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UNILEVER
PLC
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/S/ R SOTAMAA
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BY R SOTAMAA
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CHIEF LEGAL OFFICER AND GROUP SECRETARY
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EXHIBIT
NUMBER
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EXHIBIT
DESCRIPTION
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99
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Notice
to London Stock Exchange dated 10
March 2020
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Annual Financial Report
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DESCRIPTION OF RISK
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BRAND PREFERENCE
Our
success depends on the value and relevance of our brands and
products to consumers around the world and on our ability to
innovate and remain competitive.
Consumer
tastes, preferences and behaviours are changing more rapidly than
ever before. We see a growing trend for consumers preferring brands
which both meet their functional needs and have an explicit social
purpose.
Technological
change is disrupting our traditional brand communication models.
Our ability to develop and deploy the right communication,
both
in
terms of messaging content and medium is critical to the continued
strength of our brands.
We are
dependent on creating innovative products that continue to meet the
needs of our consumers and getting these new products to market
with speed.
Risk
change since last year: No change
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PORTFOLIO MANAGEMENT
Unilever's
strategic investment choices will affect the long-term growth and
profits of our business.
Unilever's
growth and profitability are determined by our portfolio of
divisions, geographies and channels and how these evolve over time.
If Unilever does not make optimal strategic investment decisions,
then opportunities for growth and improved margin could be
missed.
Risk
change since last year: No change
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CLIMATE CHANGE
Climate
change and governmental actions to reduce such changes may disrupt
our operations and/or reduce consumer demand for our
products.
Climate
change is occurring around the world which may impact our business
in various ways. It could lead to water shortages which would
reduce demand for those of our products that require a significant
amount of water during consumer use. It could also lead to an
increase in raw material and packaging prices or reduced
availability.
Governments
may take action to reduce climate change such as the introduction
of a carbon tax or zero net deforestation requirements which could
impact our business through higher costs or reduced flexibility of
operations.
Increased
frequency of extreme weather (storms and floods) could cause
increased incidence of disruption to our manufacturing and
distribution network. Climate change could result therefore in
making products less affordable or less available for our consumers
resulting in reduced growth
and
profitability.
Risk
change since last year: No change
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PLASTIC PACKAGING
We use
a significant amount of plastic to package our products. A
reduction in the amount of virgin plastic we use, the use of
recycled plastic and an increase in the recyclability of our
packaging are critical to our future success.
Both
consumer and customer responses to the environmental impact of
plastic waste and emerging regulation by governments to tax or ban
the use of certain plastics requires us to find solutions to reduce
the amount of plastic we use; increase recycling post-consumer use;
and to source recycled plastic for use in our packaging. We are
also dependent on the work of our industry partners to create and
improve recycling infrastructures throughout the
world.
Not
only is there a risk around finding appropriate replacement
materials, due to high demand the cost of recycled plastic or other
alternative packaging materials could significantly increase in the
foreseeable future and this could impact our business performance.
We could also be exposed to higher costs as a result of taxes or
fines if we are unable to comply with plastic regulations which
would again impact our profitability and reputation.
Risk
change since last year: Increase
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CUSTOMER
Successful
customer relationships are vital to our business and continued
growth.
Maintaining
strong relationships with our existing customers and building
relationships with new customers who have built new
technology-enabled business models to serve changing shopper habits
are necessary to ensure our brands are well presented to our
consumers and available for purchase at all times.
The
strength of our customer relationships also affects our ability to
obtain pricing and competitive trade terms. Failure to maintain
strong relationships with customers could negatively impact our
terms of
business
with affected customers and reduce the availability of our products
to consumers.
Risk
change since last year: Increase
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TALENT
A
skilled workforce and agile ways of working are essential for the
continued success of our business.
With
the rapidly changing nature of work and skills, there is a risk
that our workforce is not equipped with the skills required for the
new environment.
Our
ability to attract, develop and retain a diverse range of skilled
people is critical if we are to compete and grow
effectively.
This is
especially true in our key emerging markets where there can be a
high level of competition for a limited talent pool. The loss of
management or other key personnel or the inability to identify,
attract and retain qualified personnel could make it difficult to
manage the business and could adversely affect operations and
financial results.
Risk
change since last year: No change
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SUPPLY CHAIN
Our
business depends on purchasing materials, efficient manufacturing
and the timely distribution of products to our
customers.
Our
supply chain network is exposed to potentially adverse events such
as physical disruptions, environmental and industrial accidents,
trade restrictions or disruptions at a key supplier, which could
impact our ability to deliver orders to our customers.
The
cost of our products can be significantly affected by the cost of
the underlying commodities and materials from which they are made.
Fluctuations in these costs cannot always be passed on to the
consumer through pricing.
Changes
in trade relationships between Europe and the UK as a result of
Brexit could give rise to both a supply and cost
issue.
Risk
change since last year: No change
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SAFE AND HIGH QUALITY PRODUCTS
The
quality and safety of our products are of paramount importance for
our brands and our reputation.
The
risk that raw materials are accidentally or maliciously
contaminated throughout the supply chain or that other product
defects occur due to human error, equipment failure or other
factors cannot be excluded.
