UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM20-F

(Mark One)

OR

For the fiscal year ended 31 March 20192020

OR

OR

Date of event requiring this shell company report

For the transition period from                to                

Commission File Number:1-08819

BT Group plc

(Exact name of Registrant as specified in its charter)

Securities registered or to be registered pursuant to Section 12(b) of the Act: None

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

9,968,127,681 Ordinary Shares, of 5p each

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act.  Yes  ☒    No  ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes  ☐    No  ☒

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

Large accelerated filer  ☒             Acceleratedfiler  ☐            Non-accelerated filer  ☐            Emerging growth company  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.  Item 17  ☐    Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).  Yes  ☐    No  ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes  ☐    No  ☐

Not Applicable

TABLE OF CONTENTS

All references in this Form20-F to “us”, “we” or “the Company”, are to BT Group plc. None of the websites referred to in the Annual Report for the year ended March 31, 20192020 included as Exhibit 15.2 to this Form20-F (the “Annual Report 2019”2020”), including where a link is provided, nor any of the information contained on such websites is incorporated by reference in this Form20-F.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable

ITEM 3. KEY INFORMATION

3.A Selected financial data

The information set forth under the heading “Selected financial data”headings:

of the Annual Report 20192020 is incorporated herein by reference.

3.B Capitalization and indebtedness

Not applicable

3.C Reasons for the offer and use of proceeds

Not applicable

3.D Risk factors

PrincipalHow we identify our principal risks and uncertainties

The principal risks draw upon the priority risks recorded in each of the customer-facing units and corporate units and the ongoing input from our senior leaders and respective oversight committees. The principal risks are reviewed by the Group Risk Panel, a forum comprised of senior representation from across the business, before being approved by the Executive Committee and the Board.

Management and oversight of the principal risks

Each principal risk is assigned an Executive Committee owner who is responsible for monitoring the exposure and nature of the risk, deciding how it should be managed and taking the necessary action to achieve the desired target level.

Oversight of the individual principal risks is carried out via:

•Detailed reviews into each risk at Executive Committee, Audit & Risk Committee and Board meetings. Detailed reviews involve the Executive Committee owner providing an overview of the risk, relevant developments, how we are currently managing it and areas for improvement. There is also a summary of related assurance results that inform how effectively the risk is being managed.

•Collective review of the risks on a quarterly basis at the Group Risk Panel and every six months at the Executive Committee and annually by the Board.

Enhancing our risk framework

We are implementing a new framework to provide our leaders with increased confidence, comfort, knowledge and capability to manage the risks to the delivery of our strategy.

A key part of our new approach is focused on using metrics to enhance our articulation of risk appetite and clearly articulate the tolerance limits within which we wish to operate.

This clarity on the nature and extent of the risks we are willing to take to achieve our strategic objectives will refine the way we define policy, set our controls and carry out assurance over them.

Covid-19 impact

TheCovid-19 pandemic is having, and will continue to have, an impact across our entire risk landscape. We have incorporatedCovid-19 commentary into each principal risk and have included a separateCovid-19 risk which gives an overview of the related uncertainties that affect us could haveand potential impacts on the Group.

COVID-19 PANDEMIC

The globalCovid-19 pandemic is having an impact on our business, brand, assets, revenue, profits, liquiditycolleagues, operations, suppliers and capital resources.customers. The principal risks we described last year have evolved,Covid-19 pandemic has resulted in a series of measures implemented by governments around the world aimed at mitigating the further spread of the virus. These measures include restrictions on travel, closure of national borders, imposition of quarantines, prolonged closures of workplaces and socurfews or other social distancing measures. The extent of the impact on the Group is dependent on a variety of factors including, but not limited to, the length of UK and international lockdowns, levels of employee absence, virus recurrence, insolvency rates, unemployment levels, nature and extent of any government interventions, severity of economic effects and the subsequent speed and nature of the recovery.

Potential impact

TheCovid-19 pandemic has our response to them.

Our Enterprise Risk Management framework gives reasonable (but cannot give absolute) assurance that we’ve identifiedresulted in adverse impacts on sales activity and addressed our biggest risks. However, theredemand, including reduced roaming and continued suspension of sporting events, which may be some riskspartially offset by reduced churn and increasing use of connectivity products. There is a potential that are either currently unknown, supply chain issues and/or currently seen as less important butprolonged colleague absence may inhibit our ability to deliver products and services to customers, with an associated impact on our customer experience.

