All figures in
£millions
|
2020
|
2019
|
Short-term employee
benefits
|
6
|
5
|
Retirement
benefits
|
1
|
1
|
Share-based payment
costs
|
6
|
4
|
Total
|
13
|
10
|
STRATEGY AND CHANGE
|
|
1. Business transformation and change:
Risk description: The
accelerated pace and scope of our transformation initiatives
increase our
risk to execution timelines and to the business's adoption of
change.
|
2020
activity:
● As
Pearson continues its digital transformation, the efforts to
reshape our business processes, systems and operations are making
substantial progress.
● We
successfully concluded our major restructuring programme delivering
the expected cost efficiencies.
● We
continued to roll out our global Enterprise Resource Planning (ERP)
system successfully across our Asia markets.
COVID-19 impact
and 2021 trend:
● No
impact - all activities kept on plan.
● Trend
- potential for increased risk as new organisational structure and
financial reporting processes are realigned in order to pursue the
new strategy, as outlined in full year 2020 results and strategy
update.
|
2.Products and services:
Risk description: Failure
to successfully invest, develop and deliver innovative,
market-leading global products and services that will have the
biggest impact on learners and drive growth.
|
2020
activity:
● In
our products and services teams, increased provision of digital
content, coaching webinars to facilitate the transition to online
learning as well as regular dialogues with key customers to
identify areas for improvement and opportunities.
● We
also successfully transitioned many students to online and digital
solutions to support remote and online learning
demands.
..
COVID-19 impact
and 2021 trend:
● Medium
impact - despite a challenging landscape, we were able to keep pace
with the changing needs of our customers' education programmes
across our global geographies.
● Trend
- constant with matters under good ownership and
management.
|
3.Talent:
Risk description: Failure
to attract and retain the talent we need and to create the
conditions in which our people can perform to the best of their
ability.
|
2020
activity:
People
development:
We continue to monitor retention, workload, morale and our talent
succession plans. We created an integrated talent and learning
model to help build a more inclusive learning culture for our
employees and to realise our ambition of becoming 'the world's
leading learning company' inside and out. This included launching
our new capabilities framework to support employee upskilling and
reskilling, designing a simplified personal development plan for
employees, and delivering our first-ever Global Learning at Work
Week.
Diversity, Equity & Inclusion (DE&I):
We are committed to being anti-racist and to creating a more
inclusive culture where everyone feels a sense of belonging. We
created a new Global DE&I task force to help us identify 50
concrete actions to improve recruitment, retention and inclusion,
and to ensure our products build a more inclusive society. This
included sharing race and ethnicity data for the US and UK to
benchmark and measure progress.
Employee
engagement:
Feedback from employee pulse surveys continues to be encouraging,
as we support a focus on learning and development and working
flexibly. The arrival of a new Chief Executive will give long-term
direction, while simultaneously raising expectations for
changes.
COVID-19 impact
and 2021 trend:
● Medium
impact - with efforts concentrated on supporting colleagues working
from home.New ways, systems, and tools to work virtually, strong
line manager support, and frequent communications from the Chief
Executive and CHRO, reinforcing the importance of mental and
physical wellbeing.
● Trend
- potential for increased risk as lockdowns continue to impact
physical and mental health of employees. Plans and ownership in
place.
|
4.Political and regulatory risk:
Risk description: Changes
in governments, policy and/or regulations have the potential to
impact business models and/or decisions across all
markets.
|
2019
activity:
● In
the UK, we continued to build Pearson's position as a leader,
expert and innovator in general qualifications,
technical/vocational education and assessment.
● In
the US, we positioned Pearson as an innovator in the education and
workforce space, among both parties, in state capitals, on Capitol
Hill and with the US administration.
● Globally,
we also maintained positive engagement and dialogues with state,
federal and national education bodies.
COVID-19 impact
and 2021 trend:
● Low
impact - we were part of industry representations as the various
government relief plans aimed at helping institutional
establishments and learners navigate the evolving pandemic
restrictions.
● Trend
- constant with matters under good ownership and
management.
|
OPERATIONAL
|
|
5. Testing failure:
Risk description: Failure
to deliver tests and assessments (e.g. for UK Qualifications,
School Assessments and Pearson VUE) and other related contractual
requirements because of operational or technology issues, resulting
in negative publicity impacting our brand and
reputation.
|
2020
activity:
● Our
Pearson Performance Centres (PPCs) remained open (where locally
permitted) and operational, a testament to our test centre
staff.
