformance. A number of internal initiatives are underway to drive this, with appropriate oversight and governance from the Health leadership team.

3. China

The risk: Risk of economic uncertainty in China, changing regulations and changes in current or new partners impacting growth and business performance.

Potential impact

China is a critical market increasingly characterised by economic uncertainty. This includes trade conflicts between China and other major trading partners and regional tensions. The behaviours of Chinese consumers are also changing alongside other domestic economic factors that, all combined, have the potential to impact how we manufacture and supply this market.

Mitigation

We maintain a strong network in China so that we can understand both international and domestic economic developments that may impact our footprint. This includes active engagement with industry associations and regulators, external affairs capability and collaborative partnerships with government agencies.

Our China based regulatory intelligence teams provide insight on any changes in regulation that may impact us, and we work closely with local industry to ensure we are working within government set parameters.

Our global operations are subject to appropriate forex hedging that allows us to maintain accurate balance sheet forecasting and minimise any unwanted exposures.

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 forecasts 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 pages 64 to 76). The adverse assumptions also took account of the potential impact of COVID-19 on the Group's production sites, supply chains, distribution channels and customers.

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 substantial share price fall, significant loss of consumer confidence, and the 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.

(ii)  RELATED PARTY TRANSACTIONS (pages 200 and 211)

NOTE 26 RELATED PARTY TRANSACTIONS

Put and call options with non-controlling Shareholders

Within the Health Operating Segment, there are symmetrical put and call options existing over the non-controlling shareholdings in RB & Manon Business Co. Ltd, RB & Manon Business Limited and RB (China Trading) Limited. In 2018, the parties agreed to extend these options to 31 December 2023. In the event that the options are not exercised in accordance with the agreement, they are automatically extended for a further six years.

Within the Hygiene Home Operating Segment, there are symmetrical put and call options existing over the non-controlling shareholdings in RB (Hygiene Home) HK Limited, RB & Manon Hygiene Home (HK) Limited and RB & Manon Hygiene Home (Shanghai) Limited. These options were first agreed in 2019 and are currently due to expire on 31 December 2024. In the event that the options are not exercised in accordance with the agreement, they are automatically extended for a further six years.

At 31 December 2019, the present value of these put option liabilities was £135 million (2018: £148 million).

Other

The Group has related party relationships with its directors and key management personnel (Note 5).

PARENT COMPANY NOTE 9 RELATED PARTY TRANSACTIONS

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

(iii) STATEMENT OF DIRECTORS' RESPONSIBILITIES (page 141)

The Directors are responsible for preparing the Annual Report and the Group and Parent Company Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company Financial Statements for each financial year. Under that law they are required to prepare the Group Financial Statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the Parent Company Financial Statements in accordance with UK accounting standards, including FRS 102, 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'.

Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company Financial Statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable, relevant, reliable and prudent;

· for the Group Financial Statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU and IFRSs as issued by the International Accounting Standards Board (IASB) and due to a requirement of the US SEC, state they have been prepared in accordance with IFRSs as issued by the International Accounting Standards Board (IASB);

· for the Parent Company Financial Statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the parent Company Financial Statements;

· assess the Group and Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

· use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its Financial Statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

· the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

· the Annual Report and Financial Statements includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.

We consider the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group's position and performance, business model and strategy.

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