A prolonged economic downturn could see a material increase in our pension deficit and subsequent level of required contributions. Further, we may be exposed to material bad debt if a significant number of our small and medium enterprise (SME) and large corporate customers experience financial distress or insolvency. The collective impacts of the potentialpandemic and associated economic downturn could negatively impact our cash position and ability to become more so in the future.fund desired investment projects and ongoing operations.

Events outside BT present both risks and opportunities. We focus our efforts on predicting and reducing risks while aiming to take advantage of any opportunities that may emerge.Focus areas for 2020/21

We recogniseGiven the uncertainty of the duration and economic impact of theCovid-19 pandemic, we are continually modelling a variety of scenarios to identify and evaluate the financial impacts across the Group, as well as assessing the liquidity mitigation options that politicalcould be used if required. We are also carrying out risk assessments for each of our customer-facing units, considering potential strategic, operational, regulatory and geopolitical risks presentcolleague related impacts. The outputs of this scenario modelling and have continuedrisk assessment activity is being used to operate a specific Brexit programme across BT that looks at how we might be affectedidentify key actions and whatdecisions, as well as informing our response should be. This programme is keeping a close watch on developments, and reports to a steering group chaired by our group CFO.assurance activities for 2020/21.

STRATEGIC RISKS

Competition & Technology Changes

Our strategy and business model could be disrupted by technology change and/or intensifying competition and technology developments from established playersthe emergence of competitors enabled by disruptive technologies, a reduction in market differentiation, unanticipated changes in market structures and new entrants into our markets.boundaries as a result of mergers and acquisitions, changes in customer behaviours, and changes in regulation and government restrictions on vendor choices. We may also face challenges in developing product propositions in line with changing market dynamics and expectations. This competition compounds some of the external challenges that we see in the market place,marketplace, notably:

Technology changedevelopment is also a key characteristic of our sector. We need to be able to identify emerging technologies, assess how customers will adopt these technologies, and invest accordingly, frequently a long-time before the demand materialises.materializes. We also need to respond to changes in the use of existing technology, such as the exponential growth the sector has seen in data consumption and network capacity requirements.

Potential impact

Intensified competition can result in lower volumes and/or prices than we currently forecast. If we do not respond effectively to competition then we can losemay face a reduction in market share, revenue and/or profit, which could impact our ability to invest in growth and increasing the value of the business.

Further, a significant economic decline in specific industries, e.g. retail, could impact the Group’s ability to continue to attract and retain customers in those industries, which could result in a reduction of the Group’s market share, revenue and/or profit.

In addition, new technology developments can lead to accelerated obsolescence ofshifts that affect our current products,propositions, changes in customer behaviours, increased investment requirements, new sources of competition and/or the deterioration of our competitive position. This in turn can result in lower volumes and prices, stranded assets and higher costs. A failure to invest optimally in technology today can have implications for our market position and ability to generate future returns.

What’s changed over the last year?

Set against a challenging economic climate our leading competitors have been very active over the last 12 months. Important developments included:

Communications Industry Regulation

Regulation affects much of what we do.2020/21

In the UK, where Ofcom identifies competition concerns in communications markets, it can set rules requiring us2020/21, we will aim to provide certain servicesdeliver on specified terms tokey programmes that enhance our customers. Ofcom reviews markets regularlycustomer experience, network leadership and can introduce, extend, relax or remove rules as a result of its findings. It has powers to conduct specific investigations about market behaviour, including price levels. In addition, Ofcom can set out rules for spectrum auctionstransformation and to ensure consumer protection in the sector.

Ofcom will investigate our compliance with regulatory requirements and can impose fines and restitution on us if we fail to comply.

Ofcom also has powers to regulate the terms on which we’re supplied with certain services by others – for instance, mobile call termination – and can sort out disputes between us and other communications providers about the terms on which services are supplied. Appeals of regulatory decisions also give rise to risks (and opportunities).

Outside the UK, regulation defines where and howthat we are able to compete through licensing rules and definingmeeting the terms on which we are able to access networks of incumbent operators.

Potential impact

Some ofKPIs that underpin our revenue comes from supplying wholesale services to markets where Ofcom has foundstrategy. Intensifying competition may make it more difficult for us to have significant market power. This includes revenue relating to services where regulation requires us to cut average prices each year by a specific, real-term percentage for a three-year period.