● We
successfully recertified across a range of regulatory, industry and
customer requirements, ensuring our commercial obligations remained
fit for purpose.
● In
the UK, the summer exam season for A Level and GCSE exams was
cancelled by the Department for Education; as a result we continued
to work with regulators and schools towards assisting with the
teacher assessment and grading process.
COVID-19 impact
and 2021 trend:
● High
impact - significant, with initial restrictions and lockdowns
forcing the cancellation of some tests. We pivoted to ensure
medical staff were able to take qualifications in support of the
pandemic response.
● Trend
- potential for increased risk. This is being managed and mitigated
as far as possible.
|
6.Safety, safeguarding and corporate security:
Risk description: A
variety of risks that can cause harm to our people, assets and
reputation continue to evolve as our company does. While some risk
has reduced due to outsourcing and divestiture, the diverse nature
of our people's activities requires continued focus, resource and
improvement to reduce the potential for harm.
The Pearson H&S policy is approved annually and covers a range
of activities, behaviours and requirements
across the company.
|
2020
activity:
Health & Safety and wellbeing
● Throughout
2020, we continued to ensure our colleagues' safety, security and
welfare remained a priority.
● During
the year, we transitioned to adopt flexible and remote working
practices as the pandemic took hold.
● Our
incident management framework was fully utilised and saw eight
regional teams manage day-to-day activities across a range of
challenging topics.
COVID-19 impact
and 2021 trend:
● Medium
impact - we were able to remain ahead of government announcements
and worked through restrictions, with our own phased approach and
safe practices put in place.
● Trend
- potential for increased risk. This is being managed and mitigated
as far as possible.
|
7.Customer experience:
Risk description: Failure
of either our current (or future) operations, supply chain or
customer support to deliver an acceptable service level at any
point in the end-to-end journey; or to accelerate Pearson's
lifelong consumer, learner strategy.
|
2020
activity:
● In
2020, ensuring our customers were able to receive a seamless
service and support was a key priority.
● Despite
the changeable working environment, Pearson teams were able to
continue supporting learners at home via remote
connectivity.
● Our
PPCs and staff were supported and supplied with protective
equipment throughout the year.
COVID-19 impact
and 2021 trend:
● Medium
impact - we were able to keep customers informed and supported as
the pandemic took hold and delivered new areas of service.Our
legacy strength with providers and third parties ensured continued
global operations.
● Trend
- constant with matters under good ownership and
management.
|
8.Business resilience:
Risk description: Failure
to plan for, recover, test or prevent incidents involving any of
our products, customers and our businesses' locations. Incident
management and technology disaster recovery plans may vary in
ability/ comprehensiveness across the Group.
|
2020
activity:
● Direct
and prolonged incident management support to key office locations
following the activation of working from home.
● Support
to business lines as the move to online/digital gained
momentum.
COVID-19 impact
and 2021 trend:
● Low
impact - legacy efforts and plans were fit for purpose and agility
where challenges presented themselves allowed for a strong response
to the pandemic, with positive lessons learned.
● Trend
- constant with matters under good ownership and
management.
|
9.Data:
Risk description: Inability
to utilise our data to achieve market intelligence and increase
productivity and efficiency, while managing market risk impacts
arising from customer concerns around use of student data, may
significantly affect management of our core operations and
achievement of our strategy objectives.
|
2020
activity:
● The
introduction of the data-handling model allowed
colleagues to enhance our ability to utilise data to
achieve market intelligence and increase productivity and
efficiency.
COVID-19 impact
and 2021 trend:
● No
impact - all activities kept on plan.
● Trend
- constant with matters under good ownership and
management.
|
FINANCIAL
|
|
10.Tax:
Risk description: Legislative
change caused by the OECD Base Erosion and Profit Shifting
initiative,
the UK exit from the EU, or other domestic governments'
initiatives, including in response to the European Commission state
aid decision regarding the UK Controlled Foreign Companies (CFC)
exemption, results in a significant change to the effective tax
rate, cash tax payments, double taxation and/or negative
reputational impact.
|
2020
activity:
● State Aid - further
to the appeal made to the EU General Court, work has continued
on the implications of the decision. Post year end Pearson received
Charging Notices requiring a payment on account of materially all
of the alleged State Aid to be made. A payment of £100m was
made on 8 March 2021. The Group expects to recover the funds in due
course. The Group continues to be of the view that no provision is
required in respect of this issue.
