Introduction

A description of the key risk factors that may affect the British American Tobacco Group’s business is outlined below. Not all of these factors are within the control of British American Tobacco and other factors besides those listed below may affect the performance of its business. This section highlights some of these particular risks but it is not intended to be an extensive analysis of all risks affecting the Group. Some risks may be unknown at present and other risks, currently regarded as immaterial, could turn out to be material in the future. All of these risks have the potential to have an adverse impact on the Group’s business; its revenues, profits, assets, liquidity and capital resources. These risks should be considered with reference to the statement on internal control in the Corporate governance statement of the Annual Report and Accounts (the main aspects of which are summarised below) and the cautionary statement regarding forward-looking statements.

Risk management in summary

The Company maintains a sound system of internal control with a view to safeguarding shareholders’ investment and the Company’s assets. It is designed to manage risks that may impede the achievement of the Company’s business objectives rather than to eliminate these risks and can therefore provide only reasonable, not absolute, assurance against material misstatement or loss.

The Group uses audit committees at both regional and end market levels to support the Audit Committee (see Summary corporate governance) in monitoring risks and control. This framework provides a continuing process for identifying, evaluating and managing the significant risks faced by the Company and its subsidiaries. The Group’s regional audit committees (which are all chaired by an Executive Director) focus on risks and the control environment within each region and are in turn supported by end market or area audit committees. The regional audit committees’ reviews include consideration of the effectiveness of the process for identifying, evaluating and managing the risks of the business and the assessments of internal control and business risks completed by operating companies.

In addition, the Corporate Social Responsibility (CSR) Committee (see Summary corporate governance) is responsible for identifying and assessing, in conjunction with management, the significant social, environmental and reputational risks facing the Group’s business and for evaluating management’s handling of such risks. In this, it is similarly supported by a framework of regional and end market CSR committees.