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.

APPENDIX

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:

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:

Our principal and emerging risks, as at 31 December 2020

Key to principal risks

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)
 

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 £148 million (2019: £135 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.

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