Where other telecoms providers ask Ofcom to resolve disputes with us, there is a risk that Ofcom may set the prices at which we supply services, make us provide additional services and/or impact how we structure our business. In some circumstances, Ofcom can adjust past prices and make us pay back amounts to wholesale customers.

Regulation outside the UK can hit our revenue too. For example, overly-restrictive licensing requirements or ineffective regulation of access to other networks mean we might not be able to compete fairly. Regulation can also define and control the terms of access to necessary regulated inputs, which raises our costs.

What’s changed over the last year?

Ofcom has continued its cycle of market reviews, including consultations on the business connectivity and physical infrastructure markets and on its move to more holistic regulation of access across business and residential markets.

Ofcom also published Digital Communications Review Implementation Reports in June and November 2018 reviewing BT’s and Openreach’s adoption of the Commitments and Governance Protocol.

Consumer issues such as charges once a customer’s minimum contract term expires were part of a super-complaint made by Citizens Advice in September 2018 to the Competition and Markets Authority, which covered matters across the telecommunications and financial services sectors and has been referred back to Ofcom.

Finally, the Department for Digital, Culture, Media and Sport published its Future Telecoms Infrastructure Review in July 2018 as part of the Government’s modern Industrial Strategy, setting out a longer-term vision for the UK’s connectivity and associated infrastructure.achieve these goals.

Political Risk

Across our operations we are exposed to the effects of political and geopolitical risks, in particular:risks.

Potential impact

Political uncertainty can have direct financial consequences across the economy, impacting for example foreign exchange rates, the availability and cost of capital, interest rates and also resulting in changes in the tax regime.economy. For BT specifically, the most significant impact of political risk is its potential interaction with some of our other Principal Risks. In the UK, we’re seeing an increasing overlap betweenany adverse perceptions relating to the speed and/or connectivity in broadband and mobile coverage could escalate into larger political debate and thecampaigns which could result in regulatory environment,intervention, with the potential that our Communications Industry Regulation risk increases as a result.

The Covid-19 pandemic presents challenges related to network resilience, support for staff and customers and data sharing, with any failure to manage these challenges likely to create political pressure on the Group. Further, our Universal Service Obligations (USO), Shared Rural Network (SRN) commitments, and wider ambitions around network rollout may be adversely impacted by a prolongedCovid-19 lockdown and associated civil engineering restrictions beyond our control.

The impacts of Brexit are still uncertain while the UK’s future trading and transition relationship with the EU is determined albeitduring the agreement in principletransition period currently scheduled to end on a number of withdrawal measures was welcome, notably the commitment to protect the rights of EU citizens living in the UK and vice versa.31 December 2020. There is the potential for our costs to increase, for examplee.g. through any changes required to our systems to reflect new taxes or customs duties or other processes. Our regulatory risk could increase if there were to be future divergence with the EU regime. Our suppliers may face disruption as a result of challenges in their own organisationsorganizations and supply chains. Also, delivering a great customer experience and great network will become more challenging if it is harder for us to recruit and retain skilled talent and to source a sufficient construction workforce. The UK economy may also suffer as a result of this uncertainty.

Geopolitical risk outside the UK can most clearly impact our Communications Industry Regulation risk, but also our Cyber Security and ResilienceService Interruption risks where it poses a threat to the continuity of our operations.

What’s changed overFocus areas for 2020/21

In 2020/21, we are focused on fulfillingcommitments under the last year?SRN for mobile and USO for broadband, providing greater connectivity to underserved parts of the UK, as well as continuing to hold dialogue with government and other industry players on protecting consumers online, to ensure that any interventions in this space are fair and proportionate.

There has been continued uncertainty overFurther assessment will be required of the eventual naturepractical and timinglogistical impact of Brexit, despite ongoing negotiations between the EUCovid-19 related lockdown on planned and UKexisting commitments to agree arrangements against a backdrop of domestic political instability that has included new political parties being establishedGovernment and the defection of MPs from both the ConservativeOfcom around our networks and Labour parties. In the build upcoverage, including impact on pushing for Fibre to the UK’s scheduled exit fromPremises (FTTP) fibre enablers, and any impacts on legislative timetables.

These issues all have the EU we’ve continuedpotential to impact our contingency planning activities, including issuing communicationsability to successfully manage our people and working with our suppliers to understand issues such as howbusiness.

