# Dear Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/LSE_ELM.L_2020/LSE_ELM.L_2020.mmd` · pages 80-86_

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Dear Shareholders,

As Chair of the Nomination Committee (the 'Committee'), I am pleased to present the Nomination Committee report covering the work of the Committee in 2020. This report should be read in conjunction with the separate section on compliance under the UK Corporate Governance Code on page 65.

## ROLE OF THE COMMITTEE

The Committee is responsible for the structure, size and composition of the Board, ensuring that the Board and Committees have the most appropriate balance of skills, knowledge and experience. This Committee ensures and oversees succession planning and has responsibility for the annual review of the Board.

## KEY RESPONSIBILITIES

• Regularly reviewing the structure, size, diversity and composition of the Board

• Ensuring that the Company has the right leadership, balance of skills and experience to deliver the Company's strategy and enable the Board to effectively fulfil its obligations

• Succession planning for the Board and Executive Leadership team

• Leading on the annual performance evaluation of the Board and its Committees

• Identifying and nominating, for the approval of the Board, candidates to fill Board vacancies as and when they arise

• Identifying and managing any potential conflicts of interests
Directors may have

The Committee's terms of reference are available on the Company's website at www.elements.com

## RE-APPOINTMENT OF DIRECTORS

All Directors are subject to re-election at the next Annual General Meeting (AGM), as required by the UK Corporate Governance Code. Following the appraisal process, the Committee concluded that each of the Directors continued to make an effective contribution to the Board and provided sufficient time to the Company.

## HIGHLIGHTS

• Appointment of two new Non-Executive Directors

• Oversight of Group's diversity policy

• Board effectiveness review

• Adopted new terms of reference

## ATTENDANCE AT NOMINATION COMMITTEE MEETINGS

<table><tr><td>Andrew Duff (Chair)</td><td>●</td></tr><tr><td>Sandra Boss \( ^{*} \)</td><td>●</td></tr><tr><td>Dorothee Deuring</td><td>●</td></tr><tr><td>Steve Good</td><td>●</td></tr><tr><td>Anne Hyland</td><td>●</td></tr><tr><td>Nick Salmon \( ^{*} \)</td><td>●</td></tr><tr><td>John O&#x27;Higgins</td><td>●</td></tr><tr><td>Christine Soden \( ^{\circ} \)</td><td>●</td></tr></table>

* Sandra Boss and Nick Salmon stepped down from the Board and Committee on 29 April 2020.

© Christine Soden joined the Committee on 1 November 2020.

In accordance with the Code, Christine Soden will submit herself for election and the remaining Directors will submit themselves for re-election at the 2021 AGM.

## PROGRAMME OF BUSINESS

• Annual review of Directors' independence and conflicts in accordance with the Committee's terms of reference

• Engagement with external search consultants to conduct a search for a new Non-Executive Director

• Reviewing structure, size, diversity and composition of the Board

• Succession planning for the Board and oversight of senior management succession plans

• Ensuring that at least annually the Non-Executive Directors meet without the Executive Directors present

• Approval of Nomination Committee report for inclusion in the Annual Report.

## RE-APPOINTMENTS TO THE BOARD

The re-appointment of Andrew Duff (for a third term from April 2020) and Steve Good (for a third term from October 2020) were approved and recommended to the Board during the year. The recommendations were supported by considerations regarding their independence, experience and contribution that they bring to the Board and its Committees. These matters were subsequently confirmed following the Board evaluation process and a review of conflicts and independence. In line with best practice, their continuing Board roles remain subject to annual re-election by shareholders.

## BOARD EFFECTIVENESS

On an annual basis, the Chairman is responsible for conducting an appraisal with each Non-Executive Director in respect of their skills, experience, contribution and time commitment to the Company. The Committee oversees the evaluation process which during 2020 comprised an internal evaluation. The last externally facilitated review was carried out in 2018 and it is anticipated that the next external review will be conducted in 2021. Further information can be found on page 78.

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## SUCCESSION PLANNING

Following Sandra Boss stepping down from the Board in April 2020, the Committee appointed Russell Reynolds, external search consultants, to undertake a search for suitable candidates.

Following a thorough recruitment process, Christine Soden was appointed as a Non-Executive Director, and Designated Non-Executive Director for workforce engagement, with effect from 1 November 2020.

John O'Higgins was appointed to the Board on 4 February 2020 and a description of the recruitment process featured in the 2019 Annual Report.