● Reputational
risk - the
fourth annual tax report has been published. The GRI 207 Tax
Standard is effective for reports and other materials published
after 1 January 2021 and we are expanding our tax reporting agenda
to reflect this.
● Legislative
changes - the Group
continued to assess and monitor proposed changes in the
international tax framework, including proposals to address the tax
challenges arising from the digitalisation of the
economy.
COVID-19 impact
and 2021 trend:
● Low
impact - any tax legislative changes which may occur as a result of
the pandemic continue to be monitored.
● Trend
- constant with matters under good ownership and
management.
|
LEGAL AND COMPLIANCE
|
|
11.Information security and data privacy:
Risk description: We
have from time to time experienced, and may continue to experience
in the future, security breaches of our systems despite our best
efforts to prevent them.
We also risk failure to comply with data privacy regulations and
standards. The above could result in damage to the customer
experience, our reputation, and a breach of regulations and
financial loss.
|
2020 activity:
Information security
● We
continued to review and update security protocols over the data we
created, secured, used and stored for adherence to all applicable
local and national data requirements.
● We
also evolved and proactively improved our protective cyber
capabilities, recognising the increased potential for phishing and
other cyber activities/threats detected and warned of during
COVID-19.
● Operating
risk saw a reduction as stronger compliance and user control took
effect.
Data Privacy
● We
assessed new laws and regulations that came into being and
successfully implemented a readiness plan for the new Brazilian
data protection law.
● We
introduced a programme toolkit for use by our Privacy Champions to
assess and improve our privacy processes and protocols across the
company.
COVID-19 impact
and 2021 trend:
Information security
● Low
impact - with proven processes and protections in place, allowing
colleagues to successfully work from home. Minor system
modifications made to ensure controls remain in place and proactive
and regular awareness of potential threats shared with
colleagues.
● Trend
- constant with matters under good ownership and
management.
Data Privacy
● No
impact - with controls maintained.
● Trend
- constant with matters under good ownership
management.
|
12.Intellectual property:
Risk description: Failure
to adequately manage, procure, protect and/or enforce IP rights
(including trademarks, patents, trade secrets and copyright) in our
brands, content and technology may impair the value of our core
assets, or reduce profits.
|
2020
activity:
● In
2020 we continued to reduce our multiple brand identities,
streamline and strengthen Pearson's brand, and patent key strategic
technology assets.
● We
continued targeted IP enforcement against key third parties of
Pearson copyright (piracy), brands and patents.
COVID-19 impact
and 2021 trend:
● No
impact - with controls maintained.
● Trend
- constant with matters under good ownership and
management.
|
13.Compliance:
Risk description: Failure
to effectively manage risks associated with compliance (principally
anti-bribery and corruption (ABC) and sanctions risk), including
failure to vet third parties, resulting in reputational harm, ABC
liability, or sanctions violations.
The Compliance & ABC policy is a group wide requirement that
ensures colleagues and partners
are complaint with our internal guidelines, regulatory and industry
standards.
|
2020
activity:
● In
2020 we continued to enhance our compliance culture with our annual
Code of Conduct being verified by all employees.
● We
saw good improvements across our sanctions compliance, with the
risk of exposure reduced as a result.
● Increased
SpeakUp efforts and therefore reporting over the last two years has
led us to revise our investigations policy and playbook, and we
created a Compliance Council to ensure appropriate governance of
decision-making for disciplinary and remedial actions.
COVID-19 impact
and 2021 trend:
● No
impact - with controls maintained.
● Trend
- constant with matters under good ownership and
management.
|
14.Competition law:
Risk description: Failure
to comply with antitrust and competition legislation could result
in costly legal proceedings and fines of up to 10% of global
revenue; other financial consequences such as class actions,
damages, void contracts could adversely impact our
reputation.
|
2020
activity:
● We
continued to support a global network of Pearson lawyers to ensure
continued understanding of and compliance with Pearson's Antitrust
Policy, and to spot and escalate antitrust issues in the
geographies and businesses they support for purposes of maintaining
Pearson's antitrust controls.
COVID-19 impact
and 2021 trend:
● No
impact - with controls maintained.
● Trend
- constant with matters under good ownership and
management."
|
|
PEARSON
plc
|
|
|
Date: 18
March 2021
|
|
|
By: /s/
NATALIE WHITE
|
|
|
|
------------------------------------
|
|
Natalie
White
|
|
Deputy
Company Secretary
|