Communications Industry Regulation

Regulation affects much of what we can best manage stock levels through this period.

do. In the UK, there was continued high political interestwhere the telecoms regulator, Ofcom, identifies competition concerns in communications markets, it is able to change the way we operate and policy focus around communications – particularly fibre broadbandcompete, both at a Wholesale and 5G. As referenced above, this includedRetail level. This includes powers to set the publication by the Department for Digital, Culture, Mediaprices we can charge in certain markets and Sportto set service standards. Ofcom reviews markets regularly and can introduce, extend, relax or remove rules as a result of its Futurefindings. It has powers to conduct specific investigations about market behaviour, including price levels. In addition, Ofcom can set out rules for spectrum auctions and acts to promote consumer protection in the sector.

Ofcom will investigate our compliance with regulatory requirements and can impose fines and restitution on us if we fail to comply.

Ofcom also has powers to regulate the terms on which we’re supplied with certain services by others – e.g. mobile call termination – and can resolve disputes between us and other communications providers about the terms on which services are supplied. Appeals of regulatory decisions also give rise to risks (and opportunities).

Outside the UK, regulation defines where and how we are able to compete through licensing rules and defining the terms on which we are able to access networks of incumbent operators.

Potential impact

Ofcom has found us to have significant market power (SMP) in certain markets and has therefore implemented price controls for our services. Ofcom can also adjust past prices and therefore make us pay back amounts to wholesale customers. In addition to regulating our prices, Ofcom also has the ability to make us provide additional services and/or regulate how we structure our business.

Outside the UK, overly-restrictive licensing requirements or ineffective regulation of access to other networks mean we might not be able to compete fairly. Regulation can also define and control the terms of access to necessary regulated inputs, which raises our costs.

Lack of supportive or disruptive regulation could impact our ability to invest at pace and scale in ultrafast networks and converged connectivity, and could reduce our ability to innovate in building these systems. Further, an inflexible approach to regulation during the Covid-19 pandemic could stretch the delivery capability of our colleagues at a time when they’re focused on maintaining critical services and meeting customers’ needs.

Focus areas for 2020/21

In 2020/21, we will be focused on managing several key regulatory issues. We will seek to engage and work with Ofcom to explain sector competitive dynamics and implications for regulation; supportpro-investment changes to the regulatory framework for fixed access regulation for2021-26; and, as Ofcom’s Customer Fairness Framework evolves, try to ensure any interventions are proportionate and enhance the customer experience, prioritising support to customers during theCovid-19 pandemic.

In addition, we will seek to support a clear customer migration strategy for closure of the Public Switch Telephone Network (PSTN) in 2025, develop our position on the future regulatory model for digital platforms reflecting (accounting for any Covid-19 related delays) and assess any Covid-19 impacts on the format and/or timescale of the upcoming spectrum auction.

OPERATIONAL RISKS

Cyber Security

Cyber security risks could arise from our colleagues inside BT or from external sources including hacktivists, criminals, terrorists or nation states attacking our infrastructure and assets, e.g. through use of hacking tools, phishing scams or

disruptive malware. The sustained absence of key staff due to the Covid-19 pandemic could adversely affect our ability to defend against cyber-attacks.

Effective management of cyber risk is crucial to our reputation as a leader in cyber security, so we strive to, as far as possible, detect, prevent, limit the impact of and respond to any cyber-attacks that could threaten our operations.

By monitoring cyber-attacks on our networks and systems and our peers and customers, we see that hacking tools, phishing scams and disruptive malware are becoming more sophisticated and yet more accessible to attackers. In response, we continue to develop our cyber defence capability, make use of proactive threat-hunting and invest more in automatic detection and prevention systems.

Potential impact

The consequences of cyber-security risks can include disruption to our business, data being compromised at a time when communications are vital to the global response to theCovid-19 pandemic, major financial loss, long-term reputational damage, and loss of market share. Regulatory sanctions, fines and contract penalties might be applied, contracts might be terminated, and costly concessions might be needed, together with unplanned and rapid improvements to retain business and rebuild trust.

Focus areas for 2020/21

In 2020/21, we plan to continue our investment in our cyber defences, maintaining cyber hygiene, intelligence sharing, vigilance and collaboration. If we are unable to successfully implement these enhancements, we may not be able to keep pace with the evolving threat and protect BT and its customers.