NON-EXECUTIVE DIRECTOR RECRUITMENT PROCESS
The Chairman of the Board, assisted by the Nomination Committee members and Company Secretary, led the process in the search for a new NED.

Following a Committee discussion and with input from the Executive Directors, a role specification was prepared along with a recruitment brief and shared with Russell Reynolds.

Russell Reynolds prepared a longlist comprising gender diverse candidates. The Committee duly discussed the merits of each of the candidates and agreed the shortlist for interview with Board members. Committee meetings were held to discuss feedback.

Having carried out further due diligence including reference checks, time commitments and potential conflicts, the Committee agreed to recommend to the Board that Christine Soden be appointed as a Non-Executive Director and Designated Non-Executive Director for workforce engagement.

## BOARD INDUCTION

The Chairman, with the support of the Group Company Secretary, is responsible for preparing and coordinating an appropriate induction programme, which is to be tailored to the needs of each newly appointed Non-Executive Director.

Newly appointed Directors are provided with a briefing on Directors' duties from the Group Company Secretary, and legal advisers if required.

John O'Higgins and Christine Soden have undertaken their induction programmes entirely remotely. Site visits will take place when safe to do so and in line with latest guidance.

## 2021 PRIORITIES

• Complete site visit programme as part of the induction programme for John O'Higgins and Christine Soden
• Agree Board effectiveness scope and activity for 2021
• Review Board and senior management succession plans
• Review Board diversity policy and objectives

## EXAMPLE OF A TYPICAL INDUCTION PROGRAMME

## INDUCTION – GENERAL TOPICS

• The role of a Director

• Board and Committees

• Board meetings

• Rules and regulations and guidance

• Board procedures

• Current issues

• Nature of the Company, its

business and its markets

• The Company's main relationships

## INDUCTION – BOARD COMMITTEES (AS APPROPRIATE)

• Role and remit of the Committee

• Link between the Committee's policy and the Company's strategic objectives

• The annual meeting schedule for the Committee

• The main business conducted by the Committees

• The legal requirements relevant to the

Committee's operations

• Market practice and current trends relevant to the Committee

• Current issues

• Views of investors on

matters considered by the

Committee and potential

areas of focus

• Any technical training on key matters

## INDUCTION – EXTERNAL ADVISERS

Meetings with:

• External auditors

• Internal audit function

• Remuneration advisers

• Brokers

• Lawyers

## INDUCTION – SENIOR MANAGEMENT

Meetings with:

• CEO

• CFO

• SVP Global Coatings & Energy

• SVP Global Personal Care

• SVP Global Chromium

• SVP Global Talc

• Chief HR Officer

• SVP Global Technology

• SVP Global Supply Chain & Manufacturing

• Group General Counsel and Chief Compliance Officer

• Group Company Secretary

• Group Head of Tax

• Group Financial Controller

• Director of

Investor Relations

## INDUCTION – SITE VISITS

• SciPark – New Jersey, US (US head office)

• Amsterdam, Netherlands (Talc)

• Castle Hayne – North Carolina, US (Chromium)

• Others as agreed during the course of the year

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## BOARD COMPOSITION AND SKILLS

Following the internal effectiveness review, the Committee considers that the current Board membership has the right balance of commercial and governance experience, independence and challenge, and that the diverse range of skills and experience of the Directors prevents any dominance, either individually or collectively, over the Board's decision making.

## BOARD SKILLS AND ATTRIBUTES

<table><tr><td></td><td>Andrew Duff</td><td>Paul Waterman</td><td>Ralph Hewins</td><td>John O&#x27;Higgins</td><td>Steve Good</td><td>Anne Hyland</td><td>Dorothee Deuring</td><td>Christine Soden</td></tr><tr><td>Manufacturing/industrial processing</td><td>●</td><td>●</td><td>●</td><td>●</td><td>●</td><td></td><td></td><td>●</td></tr><tr><td>Specialty chemicals</td><td></td><td>●</td><td></td><td>●</td><td></td><td>●</td><td></td><td></td></tr><tr><td>Strategy/business development</td><td>●</td><td>●</td><td>●</td><td>●</td><td></td><td>●</td><td></td><td>●</td></tr><tr><td>International business and markets</td><td>●</td><td>●</td><td>●</td><td>●</td><td></td><td>●</td><td>●</td><td>●</td></tr><tr><td>Innovation/product development</td><td></td><td>●</td><td></td><td>●</td><td></td><td>●</td><td></td><td>●</td></tr><tr><td>Sales/marketing/customer</td><td>●</td><td>●</td><td></td><td>●</td><td></td><td>●</td><td></td><td></td></tr><tr><td>Accounting/tax/treasury/risk</td><td></td><td></td><td></td><td>●</td><td></td><td>●</td><td></td><td>●</td></tr><tr><td>Regulated markets</td><td>●</td><td></td><td></td><td>●</td><td></td><td>●</td><td></td><td>●</td></tr></table>

