TIDMRKT
RNS Number : 8275U
Reckitt Benckiser Group PLC
08 April 2021
8 April 2021
RECKITT BENCKISER GROUP PLC
("Reckitt" or the "Company")
2020 Annual Report and Notice of the 2021 Annual General
Meeting
Reckitt confirms that the following documents are today
published and are available on its website, www.reckitt.com:
-- Annual Report and Financial Statements for the year ended 31
December 2020 ("2020 Annual Report")
-- Notice of the Annual General Meeting 2021 to be held on 28 May 2021 ("2021 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:
-- 2020 Annual Report
-- 2021 AGM Notice
-- Form of Proxy for the 2021 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.reckitt.com, and will be
posted to shareholders who have elected to receive paper
communications on 8 April 2021.
The Company's 2021 Annual General Meeting will be held at 3.00pm
on Friday 28 May 2021 at 103-105 Bath Road Slough, Berkshire, SL1
3UH. Due to the ongoing COVID-19 pandemic, at present, the UK
Government's current guidance includes restrictions on public
gatherings. We are therefore proposing to hold the AGM with the
minimum attendance required to form a quorum. Shareholders will not
be permitted to attend the AGM in person but can be represented by
the Chair of the meeting acting as their proxy. Shareholders and
their proxies are asked, and strongly encouraged, to utilise the
option to vote by proxy in advance of the AGM. Details of how to
vote by proxy are set out in the 2021 AGM Notice.
It is our current intention to webcast the AGM so that
shareholders will be able to follow the meeting remotely. This can
be done by accessing the meeting website via
https://web.lumiagm.com. To ensure the Board is able to maintain
engagement with shareholders, those who are entitled to attend and
speak at the AGM will also be able to submit written questions
during the meeting via the online facility. Details on how to
access the webcast will be available at
www.reckitt.com/investors/annual-general-meetings/. Shareholders
may also 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, Berkshire SL1 3UH or by e-mail to
companysecretary@reckitt.com to be received no later than 21 May
2021, 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 Reckitt's preliminary announcement of annual results
released on 24 February 2021. That information, together with the
information set out in the Appendix below, which is extracted from
the 2020 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 2020 Annual Report. Page numbers in
the extracted information below refer to page numbers in the 2020
Annual Report.
For further Information:
Rupert Bondy
Company Secretary
Tel +44 (0) 1753 217 800
Simon Whittington
Deputy Head of Investor Relations
Tel +44 (0) 7408 812 062
Reckitt Benckiser Group plc's LEI code is
5493003JFSMOJG48V108
About Reckitt:
Reckitt* exists to protect, heal and nurture in the relentless
pursuit of a cleaner, healthier world. We believe that access to
the highest-quality hygiene, wellness and nourishment is a right,
not a privilege.
Reckitt is the company behind some of the world's most
recognisable and trusted consumer brands in hygiene, health and
nutrition, including Air Wick, Calgon, Cillit Bang, Clearasil,
Dettol, Durex, Enfamil, Finish, Gaviscon, Harpic, Lysol, Mortein,
Mucinex, Nurofen, Nutramigen, Strepsils, Vanish, Veet, Woolite and
more.
Every day, more than 20 million Reckitt products are bought
globally. We always put consumers and people first, seek out new
opportunities, strive for excellence in all that we do and build
shared success with all our partners. We aim to do the right thing,
always.
We are a diverse global team of more than 43,000 colleagues. We
draw on our collective energy to meet our ambitions of purpose-led
brands, a healthier planet and a fairer society. Find out more, or
get in touch with us at www.reckitt.com
*Reckitt 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 Reckitt (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, Reckitt 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 2020 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.
APPIX
The primary purpose of this announcement is to inform the market
about the publication of Reckitt's 2020 Annual Report and 2021 AGM
Notice.
The information below, which is extracted from the 2020 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 24 February 2021.
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
2020 Annual Report.
Page and note references in the text below relate to pages and
notes in the 2020 Annual Report.
(i) Our approach to integrated risk management at Reckitt (pages 80 to 92)
Risk management occurs at different levels in Reckitt with
identification and assessment performed at the functional, Global
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 Global Business Group principal Board oversight Annual Report
assessments Unit/corporate and emerging
risk assessments risk assessment
------- ---------------------- ------------------ ----------------- ----------------------- ---------------------
Consolidation and critical Reviewed by Global Principal and emerging
challenge by Risk Management Business Unit /corporate risks identified through
function leadership the Group Risk Assessment
teams are disclosed in Reckitt's
Annual Report
WHAT Identifies and Identifies and monitors Identifies Oversight
monitors risks risks with the potential the most across each
impacting the to impact each Global significant principal
operation of each Business Unit and the principal risk provided
function or corporate centre and emerging by a nominated
functional High-level control risks with Board Committee
area strategies and action potential
Controls are plans are documented to impact
mapped to the for each risk. Supporting the Group
three lines of functional risks are Principal
defence referenced and emerging
Detailed management risks are
action plans are disclosed
developed to in the Annual
address Report
control gaps
WHEN Completed Completed annually Completed Periodic
annually, in advance of the Global annually in reporting
reviewed Business Unit strategic advance of and risk
quarterly planning process the Global deep dives
with updates Business Unit occur with
provided to the strategic input from
Audit Committee planning process the risk
owner
HOW Functional risks Global Business Unit One-to-one
are reviewed risk assessments are meetings are
in detail reviewed and updated held with
annually annually through a all Group
to identify any series of one-to-one Executive
changes to the meetings with Global Committee
risk profile Business Unit leadership (GEC) members,
including new For corporate functions, Group functional
risks and changes the functional risk and assurance
in assessment assessments are reviewed heads, external
Formal sign-off and challenged advisors and
by functional Non-Executive
heads with Group Directors
CFO (NEDs)
Updates on top Synthesised
risks and output formally
associated reviewed and
mitigations are signed off
reported to the by the GEC
Risk, and thereafter
Sustainability by
& Compliance the Board
Committee (RSCC)
and Audit
Committee
on a quarterly
basis
------- ---------------------- ------------------------------------- ----------------------- ---------------------
WHO Risk assessment Global Business Unit/corporate Group Risk GEC owner
owned by functional management teams led Management
leadership team GEC owners
Functional risk assigned with
owners assigned principal and
to each specific emerging risks
risk, controls circulated
and action plans to the Board
for final review
and sign-off
---- ------------------------- ----------------------------------- ---------------------- ----------
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 Global Business Unit and corporate strategic planning
process as follows:
Identification of Control strategy Assessment of net Management action
risks risk
and prioritisation
---------------------------- ---------------------------- ---------------------------- ----------------------------
What could impact What are we doing How comfortable What more do we
Reckitt and the to are we need to do?
achievement of its manage the risk? with the level of
objectives? risk?