Supply Chain

We operate in a global supply market. Our supply chains range from simple to very complex. It’s critical to our operations that we can guarantee their integrity and continuity.

Globalization means better sourcing opportunities, but brings challenges if suppliers become more geographically and culturally remote from our customers – or if governments put barriers in the way of doing business to protect national or regional economic interests.

Our dealings with suppliers follow our trading and ethical policies, from the way we choose them to the contracts we sign and how we pay them. A failure in the supplier selection process or in the ongoing management of any of our suppliers could result in disruptions to our business. This is further compounded by restrictions on high-risk vendors from the UK Government’s Telecoms InfrastructureSupply Chain Review and the impact on suppliers caused byCovid-19.

Potential impact

If something goes wrong in July 2018. There was alsoour supply chain, the speed and scale of impact can vary. We need to determine the potential damage to customer experience, the likelihood of higher costs and the potential damage to our brand. Selecting the wrong supplier for our requirements or over-dependence on certain suppliers could result in poor commercial terms, leading to a detrimental impact on our strategic, market and competitive position.

If we fail to effectively manage our suppliers andsub-suppliers it could result in business disruption, regulatory fines and/or brand damage, e.g. if suppliers fail to meet key regulatory obligations such as the EU General Data Protection Regulation 2018 (GDPR) or human rights laws and policies. In the case of GDPR, regulatory fines could amount to 4% of our global annual turnover.

Focus areas for 2020/21

In 2020/21, we will be focused on launching a new digital supply chain platform to deliver global standardization in our supplier selection process, assessing digital capabilities to enhance ourin-life risk management capability and management of external factors that generate significant supply chain risk including GDPR non-compliance, Brexit, Huawei ban, cyber-risk and, more politicalrecently, theCovid-19 pandemic.

Change Management

We are moving into the next phase of our transformation programme, implementing a wide-ranging change programme across the entire organization that will transform our customers’ and colleagues’ experience through the simplification of our products, processes, IT systems and networks.

To be successful in its more ambitious Transformation Agenda, BT needs to adapt the way in which it executes Change Management. Our next phase of transformation requires a new set of capabilities and enablers. In order to stay competitive we must redefine our approach to change management to focus on issues like consumerremoving obstacles to improve BT’s efficiency and productivity.

The Covid-19 pandemic has also placed further pressures on our transformation programme (e.g., resource availability and remote working) and the management of our business.

Potential impact

If we fail to realise the benefits of our transformation and manage the impacts ofCovid-19 it could negatively impact customer experience and our operational efficiency, as well as our ability to make future investments.

The impact ofCovid-19 is delaying our ability in some parts of the business to immediately realise the benefits of the transformation.

Focus areas for 2020/21

In 2020/21, we will be focused on developing and implementing a transformation delivery governance model, implementing programme management tools and continuing to develop the skills of our colleagues. We will also track the progress of the financial andnon-financial measures of the transformation and seek to continue the drive to identify and implement more transformation initiatives across the business. An inability to implement these programmes will impact our ability to successfully deliver operational improvements to our business.

Major Contracts

We have a number of complex and high-value national and multinational customer contracts. The revenue and profitability of these contracts are affected by factors including variation in our costs of performing the contracts; achieving cost savings anticipated in contract pricing (both in terms of scale and time); delays in achieving agreed milestones owing to factors either in or outside of our

control; changes in customers’ needs, their budgets, strategies or businesses; and our suppliers’ performance. Any of these factors could make a contract less profitable or even loss-making.

The degree of risk varies with the scope and life of the contract and is typically higher in the early stages. Some customer contracts need investment in the early stages, which we then expect to recover over the life of the contract.

Major contracts often involve implementing new systems and communications networks, transforming legacy networks, managing customer networks and developing new technologies. Delays or missed milestones might have an impact on us recovering these upfront costs. There’s a substantial performance risk throughout the term of some of these highly complex contracts.

Covid-19 related challenges, including colleague absenteeism, supplier disruption and changing customer demands, may also impact our ability to deliver on all aspects of our major contracts.

Potential impact

If we don’t manage to meet our commitments under these contracts – or if we fail to respond to changes in our customers’ needs, budgets, strategies or businesses – then our expected future revenue, profitability and cash generation may go down. Unexpectedly high costs associated with fulfilling particular transformational contracts could also hit profitability. Our brand and reputation may be damaged by service failures, particularly those associated with critical infrastructure contracts and security and competitiondata protection services.