## As at 31 December 2020

COMPOSITION OF THE BOARD

Independent
Non-Executive
Directors 62.5%

Chairman \( ^{*} \)  12.5%
Executive
Directors 25%

![](images/82_0.jpg)

* Independent on appointment

GENDER OF ELT

![](images/82_1.jpg)

GENDER OF BOARD

Female 37.5%
Male 62.5%

![](images/82_2.jpg)

GENDER BALANCE OF ELT AND DIRECT REPORTS

![](images/82_3.jpg)

AVERAGE AGE OF THE BOARD

![](images/82_4.jpg)

GENDER COMPANY WIDE

![](images/82_5.jpg)

NATIONALITY OF THE BOARD

![](images/82_6.jpg)

LENGTH OF TENURE

Further information about Directors' independence, the Board's conflicts of interest policy and Directors' commitment is set out on page 77.

![](images/82_7.jpg)

OVERALL GENDER DIVERSITY SUMMARY (AS AT 31 DECEMBER 2020)

<table><tr><td></td><td>Male</td><td>Female</td></tr><tr><td>Board</td><td>5</td><td>3</td></tr><tr><td>ELT</td><td>10</td><td>1</td></tr><tr><td>Senior management (XLT)</td><td>33</td><td>15</td></tr><tr><td>Senior managers (s.414 CA 2006 definition)</td><td>25</td><td>6</td></tr><tr><td>All employees</td><td>1,038</td><td>314</td></tr></table>

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<table><tr><td>DIVERSITY POLICY</td><td>PROGRESS AGAINST OBJECTIVES</td></tr><tr><td>Policy objective Search and recruit the right candidates from the widest talent pool, against objective criteria and with regard for the benefits of diversity, including gender and ethnicity. When recruiting new Board members, the Nomination Committee Chairman will engage recruitment advisers who are able to demonstrate a commitment to gender and ethnic diversity as part of their role in identifying suitably qualified candidates from a talent pool that also reflects the Group&#x27;s international profile.</td><td>Longlists have supported our diversity objectives representing gender and ethnicity</td></tr><tr><td>Implementation Russell Reynolds were appointed to undertake a search for a new Non-Executive Director in 2020. Russell Reynolds have signed up to the Voluntary Code of Conduct for Executive Search Firms which aims to address gender diversity on corporate boards and best practice for the related search processes.</td><td></td></tr><tr><td>Policy objective Ensure that the Board is comprised of an appropriate balance of skills, experience and knowledge to effectively oversee and support the management of the Company.</td><td>Ongoing</td></tr><tr><td>Implementation The Nomination Committee continues to review the composition of the Board and ongoing succession plans in accordance with its terms of reference.</td><td></td></tr><tr><td>Policy objective Maintain gender balance of females on the Board of at least 33%.</td><td>Exceeded target</td></tr><tr><td>Implementation During the year, Nick Salmon and Sandra Boss retired from the Board and were succeeded by John O&#x27;Higgins and Christine Soden.</td><td></td></tr><tr><td>Policy objective Aspire to improve the percentage of senior leadership positions held by women throughout the Group. The Nomination Committee will monitor pipeline diversity and the delivery of plans to improve gender and ethnic diversity across the organisation and promote talent from across our locations into management roles.</td><td>Ongoing</td></tr><tr><td>Implementation The Nomination Committee has visibility of diversity and inclusion initiatives to improve diversity throughout the organisation and receives succession planning updates for talent below senior management level as well as diversity, equity and inclusion updates. See page 40 for further information.</td><td></td></tr><tr><td>Policy objective Oversee succession plans to ensure that they meet both current and future needs of the business including improvement of gender and ethnic diversity across the organisation.</td><td>Ongoing</td></tr><tr><td>Implementation Succession plans are regularly reviewed in line with the current and future needs of the business.</td><td></td></tr><tr><td>Policy objective Report annually against policy objectives and assess the skills, expertise, backgrounds and experiences of Board members.</td><td>Complete</td></tr><tr><td>Implementation The Nomination Committee has reviewed and approved the Nomination Committee report.</td><td></td></tr><tr><td>Policy objective Continue to monitor regulatory developments and best practice in respect of diversity.</td><td>Ongoing</td></tr><tr><td>Implementation The CHRO and Company Secretary provide regular updates on regulatory developments and practices in this area.</td><td></td></tr><tr><td>Policy objective Periodically review this policy and its effectiveness.</td><td>Every 3 years</td></tr><tr><td>Implementation This policy, its objectives and effectiveness will be reviewed every 3 years or in line with developing practice if sooner.</td><td></td></tr></table>