---------------------------- ---------------------------- ---------------------------- ----------------------------
Identifies the Control strategy Considering the Having identified
most significant is reviewed to controls we have areas of highest
principal and emerging establish in place to manage risk that require
risks with potential if it is appropriate each risk: attention, action
to impact and operating as What is the probability plans are developed
the Group intended that the risk will by management to:
One-to-one meetings Where we identify materialise? address any control
are held with all control gaps, what If it did, what gaps identified
GEC members, Group more do we need would the likely improve the
functional and to do? impact be? effectiveness
assurance How comfortable of existing controls,
heads, external are we with how thereby reducing
advisors and NEDs the risk is being the probability
Functional, Global managed? and impact to an
Business Unit and Is the risk within acceptable level
corporate risk an acceptable level GEC owners assigned,
assessments of appetite? with principal and
feed into this process Assessment identifies emerging risks
Identifies sources those risks and circulated
of risk, key drivers controls where to the Board for
and areas of impact management final review, sign-off
Completed annually should focus and ongoing monitoring
in advance of the its effort Principal and emerging
Global Business The decision to risks are disclosed
Unit strategic planning act will be based in the Annual Report
process on which risks are
no longer acceptable
---------------------------- ---------------------------- ---------------------------- ----------------------------
Our principal and emerging risks, as at 31 December 2020
Key to principal risks
Category ID Risk title Risk statement
------------ ----- ---------------------- ------------------------------------------------------
Operational 1 COVID-19(1) COVID-19 causes significant disruption
to core business processes in key markets,
impacting our ability to meet customer
and consumer demand and protect our employees.
------------ ----- ---------------------- ------------------------------------------------------
2 Product Safety Robust process, systems and culture for
the development and assessment of product
safety are not in place or operating effectively,
leading to safety risk to consumers.
------------ ----- ---------------------- ------------------------------------------------------
3 Supply Disruption(1) Disruption to the continuity of supply
as a result of inability to procure critical
ingredients and/or reliance on single factories
that supply key markets without actively
qualified contingencies in place.
----- ---------------------- ------------------------------------------------------
4 Cyber Security As a complex global organisation, there
is a risk that Reckitt falls victim to
increasingly sophisticated cyber-attacks
aimed at causing disruption to our information
assets by destruction, circumventing confidentiality,
integrity or availability controls.
----- ---------------------- ------------------------------------------------------
5 Employee Health Work accidents leading to death, injury
& Safety or illness of Reckitt employees wherever
they are working and other workers on Reckitt
premises or premises under Reckitt supervision,
in case of outsourced operations.
----- ---------------------- ------------------------------------------------------
6 Sustainability(1) Failure to address existing and emerging
environmental and social risks and opportunities,
and changing societal expectations of businesses
in addressing these, creates underlying
risk to business resilience and growth,
risking stranded assets or missed growth
opportunities.
----- ---------------------- ------------------------------------------------------
7 Adherence Non-compliance with applicable quality
to Product regulations, guidelines and internal/external
Quality Standards(1) standards across the product lifecycle
governing how we produce and supply product.
------------ ----- ---------------------- ------------------------------------------------------
Strategic 8 Innovation(1) 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.
------------ ----- ---------------------- ------------------------------------------------------
9 Disruption(1) 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.
------------ ----- ---------------------- ------------------------------------------------------
10 China(1) Risk of economic uncertainty in China,
changing regulations and changes in current
or new partners impacting growth and business
performance.
------------ ----- ---------------------- ------------------------------------------------------
People 11 People(1) Failure to achieve strategic objectives
as a result of significant management churn
and inability to attract and retain top
talent.
------------ ----- ---------------------- ------------------------------------------------------
Financial 12 Tax Disputes Significant unprovisioned cash outflows
as a result of tax authority challenge
to filed tax positions in territories.
------------ ----- ---------------------- ------------------------------------------------------
Compliance 13 Product Regulations Non-compliance with product classification
regulations, guidelines, internal standards
and/or registrations across the supply
chain and throughout the product lifecycle.
------------ ----- ---------------------- ------------------------------------------------------
14 Legal & Compliance We are not fully compliant with relevant
laws and regulations, including anti-corruption
laws, data privacy laws and global competition
laws.
------------ ----- ---------------------- ------------------------------------------------------
15 South Korea Financial and reputational risk as a result
of the health issues caused by consumers
inhaling a humidifier sanitiser previously
sold by Oxy, which Reckitt acquired in
2001.
------------ ----- ---------------------- ------------------------------------------------------
Other BS Black Swan Multiple brands and territories impacted
Event by an unforeseen probably reputational
incident.
------------ ----- ---------------------- ------------------------------------------------------
1. COVID-19
Risk movement:
New risk
Oversight accountability
Executive ownership resides directly with the Group Executive
Committee, with each Global Business Unit responsible for their
respective deliverables. Board oversight is provided by the main
Board.
The risk: COVID-19 causes significant disruption to core
business processes in key markets, impacting our ability to meet
customer and consumer demand and protect our employees.
Potential impact
The impacts of this risk are broad reflecting the wide-ranging
disruption caused by the pandemic. Chief among these has been the
impact on our workforce, both protecting those working at Reckitt
sites and supporting the remainder through a prolonged period of
remote working; and the supply chain disruption that has impacted
our ability to produce and ship our products.