Covid-19 could inhibit our ability to meet our contract delivery timescales and service levels. Additionally, our customers may experience shrinkage, consolidation or failure as a result of the Covid-19 pandemic, which could negatively impact on our profits.

One of our highest profile contracts is providing a key element of the UK Emergency Services Network (ESN) on our EE mobile network. The complexities described above all apply to this programme. This service is delivered with several partners and managed by the UK Home Office. Furthermore, the criticality of this service increases our risk exposure, and given the network provides emergency services communications for the UK, anyin-life network performance issues could have reputational consequences for BT.

We’re continuing to deliver contracts with UK local authorities through regional fibre deployment programmes, including the Building Digital UK programme. As with our other major contracts, if we fail to deliver these contracts successfully it might lead to reduced future revenue, profitability and cash generation. As well as carrying a higher reputational risk, these contracts present specific risks around deployment, delivery and our ability to recover public funding. We also have an obligation to potentially either reinvest or repay grant funding depending on lots of different factors, including how many customers take up a new service.

Focus areas for 2020/21

In 2020/21, we will aim to adopt a clear approach to understanding the impact of theCovid-19 pandemic and implement effective strategies to manage them and recover any impacted contracts, develop skills across the contract management teams to better identify and manage risk, utilize enhanced contract management tools to further support front-line contract managers and deploy Artificial Intelligence (AI) capability to enhance the analysis of contractual risks and obligations.Covid-19 presents additional challenges, e.g. the availability of our colleagues, services provided by our supply chain and changing customer demands.

Customer Experience

There is a risk that our customer experience (e.g. products and services, culture, brand, processes, leadership, technology, colleagues and policies) may not be brand enhancing nor drive sustainable profitable revenue growth.

Potential impact

If we fail to transform effectively it could adversely impact our brand value, colleague pride and advocacy, customer retention, Group revenues and/or regulatory compliance and associated financial penalties. Perceptions relating to poor customer experience also have the potential to influence political and regulatory discussions and interventions, which can in turn impact our business.

Focus areas for 2020/21

In 2020/21, we will be focused on maintaining our network performance and customer experience during theCovid-19 pandemic, rapidly rolling out FTTP and 5G networks and continuing the communicationsdevelopment and launch of innovative propositions. Customer experience may suffer if we are unable to successfully implement these initiatives.

Service Interruption

Our commercial success is firmly rooted in our reputation for the resilience of our network and services. There is a risk we are unable to protect the customer experience through the continuity ofend-to-end customer services including network connectivity, network performance, IT systems and service platforms. This could be caused by failing to prevent or respond to natural perils, pandemics, network and systems faults, malicious acts, supply chain.chain failure, software or infrastructure outages.

Potential impact

The consequences of a major outage could result in regulatory breaches, financial penalties, reduced productivity and potential harm to individuals. Damage to our reputation, especially during theCovid-19 pandemic when the territories in which we operate are so reliant on our connectivity, could impact our ability to retain and grow our customer base. Regulatory sanctions, fines and contract penalties might be applied, contracts might be terminated, and costly concessions might be needed, together with unplanned and rapid improvements to retain business and rebuild trust. We might also miss opportunities to grow revenue and launch new services ahead of the competition.

Focus areas for 2020/21

In 2020/21, we will be focused on addressing several key areas that could result in service interruptions, which include improving our change management processes through strengthening our testing capability and driving greater accountability across third-party changes; initiating projects aimed at mitigating the longer-term risk to our estate posed by climate change and associated extreme weather events; heightening monitoring and service protection measures across all services and platforms in response toCovid-19, with increased call capacity between mobile and fixed lines to handle increased demand; and planning to manage near and longer-term service risks related to a transition from the Covid-19 pandemic lockdown back to a normal trading model.

If we are unsuccessful in managing and improving these processes and programmes our ability to reduce the effects of service interruptions to our business could be impacted.

Colleague Engagement

Our colleagues are central to everything we do and a vital part of our ambition to deliver a great customer experience and sustainable, profitable revenue growth. Our colleague strategy supports this ambition by creating an inclusive and enjoyable workplace so that our colleagues can thrive as part of a dynamic business. Great colleague engagement is necessary to ensure we meet our strategic aims.