Please read more on our diversity and inclusion policies in the Social section on page 40

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# Audit, risk and internal control
Audit Committee report

![](images/84_0.jpg)

ANNE HYLAND
CHAIRMAN
AUDIT COMMITTEE

Dear Shareholders,
As Chair of the Audit Committee (the 'Committee'), I am pleased to present the Audit Committee report covering the work of the Committee during 2020. This report should be read in conjunction with the separate section on compliance under the UK Corporate Governance Code on page 65.

## ROLE OF THE COMMITTEE

To assist the Board by establishing, reviewing and monitoring the Group's financial reporting, internal controls framework and risk management, internal audit programmes and changes in regulatory requirements.

## COMPOSITION OF THE COMMITTEE

In accordance with the UK Corporate Governance Code (the 'Code'), the Board has confirmed that all members of the Committee are independent Non-Executive Directors and have been appointed to the Committee based on their individual financial and commercial experience.

The Board is satisfied that Anne Hyland, as Chair of the Committee, has recent and relevant financial experience to chair this Committee through her current executive role as CFO at Kymab Group and in a previous role as CFO at FTSE listed Vectura plc. Anne is a chartered accountant (FCA) and a corporate tax adviser (CTA-AITI).

The Committee, as a whole, has financial and commercial competence relevant to the sector in which the Group operates. Further information on the skills, expertise and experience of Committee members can be found on page 81.

## HIGHLIGHTS

• Going concern and longer term viability

• Assessment of impact of COVID-19 on the key balances and estimates

• Presentation of adjusting items

• Goodwill and indefinite life intangible assets impairment review

• Group tax exposures and uncertain tax positions

## ATTENDANCE AT AUDIT COMMITTEE MEETINGS

<table><tr><td>Anne Hyland (Chair)</td><td>●●●</td></tr><tr><td>Sandra Boss \( ^{*} \)</td><td>●</td></tr><tr><td>Dorothee Deuring</td><td>●●</td></tr><tr><td>Nick Salmon \( ^{*} \)</td><td>●</td></tr><tr><td>John O&#x27;Higgins</td><td>●●</td></tr><tr><td>Christine Soden \( ^{\diamond} \)</td><td>●</td></tr></table>

* Sandra Boss and Nick Salmon stepped down from the Board on 29 April 2020.

Christine Soden joined the Committee on 1 November 2020.

All members of the Committee are independent Non-Executive Directors.

Members' biographies can be found on pages 66 to 67.

The Chairman of the Board, CEO, CFO and Group Financial Controller, alongside representatives from the external auditors, Deloitte, and internal auditors, PwC, have a standing invitation to attend Committee meetings.

The Chair of the Audit Committee is available to meet with shareholders at the Company's AGM and on request during the course of the year.

## KEY RESPONSIBILITIES

• Monitoring the integrity of the Group's financial statements, financial reporting and related statements

• Ensuring the appropriateness of accounting policies, any changes to these, and any significant estimates and judgements made

• Reviewing the effectiveness of internal control, compliance and risk management systems (including whistleblowing arrangements)

• Overseeing all aspects of the relationship with the internal and external auditors; approving the policy on non-audit services; making recommendations to the Board for their dismissal or changes; and supervising any tender process

The Committee's terms of reference, which are reviewed and approved annually, are available on the Company's website.