Mitigation progress in 2020
In response to the pandemic, a Group-wide cross-functional
COVID-19 Decision Making Forum was established to oversee the
Group's response to the evolving crisis. The Forum was supported by
Global Business Unit crisis teams tracking local developments,
including infection rates.
Essential business functions, roles and critical processes were
identified and subject to contingency planning.
Site-specific protocols and remote working safeguards were
introduced where required. A programme of global and local
wellbeing initiatives was established to support employee health
and wellbeing.
Across the Supply organisation, continuity responses were
activated which included engagement of new suppliers for critical
materials, daily reviews of manufacturing capacity across our
network of factories and manufacturing partners, and partnership
with logistics providers ensuring we could move products across
closed borders.
Current control strategy
As the pandemic continues into 2021, return to work protocols
have been established to ensure both compliance with local
government requirements as well as respect for each individual's
personal situation. Additional safety measures have been introduced
across our sites and are supported with a set of global procedures.
We continue to support our employees through regular updates and
dedicated resources online.
Activity impact for 2021
Our Group-wide and local COVID-19 response procedures are
continually reviewed to ensure they are appropriate and reflect any
further developments. It is anticipated that, while some disruption
will continue into 2021, this will reduce as our new ways of
working become further embedded. Target rating from current Red to
Green by the end of 2021.
2. Product safety
Risk movement:
No change
Oversight accountability
Executive ownership resides with the Chief R&D Officer, who
drives activity through each of the Global Business Unit executive
leadership teams. Board oversight is provided by the CRSEC
Committee.
The risk: Robust process, systems and culture for the
development and assessment of product safety are not in place or
operating effectively, leading to safety risk to consumers.
Potential impact
Product 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.
Mitigation progress in 2020
Several product safety related programmes have been completed or
remain on plan for completion. PLM (Product Lifecycle Management)
implementation is ongoing and includes the digital integration of
cross-functional systems (Safety, Regulatory, Pharmacovigilance,
Quality, Supply and Procurement) to provide greater control,
compliance and reduce manual intervention across the product
lifecycle.
A Chief Safety Officer has been appointed with additional
medical safety personnel now in role. Product safety training has
been rolled out to all employees, as well as specific training for
relevant employees to understand their role in ensuring SQRC
(safety, quality and regulatory compliance) for Reckitt
products.
We have made investment into consumer relations to improve
consumer data insights and awareness of social media to identify
emerging trends, themes and safety concerns.
Current control strategy
As part of the evolution of our product safety and regulatory
processes, the SQRC function has now been integrated into the
Supply and R&D functions. This restructure will help to further
embed product safety into each of the Global Business Units by
driving proximity to markets whilst also providing centralised
oversight and assurance services.
A robust quality management system is underpinned with clear
policies and supporting systems, which are subjected to
comprehensive and independent regular audit review. Consumer safety
and vigilance teams within the Global Safety Assurance function
conduct pre-market safety reviews and monitor and report on adverse
events.
Our Global Safety Assurance function reports through R&D and
is accountable to the Risk, Sustainability & Compliance
Committee (RSCC) and thereafter to the Corporate Responsibility,
Sustainability, Ethics & Compliance (CRSEC) Committee.
Activity impact for 2021
2021 will see the continued roll-out of the upgraded PLM system
to better enable compliance management throughout the lifecycle.
The Product Integrity Review (PIR), ensuring all Reckitt products
have a refreshed compliance review, and change management
programmes will be completed in the first half of 2021. Innovation
and business processes continue to be adapted to ensure safety
diligence requirements are fully implemented. Target rating to
remain Amber at the end of 2021. This is a multi-year deliverable
to replace current systems.
3. Supply Disruption
Risk movement:
No change
Oversight accountability
Executive ownership resides directly with the Chief Supply
Officer. Board oversight is provided by the main Board.
The risk: Disruption to the continuity of supply as a result of
inability to procure critical ingredients and/or reliance on single
factories that supply key markets without actively qualified
contingencies in place.
Potential impact
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.
COVID-19 has further heightened this risk, through global
shortages of critical materials required for COVID-19 essential
products, the impact of the virus on labour availability, capacity
constraints and disruption to logistics as a result of closed
borders and other factors.
Mitigation progress in 2020
In response to the COVID-19 pandemic, emergency business
continuity projects were activated to ensure continuity in
servicing our customers. These included increasing safety stock
levels, shifting volumes across the network and to external
manufacturing partners, and activating alternative suppliers of key
materials.
An end-to-end planning reset is under way to drive proactivity
and better balance supply and demand. This will help to strengthen
the resilience of our supply chain through investments in upstream
supply resilience; alternative sites of manufacture; adequate
manufacturing capacity; robust products; manufacturing processes
and holistic packaging design.
Current control strategy
Procurement, manufacturing and supply services have defined
manufacturing and quality control processes to ensure products are
safe and meet all regulatory and legal requirements.
Continued investment to reduce monosourcing risk across raw and
packaging materials through dedicated programmes focusing on
priority materials in Hygiene, Health and Nutrition.
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. Review
of business interruption insurance policies to ensure adequate
cover is in place.
Activity impact for 2021
A Group-wide business continuity programme has recently
commenced to strengthen existing business continuity arrangements
for products, sites and functions, including ongoing delivery of
ingredient planning across specific brands and markets alongside
qualification of secondary manufacturing sites. This will allow us
to increase the resilience of our supply chain and provide more
robust business continuity processes throughout the portfolio.
Target rating to remain Amber at the end of 2021.
4. Cyber
Risk movement:
Increasing
Oversight accountability
Executive ownership resides directly with the Group Chief
Information & Digitisation Officer. Board oversight is provided
by the main Board.
The risk: As a complex global organisation, there is a risk that
Reckitt falls victim to increasingly sophisticated cyber-attacks
aimed at causing disruption to our information assets by
destruction, circumventing confidentiality, integrity or
availability controls.