Potential impact

We need to transform our business while also continuing to recruit, retain and engage our workforce to deliver a great customer experience and grow the business. A negative reaction to change or poor consultation could result in our colleagues not being sufficiently engaged to enable us to achieve our strategic objectives. This could impact talent retention resulting in a loss of critical skills and increased recruitment costs. Poor engagement could also slow the change agenda and/or lead to industrial unrest and action, which in turn could cause disruption to our operations and the services that we provide to our customers. Further, reduced colleague attendance, engagement and discretionary effort could have an impact on our customer experience if we fail to support their needs during theCovid-19 pandemic.

Focus areas for 2020/21

In 2020/21, we intend to focus on the robustness of the business continuity plans that enable us to adapt at pace to changing circumstances, continuing extensive communication with our colleagues and taking steps to safeguard their wellbeing and investing in direct engagement mechanisms (e.g. our Colleague Board alongside our formal colleague representative structures).

FINANCIAL RISKS

Pensions Risk

We have a large funding obligation to our defined benefit (DB) pension schemes. The largest of these,

Our defined benefit pension schemes, in particular the BT Pension Scheme (BTPS or Scheme),(BTPS) which represents over 97% of our pension obligations. The BTPS faces similar risks to other UK DB schemes: things likeobligations, could become more of a financial burden as a result of future low investment returns, highchanges in inflation expectations, longer life expectancy andexpectancies, a more prudent approach being taken (e.g. if BT’s financial strength is viewed as having worsened) and/or regulatory changes may all meanchanges.

The forthcoming review of contributions for the BTPS becomes moreas at 30 June 2020 and recent market movements following the Covid-19 outbreak have increased the magnitude of a financial burden.this risk.

Potential impact

The next valuation of the BTPS is scheduled to take place as at 30 June 2020. When a valuation is calculated, the funding position is affected by the financial market conditions at the valuation date. When determining expected future returns on the Scheme assets, different factors are taken into account, including yields (or returns) on government bonds. If assets returns are lower than expected over the period to the next valuation, or a lower future investment return assumption is adopted at the 30 June 2020 valuation outcome leads to an increase in cash contributions to the deficit would likely increase, potentially leading to a higher level of future deficit payments. IndirectlyBTPS, it may also have an adverse impact on our share price and credit rating.

Any deterioration in our credit rating would increase our cost of borrowing and may limit the availability or flexibility of future funding for the group, thereby affectingcould reduce our ability to invest in our business and/or pay dividends dividends.

A rise in the BTPS deficit could negatively affect our share price and/or repay debt ascredit rating making it matures.harder and more expensive to access funding.

What’s changed over the last year?Focus areas for 2020/21

The actuarial valuation of the Scheme as at 30 June 2017 was announced in May 2018. This led to a £2bn contribution in June 2018, funded by proceeds from issuing long-term bonds to the BTPS. Agreement of this valuation and the associated funding plan provides certainty over the level of cash contributions required untilIn 2020/21, we will be agreeing the next triennial valuation is concluded, taking place no later than as at 30 June 2020.

As part of the actuarial valuation, we discussed the Scheme’s approach to investing assets with the Trustee. The resulting changes should help protect the BTPS from volatile investment returns and high inflation by investing in a way which provides greater certainty over the Scheme’s ability to meet benefit payments over the longer term.

We also reviewed pension arrangements for our UK people, closing Sections B and C of the BTPS, as at June 2020, which will set the contributions we need to future benefit accrual on 30 June 2018 (representing more than 99% of active members at the time). This has largely removed thebuild-up of additional future liabilities in the BTPS.

In March 2019 The Pension Regulator issued its Annual Statement, which increased the regulatory pressure on companies –make for example encouraging trustees to seek shorter Recovery Plans (of less than 7 years) and to aim for contributions no lower than dividend payments. This could potentially have a negative impact on the level and timing of BT’s cash contributions following the next valuation at 30 June 2020.three years. We will also review and prepare a response to relevant consultations, including those on RPI reform and the funding regime for defined benefit pension schemes, intended to support the Pensions Regulator’s aim of being clearer, quicker and tougher.