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## PROGRAMME OF BUSINESS

The Committee's focus in 2020 has been:

• Meetings with both the internal and external auditors to review their key findings

• Reviewing the internal control systems and considering the output of internal audit reviews and management's action plans
• Reviewing the integrity and consistency of key accounting judgements made by management in both the Company's full and half year results

• Advising the Board on whether the Annual Report and Accounts is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy

• Reviewing the going concern and viability statements and the supporting assumptions and assessments in the Company's Half year report and Annual Report and Accounts

• Ensuring compliance with applicable accounting standards, monitoring developments in accounting regulations which affect the Group and reviewing appropriateness of accounting policies and practices currently in place

• Reviewing effectiveness of the internal and external auditors, their independence and objectivity and terms and scope of engagement and recommending their re-appointment

• Overseeing matters relating to tax including the impact of tax rates on the financial statements, approving the Company's tax strategy and EU state aid

• Litigation and compliance reports for both the full and half year
• Considering the material legal risks impacting the Company and the associated provisioning for both the full and half year

• Receiving updates on the Code of Business Conduct and Ethics and the associated training and whistleblowing policies
• Technical updates on Annual Report and Accounts key developments, 2020 year end reporting environment, corporate governance matters and future developments

• Reviewing the Group's risk management activities undertaken by each business area, and at Group level to identify and assess the Group's principal risks

• Monitoring and assessing the Group's insurance arrangements

The report of the Audit Committee for the 2020 financial year explains how its responsibilities have been carried out during the year.

## COMMITTEE EFFECTIVENESS

As part of corporate governance, the Committee's performance and effectiveness was reviewed in the year as part of the review of Board and Committee effectiveness conducted by the Company Secretary, further details are on page 78.

## EXTERNAL AUDITORS

Deloitte have served as external auditors to the Company since April 2016. The Committee engaged with Deloitte to ensure this key area of oversight was appropriately maintained.

The Committee periodically meets privately with the lead audit partner and senior members of the audit team to discuss their work and findings, particularly in relation to the key areas of audit risk previously identified.

## AUDITOR ROTATION AND TENDERING AND COMPETITION AND MARKETS AUTHORITY ORDER – STATEMENT OF COMPLIANCE

The Committee carried out an audit tender process in 2015 resulting in the appointment of Deloitte as external auditors in April 2016. Deloitte's re-appointment in 2020 was approved by shareholders at the Company's AGM in April 2020. The year ended 31 December 2020 is the fourth year for the lead audit partner Christopher Powell. The Committee confirms that the Company is compliant with the provisions of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014, for the year ended 31 December 2020.

## AUDIT OF THE 2020 ANNUAL REPORT

At the end of 2020, Deloitte presented their audit plan for the year which the Committee considered and then approved. Deloitte highlighted the key areas of risk, which were primarily identified as areas of judgement and complexity and were consistent with those areas identified by the Committee. As part of the audit process, Deloitte then presented a detailed report of their audit findings, which was reviewed and discussed. A similar process is undertaken for the half year results.

## AUDIT EFFECTIVENESS

To support the Committee in evaluating the effectiveness of the external auditors, a questionnaire based evaluation is circulated to internal stakeholders who have had the most interaction with the external auditors during the audit process. The data is collated into a score card which is used to assess the strengths and weaknesses of the external auditors.

Management and the external auditors then address any areas of weakness in their regular review meetings, and the lead audit partner from Deloitte updates the Committee on how areas of weakness are being addressed.

The Committee also monitors audit effectiveness by reviewing the Audit Quality Inspection reports published by the FRC.

The Committee will formally assess Deloitte's performance in relation to the 2020 audit following its completion. It is intended that a resolution to re-appoint Deloitte as the external auditor will be proposed at the 2021 AGM.

## AUDIT INDEPENDENCE

The Committee considers the external auditors' objectivity and independence at least twice a year. It receives reports from Deloitte on its internal quality controls and independence rules and considers carefully the extent of the non-audit services provided by Deloitte. The Committee is of the view that Deloitte was objective and independent throughout the 2020 audit process notwithstanding the level of non-audit services provided.

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## KEY JUDGEMENTS AND AREAS OF SIGNIFICANT FOCUS

The following table sets out the significant matters considered by the Committee during the year in relation to the financial statements. Further information on these judgements are detailed in Note 1 of the accounts.