Potential impact
Significant business disruption, data destruction or theft,
regulatory non-compliance, reputational damage, financial loss and
constraints in delivering global business strategy.
This risk is heightened by the increasing volume and types of
sensitive personal data held, a strengthened regulatory environment
including significant financial penalties for non-compliance and
the growing number and complexity of connected digital systems.
These include third parties, cloud and digital service
providers.
Mitigation progress in 2020
Phase 1 of the Cyber Transformation Programme was successfully
completed in early 2020 and included removal of legacy platforms;
increased IT security team headcount; new cyber response playbooks
and processes; advanced threat protection; and continued
improvements to system recovery speed and capability. It also
covered areas such as improving baseline identity and access
management for some financial systems as well as multi-factor
authentication to protect Reckitt system identities.
We have launched the next phase of our multi-year cyber security
strategy which will further reduce cyber risk through investment in
our cyber security baseline, agility and innovation to stay as
close as possible
to emerging cyber threats.
Current control strategy
Our strategy places continued focus on reducing cyber risk
whilst improving the maturity of our security posture, upgrading
our capabilities and supporting business agility, innovation and
the strategic growth agenda. We apply industry standards and
methodologies to establish the control framework including ISO and
National Institute of Standards and Technology (NIST)
guidelines.
Through increasing engagement with the business and partners,
advancement of our cyber capabilities and renewed focus on risk
ownership and accountability, the Group Cyber Transformation
Programme will continue to evolve the cyber security strategy and
framework, and implement the correct controls to mitigate cyber
risk.
Activity impact for 2021
Phase 2 of the Cyber Transformation Programme begins in 2021 and
over the next three to four years will continue to invest in and
embed cyber security processes across the Group.
This includes enhancements to operational technology in critical
factories, identity and access management for critical business
applications, digital security, building stronger cyber defence
detection and response capabilities to cover our multi-cloud
strategy as well as uplifting Reckitt colleague cyber awareness and
education. This risk is dynamic and constantly evolving, and as
such target rating to remain Amber at the end of 2021.
5. Employee Health & Safety
Risk movement:
Decreasing
Oversight accountability
Executive ownership resides directly with the President of each
Global Business Unit. Board oversight is provided by the CRSEC
Committee.
The risk: Work accidents leading to death, injury or illness of
Reckitt employees wherever they are working and other workers on
Reckitt premises or premises under Reckitt supervision, in case of
outsourced operations.
Potential impact
Impacts are wide ranging and variable in materiality; they may
include loss of life, debilitating injury, 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.
Mitigation progress in 2020
COVID-19 health and safety policies, standards and return to
work protocols have been published and adopted across our sites,
with key messages cascaded through the GBU and Supply leadership
teams. Local audits were completed where required by regulators to
comply with COVID-19 regulations.
We have launched an extensive programme to embed a heightened
Employee Health & Safety (EH&S) culture across the enlarged
Group through rigorous auditing, culture days, surveys and training
initiatives.
A Driver Safety Standard programme has been deployed.
Engineering standards are in place and a Global Engineering
Compliance team for structural auditing has been established. Group
ISO 45001 or OHSAS 18001 certification is complete across all
Reckitt in-scope sites and our Group EHS Standards continue to be
enhanced to meet scope.
Current control strategy
Policy and enhanced EH&S standards are in place and
reinforced through an audit compliance programme (including
self-assessment, site visits, assurance of improvement actions, KPI
tracking and culture surveys) by a second line of defence
compliance team within Supply, and ongoing EH&S training across
all sites including commercial offices. During COVID-19 related
travel restrictions, technology aided inspections and site coaching
calls. Oversight from the Supply leadership team as well as the
Group Risk, Sustainability & Compliance Committee (RSCC).
Activity impact for 2021
We will continue to roll out the programme of culture surveys
and safety days to increase awareness and continue with the rigour
of auditing and supporting the business through supply, commercial
and R&D site visits Target rating to remain Amber at the end of
2021.
6. Sustainability
Risk movement:
No change
Oversight accountability
Executive ownership resides directly with the CEO and the Head
of Corporate Affairs & Chief Sustainability Officer. Each
Global Business Unit is responsible for their respective
deliverables. Board oversight is provided by the CRSEC
Committee.
The risk: Failure to address existing and emerging environmental
and social risks and opportunities, and changing societal
expectations of businesses in addressing these, creates underlying
risk to business resilience and growth, risking stranded assets or
missed growth opportunities.
Potential impact
Failure to increase the sustainability of our environmental and
social footprint may lead to increased scrutiny from consumers,
customers, NGOs and ESG related investors. The impacts of this are
broad in range and include reputational damage; adverse public
perception; resource inefficiency; loss of market share as
consumers shift towards 'greener' products; omission from
established sustainability indices impacting future investment; and
potential regulatory penalties.
Climate change has the potential to significantly disrupt
Reckitt's operations through an increased number of extreme weather
events, water crises and ecosystem loss.
Mitigation progress in 2020
We continue to focus on strengthening our processes, programmes
and controls alongside our external stakeholder relationships,
through partnerships with NGOs, academia, and critical opinion
formers. Our 2030 Sustainability Strategy has been launched and
appropriately resourced to progressively deliver performance
targets.
A holistic packaging strategy is in development, supporting both
e-commerce and traditional retail channels with levels of packaging
use. The expansion of our Human Rights programme beyond our supply
chain, using the Societal Impact Framework to assess and address
human rights impacts along the full value chain, is on track.
Our sustainability and governance capability has been enhanced
through the establishment of the Risk, Sustainability &
Compliance Committee (RSCC).
Current control strategy
We are progressively embedding plans and resources to deliver an
environmental strategy in the supply chain in support of climate
change and water efficiency, with capex plans, environment project
identification, local and global capabilities and capacity to
support environmental performance improvement.
At a Global Business Unit and brand level, we are driving
sustainability through customer-facing programmes, delivery of
ingredients, packaging and sourcing programmes. We continue to
embed sustainability into the product development process by
evaluating all new innovation against a set of sustainability
criteria.