Labelling
errors can have potentially serious consequences for both consumer
safety and brand reputation. Therefore on-pack labelling needs to
provide clear and accurate ingredient information in order that
consumers can make informed decisions regarding the products they
buy.
Risk
change since last year: No change
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SYSTEMS AND INFORMATION
Unilever's
operations are increasingly dependent on IT systems and the
management of information.
The
cyber-attack threat of unauthorised access and misuse of sensitive
information or disruption to operations continues to increase. Such
an attack could inhibit our business operations in a number of
ways, including disruption to sales, production and cash flows,
ultimately impacting our results.
In
addition, increasing digital interactions with customers, suppliers
and consumers place ever greater emphasis on the need for secure
and reliable IT systems and infrastructure and careful management
of the information that is in our possession to ensure data
privacy.
Risk
change since last year: No change
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BUSINESS TRANSFORMATION
Successful
execution of business transformation projects is key to delivering
their intended business benefits and avoiding disruption to other
business activities.
Unilever
is continually engaged in major change projects, including
acquisitions, disposals and organisational transformation, to drive
continuous improvement in our business and to strengthen our
portfolio and capabilities. Continued digitalisation of our
business models and processes together with enhancing data
management capabilities is a critical part of our
transformation.
We have
an extensive programme of transformation projects. Failure to
execute such initiatives successfully could result in
under-delivery of the expected benefits and there could be a
significant impact on the value of the business.
Risk
change since last year: Increase
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ECONOMIC AND POLITICAL INSTABILITY
Unilever
operates around the globe and is exposed to economic and political
instability that may reduce consumer demand for our products,
disrupt sales operations and/or impact the profitability of our
operations. Adverse economic conditions may affect one or more
countries within a region, or may extend globally.
Government
actions such as foreign exchange or price controls can impact on
the growth and profitability of our local operations.
Unilever
has more than half its turnover in emerging markets which can offer
greater growth opportunities but also expose Unilever to related
economic and political volatility.
Risk
change since last year: No change
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TREASURY AND TAX
Unilever
is exposed to a variety of external financial risks in relation to
Treasury and Tax.
The
relative values of currencies can fluctuate widely and could have a
significant impact on business results. Further, because Unilever
consolidates its financial statements in euros, it is subject to
exchange risks associated with the translation of the underlying
net assets and earnings of its foreign subsidiaries.
We are
also subject to the imposition of exchange controls by individual
countries which could limit our ability to import materials paid in
foreign currency or to remit dividends to the parent
company.
A
material shortfall in our cash flow could undermine Unilever's
credit rating, impair investor confidence and restrict Unilever's
ability to raise funds. In times of financial crisis, there is a
further risk that we may not be able to raise funds due to market
liquidity.
We are
exposed to counter-party risks with banks, suppliers and customers
which could result in financial losses.
Tax is
a complex and evolving area where laws and their interpretation are
changing regularly, leading to the risk of unexpected tax
exposures. International tax reform remains a key focus of
attention with the OECD's Base Erosion and Profit Shifting project,
and the Digitalising Economy Project, and further potential tax
reform in the EU.
Risk
change since last year: No change
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ETHICAL
Unilever's
brands and reputation are valuable assets and the way in which we
operate, contribute to society and engage with the world around us
is always under scrutiny both internally and
externally.
Acting
in an ethical manner, consistent with the expectations of
customers, consumers and other stakeholders, is essential for the
protection of the reputation of Unilever and its
brands.
A key
element of our ethical approach to business is to reduce inequality
and promote fairness. Our activities touch the lives of millions of
people and it is our responsibility to protect their rights and
help them live well. The safety of our employees and the people and
communities we work with is critical. Failure to meet these high
standards could result in damage to Unilever's corporate reputation
and business results.
Risk
change since last year: No change
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LEGAL AND REGULATORY
Compliance
with laws and regulations is an essential part of Unilever's
business operations.
Unilever
is subject to national and regional laws and regulations in such
diverse areas as product safety, product claims, trademarks,
copyright, patents, competition, employee health and safety, data
privacy, the environment, corporate governance, listing and
disclosure, employment and taxes.
Failure
to comply with laws and regulations could expose Unilever to civil
and/or criminal actions leading to damages, fines and criminal
sanctions against us and/or our employees with possible
consequences for our corporate reputation. Changes to laws and
regulations could have a material impact on the cost of doing
business.
Risk
change since last year: No change
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Related party balances
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€ million
2019
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€ million
2018
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Trading and other balances due from joint ventures
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123
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121
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Trading and other balances due from/(to) associates
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Name
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Function
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Nils
Andersen
Youngme
Moon
Alan
Jope
Graeme
Pitkethly
Laura
Cha
Vittorio
Colao
Marijn
Dekkers
Judith
Hartmann
Andrea
Jung
Susan
Kilsby
Strive
Masiyiwa
John
Rishton
Feike
Sijbesma
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Chairman
Vice-Chairman
and Senior Independent Director
Chief
Executive Officer
Chief
Financial Officer
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
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