<table><tr><td>Key judgements</td><td>How the Committee has addressed these matters</td></tr><tr><td>Going Concern</td><td>Given the continuing significant uncertainties resulting from the impact of COVID-19 on the economic environment in which the Group operates, and the material uncertainty around going concern reported at the half year, the Committee have placed a particular focus on the appropriateness of adopting the going concern basis in preparing the consolidated financial statements for the twelve months ended 31 December 2020.To support the Committee&#x27;s assessment, Management produced three models over a future period of three years from the date of these accounts - a base case, a downside case and a reverse stress case with cashflows for each demonstrating the position of the company regarding its two financial covenants - Net Debt/EBITDA and Interest cover at each measurement period for the 18 months following the date of signing of these accounts.Having agreed covenant relaxations with our lenders in March and September 2020, the revised provision in our banking arrangements is for the net debt/EBITDA covenant to step down from 3.75x at present to 3.25x in June 2022. Under both the base and downside cases the Group is expected to remain within its financial covenants throughout the going concern period and the conditions necessary for the reverse stress case to be applicable were deemed sufficiently remote. As such the Committee concluded it was appropriate for the Group to adopt the going concern basis for these accounts.</td></tr><tr><td>Environmental provision</td><td>A process consistent with 2019 for the evaluation of environmental provisions was followed by management, the key area of judgement being the discount rate used for future liabilities. In 2019, the discount rate was 1% for the UK and 2% for the US. The Committee considered these discount rates and decided that revised rates of 0.8% for the UK and 1.7% for the US would reflect current market assessments of the time value of money and risks specific to the liabilities and therefore appropriate for 2020.</td></tr><tr><td>Impairment testing of goodwill in relation to the Talc CGU</td><td>Critical accounting estimates arise in determining the value in use for the goodwill balances tested, which require assessments of the achievability of business plans (and therefore future cash flows), growth rates beyond the period covered by the five-year business plans and appropriateness of the discount rates applied to future cash flows. A report from management was discussed setting out the basis for the assumptions and confirmation that the cash flows used were derived from the 2020 three year plan (which in their role as members of the Board, Committee members had previously reviewed and approved).The Committee has reviewed the robustness of the impairment model, challenged the appropriateness of the key assumptions used to calculate value in use including forecast sales volumes, selling prices, growth rates used to extrapolate beyond the forecast period and the discount rates applied to the resulting cash flows.After considering these items, and also the impairment of \(33.4m made to goodwill relating to the Talc CGU at the half year, the Committee concluded no further impairment was necessary at 31 December 2020.</td></tr><tr><td>Revenue recognition</td><td>The main area of judgement continues to be in relation to recognition of revenue from shipments by sea. The Committee satisfied itself that the Group had appropriately recognised revenues in accordance with their contractual obligations during the period, paying particular attention to period end cut-off.</td></tr></table>

## NON-AUDIT SERVICES AND FEES

The Group has an agreed policy with regard to the provision of audit and non-audit services by the external auditor, which has operated throughout 2020 and is available on the Company's website. Under the policy, the CFO may approve individual engagements where the fee is up to 15% of the Group's audit fee for the year, provided that the non non-audit fees in the year do not exceed 50% of that Group audit fee. Decisions above these thresholds must be referred to the Committee for determination.

<table><tr><td></td><td>2020</td><td>2019</td></tr><tr><td>Audit fees (\()</td><td>2.2*</td><td>1.4</td></tr><tr><td>Assurance related services (\))</td><td>0.1</td><td>0.1</td></tr><tr><td>Non-audit fees (\))</td><td>0.1</td><td>0.0</td></tr><tr><td>Ratio of non-audit fees to audit fees (%)</td><td>4.5%</td><td>0%</td></tr><tr><td>Total fees (\))</td><td>2.4</td><td>1.5</td></tr></table>

* Includes $0.3m of extra fees relating to the 2019 group audit

## INTERNAL CONTROLS & RISK AND RISK MANAGEMENT

The Committee's role is to review the effectiveness of the internal control, compliance and risk management systems which it carries out in support of the Board's formal review of significant risks and material controls, as summarised in the Risk management report on pages 56 to 58.

PwC provide an outsourced internal audit function. The Committee considers that the value of internal audit is enhanced by having a third party perform this function, to support the independent challenge of management and give greater access to expertise and resources than an internal function could provide. The internal audit plan is based on a review of the Group's key risks which are considered high risk or have not been subject to a recent audit.

The 2020 internal audit plan was discussed and agreed between management and PwC ahead of it being considered and subsequently approved by the Committee. Management review the schedule with