Activity impact for 2021
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 to remain Amber at the end of
2021. This is a multi-year deliverable to build and embed the
significant actions required.
7. Adherence to Product Quality Standards
Risk movement:
No change
Oversight accountability
Executive ownership resides directly with the Chief Supply
Officer, who drives activity through each of the Global Business
Unit executive leadership teams. Board oversight is provided by the
CRSEC Committee.
The risk: Non-compliance with applicable quality regulations,
guidelines and internal/external standards across the product
lifecycle governing how we produce and supply product.
Potential impact
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.
Mitigation progress in 2020
We have made significant investment in ensuring the upmost
quality of our products and compliance with all applicable
regulations and standards. These measures include assurance
programmes covering predictive quality, culture of quality,
technology enabled fail-safe controls, quality audit programmes
across manufacturing sites and supplier facilities, and
transformation of our consumer relations function.
Quality KPIs and metrics are routinely presented and discussed
at each Global Business Unit, Risk Sustainability & Compliance
Committee (RSCC) and the Corporate Responsibility, Sustainability,
Ethics & Compliance (CRSEC) Committee meeting.
Current control strategy
Reckitt's Quality standards have been defined, communicated and
embedded within our standard operating procedures. A quality audit
programme to assess compliance with Reckitt's Quality standards
across manufacturing sites has been established and is being
delivered against.
In 2020, the audit schedule was reprioritised and adapted to
respond to COVID-19 travel restrictions.
Continued investment in key Quality transformation programmes
including implementation of a systematised product safety and
compliance programme through the Product Lifecycle Management (PLM)
project, and an end-to-end quality review of the product portfolio
through the Product Integrity Review (PIR). COVID-19 impact
assessments have been performed to identify risks to programme
delivery and agreed timescales.
Activity impact for 2021
We continue to look for opportunities to optimise our quality
assurance processes and the use of quality data to drive continuous
improvement across the product lifecycle. Target rating to remain
Amber at the end of 2021.
8. Innovation
Risk movement:
Decreasing
Oversight accountability
Executive ownership resides directly with the President of each
Global Business Unit. Board oversight is provided by the main
Board.
The risk: 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.
Potential impact
Failure to understand and effectively respond to changing
consumer wants, needs and behaviours (including COVID-19) may lead
to 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.
Mitigation progress in 2020
Continued investment in science to better scale, leverage and
accelerate our innovation pipeline. Our Chief Research &
Development (R&D) Officer is now in role and is leading the
elevation of our science capability and platforms, and driving
external partnerships to co-create innovations.
The R&D organisation is structured with dedicated teams
focused on delivering innovation for global brands and operational
teams focused on local brands. Frontline resources have been
deployed in-market to drive proximity to consumers.
Our Centre for Scientific Excellence is now operating in Hull,
as a world-leading R&D facility for the healthcare
portfolio.
Current control strategy
Base business innovation is driven through a three-year pipeline
and resource allocation process. We continue to invest in building
capability in core technical areas and establishing
cross-functional teams that participate in and assess new growth
platforms and white space. Dedicated resourcing has been deployed
to deliver on e-commerce first focused innovations.
Our consumer data and insights capability has been strengthened
with a dedicated team focused on insight generation and idea
validation through new digital tools for faster and more accurate
innovation modelling.
Activity impact for 2021
A Category Development Organisation (CDO) is being established
within the Nutrition GBU and will be focused on delivering
successful innovation to market. Historically this global CDO
organisation was part of the wider Health CDO team.
Innovation models will continue to evolve during 2021 and will
broaden as additional drivers of innovation growth are identified.
It is expected that further enhancement of our innovation pipeline
monitoring and reporting will focus on identifying root causes of
execution slippage. Target rating to remain Amber at the end of
2021. This is a multi-year deliverable to build and embed the
significant actions required.
9. Disruption
Risk movement:
No change
Oversight accountability
Executive ownership resides with the President of each Global
Business Unit. Board oversight is provided by the main Board.
The risk: 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.
Potential impact
2020 has seen dramatic changes to the ecosystem and competitive
landscape in which we operate, many of these changes arising from
COVID-19 and its impact around the globe.
Failure to respond to these disruptions may result in share loss
to insurgent brands that are more consumer-centric and reduce our
ability to identify and exploit rapidly growing channels, impacting
top-line growth.
Mitigation progress in 2020
eRB has now been launched as a dedicated organisation to drive
and support each Global Business Unit with digital business
development, build capability through technology and
infrastructure, and incubate new brands and partnerships.
Four capability centres have been established to share
excellence across Global Business Units in the areas of Marketing
Excellence, Sales Outperformance, Medical and e-commerce. These
centres will develop functional capabilities, drive economies of
scale and scope, and provide tools and technology enabling best
practice sharing.
Chief Customer and Chief Information & Digitisation Officers
have been appointed to strengthen customer relationships and drive
new business models for our increasingly digital consumers.
Global Business Solutions launched in 2020 to support businesses
with the expertise, knowledge and products they need to make their
workplaces and outlets hygienically safe for both consumers and
employees.
Current control strategy
Continued investment in capability and technology, enabling us
to harness the power of all channels, all platforms, all brands, in
all markets. Pursuit of external partnership opportunities to
identify, incubate and launch new brands and ventures, driving
future growth. Entering new growth spaces will also allow us to
reach and acquire more consumers.
Activity impact for 2021
The Digital Factory will be established in 2021, in
collaboration with Marketing Excellence and consumer relations,
focused on harnessing and building e-commerce expertise across GBUs
and markets.
Internal and external initiatives will continue to increase
capability and drive incremental growth across priority channels
and segments. Target rating to remain Amber at the end of 2021.
This is a multi-year deliverable to build and embed the significant
actions required.
10. China
Risk movement:
New risk
Oversight accountability
Executive ownership resides directly with the President
Nutrition, eRB & Greater China business. Board oversight is
provided by the main Board.
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 and regulatory uncertainty. The behaviours of Chinese
consumers are also changing which, alongside other economic
factors, have the potential to impact our operations and
performance in this market.
Mitigation progress in 2020
Reflecting China's importance, we have launched an integrated
cross-GBU organisation in China. eRB & Greater China is an
innovative, agile and digital business that will deliver
innovation, capability and growth to Reckitt globally. This new
organisation will allow us to better leverage our scale across the
Greater China area while maintaining agility, boosting partnerships
to support our growth ambitions and driving China-centric
innovation through bespoke design and innovation hubs.
Current control strategy
We maintain a strong network in China to 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.
China-based regulatory intelligence teams provide insight on any
changes in regulation that may impact us, and we partner closely
with local industry to ensure we are working within government-set
parameters.
Activity impact for 2021
Execution of the Greater China operating model, strategic review
of the infant formula business, alongside continued delivery of
China-centric innovation, consumer centricity and close monitoring
of global and regional economic developments will help to maintain
operating focus in China. Target rating from current Red to
realistically reduce to Amber by the end of 2021, though further
disruptions can be anticipated which could extend this level of
higher exposure.
11. People
Risk movement:
Decreasing
Oversight accountability
Executive ownership resides directly with the Chief Human
Resources Officer, who drives activity through each of the Global
Business Unit executive leadership teams. Board oversight is
provided by the main Board.
The risk: Failure to achieve strategic objectives as a result of
significant management churn and inability to attract and retain
top talent.
Potential impact
Disruption to business performance attributed to churn across
senior management positions and the risk of fatigue arising from a
period of sustained business change.
Mitigation progress in 2020
Following the launch of the Rejuvenating Sustainable Growth
strategy, a new leadership team is now in place and churn across
senior management has stabilised. An SVP HR has been appointed to
each Global Business Unit and the corporate centre.
We launched a Leadership Development and Talent Centre of
Excellence to deliver greater value to the business by identifying,
developing and scaling best practice HR processes that directly
contribute to the attraction, retention and development of our
talent.
Current control strategy
Talent identification, mapping and calibration have been
undertaken for critical senior management positions, helping to
optimise both talent management and succession planning processes.
Succession plans for key management positions are in place and
retention risk analysis is undertaken regularly, including reviews
of turnover rates. The Group's total compensation programmes and
Employee Value Proposition (EVP) are also subject to annual
review.
A number of initiatives are under way to promote Reckitt as an
employer of choice. These include social impact and diversity and
inclusion (D&I) programmes, and employee wellbeing. We offer a
suite of tools to help Reckitt employees get the most out of their
careers at Reckitt, from learning and development, the annual
performance review process and Leadership Development programmes
that focus on how managers can inspire, empower and engage their
teams.
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.
Activity impact for 2021
We will continue to focus on unleashing the potential of our
people, performance and purpose by attracting the best talent,
developing our people and enabling culture change, to shape and
drive the future workplace to deliver sustainable outperformance.
Target rating to remain Amber by the end of 2021.
12. Tax disputes
Risk movement:
No change
Oversight accountability
Executive ownership resides at corporate directly with the Chief
Financial Officer. Board oversight is provided by the Audit
Committee.
The risk: Significant unprovisioned cash outflows as a result of
tax authority challenge to filed tax positions in territories.
Potential impact
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.
Mitigation progress in 2020
Ongoing timely and robust responses to progress outstanding
disputes and continual monitoring of progression in relation to
Advanced Pricing Agreements (APAs) and subsequent operating model
tax audits. Detailed and thorough advice and technical support from
advisors take place.
Provisions made at CHQ for anticipated exposures. The business
will continue to review the provisioning strategy over the next
five years in light of any expected changes.
Current control strategy
Ongoing review by Reckitt 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 Reckitt. We monitor the impact of the Base
Erosion and Profit Sharing (BEPS) initiative and other law changes
to identify possible adverse impacts and put in place remedial
strategies.
Activity impact for 2021
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 are expected to maintain
this risk as Green for 2021. Target rating to remain Green at the
end of 2021.
13. Product Regulations
Risk movement:
Decreasing
Oversight accountability
Executive ownership resides directly with the Chief R&D
Officer, who drives activity through the Global Business Unit
executive leadership teams. Board oversight is provided by the
CRSEC Committee.
The risk: Non-compliance with product classification
regulations, guidelines, internal standards and/or registrations
across the supply chain and throughout the product lifecycle.
Potential impact
Non-compliance with a product related regulation may result in
supply disruption, increased regulatory scrutiny, 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 are
not ready to use them 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.
Mitigation progress in 2020
A detailed review of the portfolio is ongoing with expected
completion in 2021. The programme reviews critical compliance
elements of the portfolio and covers all Global Business Units. The
schedule follows a risk-based approach.
Current control strategy
Multiple control programmes are in place to manage regulatory
compliance risks, including the Product Integrity Review (reviewing
product compliance with registration and/or regulatory
requirements), REACh compliance programme and updates to our
company Core Datasheets.
Regulatory Intelligence processes and systems have been
strengthened and we have evolved how our regulatory KPIs are
established, monitored and reported.
The Risk, Sustainability & Compliance Committee (RSCC)
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.
Activity impact for 2021
The Product Lifecycle Management (PLM) programme will
systematise our product safety and compliance processes, aligning
with the standards set within the Product Integrity Review (PIR)
and Product Safety Evaluation Report (PSER) projects. PLM is due
for completion in 2022. Review of the end-to-end artwork and label
approval process is also under way and is a focus area for
2021.
Our Regulatory teams partner with external regulators to
credibly engage in regulation development and to assess the impact
and opportunities of future regulations to drive readiness,
innovation and competitive advantage. Target rating to remain Amber
at the end of 2021. This is a multi-year deliverable to replace
current systems.
14. Legal & Compliance
Risk movement:
No change
Oversight accountability
Executive ownership resides with the General Counsel &
Company Secretary together with the Chief Ethics & Compliance
Officer, with each Global Business Unit responsible for their
respective deliverables. Board oversight is provided by a
combination of the CRSEC and Audit Committees to ensure full and
appropriate coverage of the Compliance programme.
The risk: We are not fully compliant with relevant laws and
regulations, including anti-corruption laws, data privacy laws and
global competition laws .
Potential impact
Non-compliance with relevant laws and regulations may damage
Reckitt's reputation, lead to significant potential fines and
possible criminal liability for Reckitt companies and/or senior
management.
Stricter data privacy regulations in key markets, together with
adoption of new technology and our growing e-commerce business,
have impacted data handling practices across the Group. The
COVID-19 pandemic has seen an increase in competition law and
anti-trust compliance risk as we respond to a significant increase
in demand for COVID-19 essential products. The Nutrition business,
combined with changes in the way we interact with healthcare
entities (HCEs) and healthcare professionals (HCPs) due to
COVID-19, has also increased exposure to anti-corruption laws.
Mitigation progress in 2020
The global Ethics & Compliance programme has been
strengthened through the implementation of extensive controls
across key compliance risk areas. For data privacy, this includes
the establishment of a dedicated e-commerce privacy function,
completion of Privacy Impact Assessments and adoption of stringent
data protection safeguards across direct-to-consumer channels.
Competition law risk and control assessments were completed in
key markets, with supporting mitigation plans agreed and
implemented. Our third-party bribery, Interaction with HCEs and
HCPs, and Grants, Donations & Charitable Contributions
processes have evolved through the introduction of an enhanced
operating model supported by more robust systems and
procedures.
Current control strategy
SVP Legal now appointed into each Global Business Unit, with
dedicated Ethics & Compliance resources working alongside the
Global Business Units to roll out the Compliance programme across
all key markets. The programme of global compliance risk
assessments will continue in 2021, alongside implementation of new
policies and procedures, allowing us to effectively respond to any
changes in the risk profile.
All employees are required to complete online Global Compliance
training modules, with refresher training deployed each year. Core
modules include Code of Conduct, anti-bribery, antitrust, data
privacy and separately product safety.
The Group-wide Speak Up hotline is operational, widely
communicated and reinforced through a robust, independent
investigation process and follow-up.
Activity impact for 2021
Continued advancement of the Ethics & Compliance programme
through targeted risk assessments, enhanced analytics and expansion
of the training programme will help to drive greater awareness of
relevant laws and regulations. Target rating to remain Amber at the
end of 2021. This is an ongoing and dynamic programme.
15. South Korea Humidifier Sanitiser (HS)
Risk movement:
No change
Oversight accountability
Executive ownership of the risk at a Group level resides
directly with the General Counsel & Company Secretary. Board
oversight is provided by the main Board.
The South Korea Humidifier Sanitiser (HS) issue was a tragic
event. The Group continues to make both public and personal
apologies to victims.
The risk: Financial and reputational risk as a result of the
health issues caused by consumers inhaling a humidifier sanitiser
previously sold by Oxy, which Reckitt acquired in 2001.
Potential impact
While a provision was made in 2016 to cover the initial
government classification rounds and certain other costs, the risk
of additional exposure remains. An amendment made to the HS Special
Law in 2020 may lead to an increased volume of civil claims against
Reckitt Benckiser Korea (RBK). The South Korean Government has now
recognised asthma, toxic hepatitis and children's interstitial lung
disease as HS injuries and there is potential further expansion of
liability as the new amendment to the law reduces the burden of
proof to establish that injury or illness is caused by HS exposure.
Further, under the law amendment, RBK may be required to make
additional contributions to the Industry Relief Fund (IRF).
Mitigation progress in 2020
RBK has continued to work with the government, victims and other
businesses to progress settlement with claimants via its
Compensation Plan, and address legal claims, as well as to restore
trust among consumers in South Korea. RBK also made comments on the
issues with the HS law amendment during the legislative process and
has made clear to the Korean Government that it is dependent on the
Reckitt Group as its shareholder for all funding.
Current control strategy
Full public apology formally and repeatedly made by RBK to
affected parties. Regular review meetings continue with the Group,
to monitor issues as they arise. The Group provides liquidity to
RBK on a tightly managed basis. It has encouraged RBK to seek a
broader resolution involving all responsible parties on a basis
that provides fair compensation to legitimate victims, with each
responsible party contributing its fair share. The Group is
considering a number of options for the future in light of the
amended law.
Activity impact for 2021
The Group will continue to encourage RBK to seek a broader
resolution and will continue to evaluate options to do the right
thing while limiting liability to fund compensation payments which
are not anchored in proper standards of legal and scientific proof.
Target rating likely to remain Amber until the South Korea
Government closes the matter.
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.
We have defined an emerging risk as an event that has the
potential to significantly impact Reckitt'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. five+ years)
Category ID Risk title Risk statement
------------ --- ----------------- -----------------------------------------------------
Strategic 1 Geopolitical Increasing geopolitical volatility with the
potential to destabilise key markets and in
some cases disrupt our operations. This includes
domestic political developments, regional tensions,
the impact of Brexit, fluctuations in oil prices
and changes to local regulations impacting imports
and exports.
------------ --- ----------------- -------------------------------------------------------
2 Sustained/ Risk of sustained/deepening recession or financial
deepening crisis as a result of the slowdown in many global
economic economies caused by the COVID-19 pandemic.
recession
------------ --- ----------------- -------------------------------------------------------
Operational 3 Pandemic-related As a result of the COVID-19 pandemic, applicable
litigation laws and regulations will be enacted, or existing
and regulation ones changed, in a way that may significantly
impact Reckitt's business and at a speed that
makes it difficult to comply, thereby potentially
exposing Reckitt to new litigation e.g. related
to supply and product liability issues.
------------ --- ----------------- -------------------------------------------------------
1. Geopolitical
The risk: Increasing geopolitical volatility with the potential
to destabilise key markets and in some cases disrupt our
operations. This includes domestic political developments, regional
tensions, the impact of Brexit, fluctuations in oil prices and
changes to local regulations impacting imports and exports.
Potential impact
The potential impacts of any geopolitical volatility are wide
ranging and include decreasing sales and revenue, fluctuations in
corporate finance and treasury, and fewer opportunities for
strategic growth. As we operate across a large global network,
geopolitical instability can also impact our supply chain
operations, workforce management practices and the safeguarding of
our data and intellectual property.
Mitigation
We continue to closely monitor the global geopolitical climate
to ensure we understand any developments and how they have the
potential to impact our business. Key measures include monitoring
and analysis of any political or regulatory uncertainty through our
External Affairs network, engagement of advisors in critical
markets and identification of security threats facing the business
through the Corporate Security programme.
2. Sustained/deepening economic recession
The risk: Risk of sustained/deepening recession or financial
crisis as a result of the slowdown in many global economies caused
by the COVID-19 pandemic.
Potential impact
The commercial teams closely monitor the economic trends and
plan commercial strategies to optimise our business appropriately.
Whilst we cannot fully protect our business from recessionary
pressures, we take appropriate measures to maximise and protect our
business during economic downturns.
Mitigation
Key mitigations include portfolio rightsizing and review of
pricing guidelines, adapting our channel strategy with disruptive
value offerings and the acceleration of the e-commerce portfolio,
ensuring we carefully balance price and volume-led growth through
targeted costing programmes, maintaining prudent financial risk
management through clear ROI metrics for large investments and
accurate forecasting and cash flow management.
3. Pandemic-related litigation and regulation
The risk: As a result of the COVID-19 pandemic, applicable laws
and regulations will be enacted, or existing ones changed, in a way
that may significantly impact Reckitt's business and at a speed
that makes it difficult to comply, thereby potentially exposing
Reckitt to new litigation e.g. related to supply and product
liability issues.
Potential impact
The materialisation of the risk could result in damage to
Reckitt's reputation, interference in Reckitt's operations, fines
and financial liability to third parties.
Mitigation
Our Legal function participates in GBU, regional and market
level COVID-19 related meetings. Processes have been implemented to
review and manage ongoing major litigation, including input from
regional legal teams into the Group litigation report. The
implementation of our compliance programme is ongoing, and the
Group's COVID-19 risk assessment process provides visibility and
reporting of COVID-19 related risks across the business.
(ii) Viability Statement (page 93)
The assessment process and key assumptions
The Board's Viability Review is based on the Group's strategy,
its long term financial plan and its principal risks. A financial
forecast covering a five-year period was prepared (the "base
case"). This period was selected as it is the period covered in the
Group's long-term forecasting process, based on the 2021 budget and
projections for the following years, and covers the introduction to
market of the current new product pipeline.
The financial forecast is based on a number of key assumptions
aligned to the Group's growth strategy, planned capital spending
and capital allocation policy. The assessment of viability takes
into account the Group's cash flow, its currently available banking
facilities and interest cover ratios in relevant financial
covenants, and does not assume the raising of additional new debt
or equity finance. If Reckitt performs in line with the base case
forecasts, it would have sufficient funds to trade, settle its
liabilities as they fall due, and remain compliant with financial
covenants.
Assessment of principal risks and viability
To further test the robustness of the base case forecast,
further analyses were prepared to consider the viability of the
business in the event of adverse unexpected circumstances. Such
adverse circumstances were modelled primarily upon the
crystallisation of the Group's principal risks (see pages 84 to 91,
including mitigation and control strategies).
Principal risks have the potential to create adverse
circumstances for the Group and can occur individually or in
combination with each other. The assessment of viability considered
the implications of crystallisation of each principal risk,
assigning each an estimated annual monetary value and estimating
the impact on interest cover ratios and headroom over available
borrowing facilities.
These principal risks were aggregated to create two scenarios
which model plausible downside scenarios of increasing severity
based on: (i) crystallisation of principal risks deemed to have the
most relevant potential impact on viability (see risks marked '1'
on page 82); and (ii) crystallisation of all principal risks and
the impact of adverse movements in foreign exchange and interest
rates. The analysis indicated that even with unexpected events
occurring immediately and in combination, Reckitt 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 of greater adversity than those modelled above,
with sufficient potential impact to risk the future of Reckitt 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. On the basis of a comprehensive set of
mitigating controls in place across the business, considering the
unknown nature of a Black Swan event and that its occurrence is
considered highly unlikely, it has not been included in the
Viability Review.
Viability Statement
The Board believes that the Group is well-positioned to manage
its principal risks successfully. The Board's belief is based on
consideration of the historic resilience of Reckitt and has taken
account of its current position and prospects, the actions taken to
manage the Group's debt profile, risk appetite and the principal
risks facing the business in unexpected and adverse
circumstances.
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.
(iii) Related party transactions (pages 218 and 224)
Notes to the financial statements
Note 27 Related Party Transactions
Put and Call Options with Non-controlling Shareholders
At 31 December 2020, 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.
In addition, within the Hygiene 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
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.
The present value of these put option liabilities was GBP148
million (2019: GBP135 million).
Other
The Group has related party relationships with its Directors and
key management personnel (Note 5).
Notes to the parent company financial statements
Note 8 Related Party Transactions
There were no transactions with related parties other than
wholly owned companies within the Group.
(iv) Statement of Directors' Responsibilities (page 161)
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 Accounting Standards in conformity
with the requirements of the Companies Act 2006 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'. In addition, the Group Financial Statements are required
under the UK Disclosure Guidance and Transparency Rules to be
prepared in accordance with International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
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 and reliable;
-- for the Group Financial Statements, state whether they have
been prepared in accordance with International Accounting Standards
in conformity with the requirements of the Companies Act 2006,
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union,
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.
___________________________________
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
ACSSSFSUAEFSEFL
(END) Dow Jones Newswires
April 08, 2021 05:14 ET (09:14 GMT)
Reckitt Benckiser (LSE:RKT)
Historical Stock Chart
From Mar 2024 to Apr 2024
Reckitt Benckiser (LSE:RKT)
Historical Stock Chart
From Apr 2023 to Apr 2024