Financial Risk

In common with other major international businesses, we’reWe’re exposed to a variety of financial risks. These include treasury risks, which arise principallyincluding funding and liquidity risks (including those arising from market risk (includingour underlying business operations) and also financial risks such as interest rate, risk and foreign exchange risk), credit risk, and liquiditycounterparty risk. They also include tax risk, principally that we needA failure to understand fully the current andproperly anticipate future tax consequenceschanges and/or comply with the tax rules of the countries in which we operate could expose us to poor business decisions to comply with tax rules and avoid(e.g. under-pricing contract bids), financial penalties and reputational damage.

Potential impact

Funding and liquidity risk could impact the viability of our business and ability to continue as a going concern, including a downturn in our business operations for unexpected factors such asCovid-19. A deterioration in liquidity could have an adverse impact on the Board’s assessment of going concern, particularly if combined with an inability to refinance maturing debt.

If there is an adverse movement in foreign exchange and interest rates there could be a negative impact on the group’sGroup’s profitability, cash flow, and balance sheet. Sensitivity in the income statement and shareholders’ equity arising from interest rate and foreign exchange volatility is shown in note 2728 to the consolidated financial statements.

The failure of Treasury counterparties to honour financial obligations could have an adverse impact on the group’sGroup’s liquidity (for example(e.g. from the loss of cash deposits) and profitability (for example(e.g. from increased finance expenses)credit losses). A deterioration in liquidity could have an adverse impact on the Board’s assessment of going concern, particularly if combined with an inability to refinance maturing debt.

If we fail to comply with tax rules then we could face financial penalties and reputational damage. Beyond compliance, if we don’t adequately reflect the current and future tax consequences in our business decisions, we might make bad decisions resulting in financial loss and potentially financial misstatements, as well as reputational damage.

What’s changed overFocus areas for 2020/21

In 2020/21, we are focused on maintaining sufficient funding and liquidity for our updated annual business plans, especially in light of the last year?

We continueuncertainty created byCovid-19, managing any increased volatility in foreign exchange and counterparty risks associated with the end of the transitional Brexit period andCovid-19, and monitoring the development of the OECD’s proposals to face similar treasury risks as in financial year 2017/18.

Earlier in the year S&P and Fitch downgraded our credit rating, due to concerns over the effect that competing pressures, including those related to our pension and our network investments, may have on our cash flows. The three main agencies now rate us Baa2/BBB with stable outlook.

Globalupdate international tax rules also continue to evolve, for exampledeal with the OECD’s Base Erosion and Profit Shifting project, US tax reform,digitalization of economies. If we are unable to successfully manage the European Commission’s challenge to tax practices under state aid provisions, and EC and UK proposals foruncertainty resulting from the introductionCovid-19 pandemic it could increase the magnitude of an interim digital services tax. All these change the current and future tax consequences of business decisions. As the external tax environment changes, we have to make more judgements to forecast the future tax consequences of business decisions.this risk.

COMPLIANCE RISKS

Health, Safety and Wellbeing

Our colleagues are crucial to our business and if they feel safe, healthy and happy they will perform better for our customers and shareholders. Working to reduce the risk of harm to our colleagues helps us comply with health and safety laws wherever we operate.

Many of our colleagues, especially our UK engineers, work for much of the time in community settings where we have limited control over the working environment. Much of the network is carried above ground level and temporary work at height is a material risk for us. All of our colleagues work in a fast-paced and highly competitive sector where change is constant and psychological pressures are significant. Managing physical and psychological hazards is therefore complex.

There is a risk we might fail to look after the health, safety and wellbeing of our colleagues or members of the public, in breach of health and safety laws and regulations.

Potential impact

We work to make sure our colleagues go home safely every day. Any health and safety failure could result in injury to members of the public or our colleagues, financial penalties, disrupted or ceased operations and/or reputational damage.

Failure to maintain the wellbeing of our colleagues could diminish our ability to transform our business or to recruit, retain or engage our workforce to deliver great customer experience and grow the business.

Focus areas for 2020/21

In 2020/21, we will be focused on the rollout of our fall-arrest harness training programme to promote safe working at height, continuing to assess the public perceptions on theUK-wide 5G rollout and ensure compliance with European and industry guidance, and strengthening our assurance and oversight functions. Further, we continue to monitor the potential impact ofCovid-19 pandemic on our colleagues, monitoring and complying with global and government public health guidance, assessments and measures. This informs our business continuity planning function. BT’s ability to manage these initiatives will impact on its risk associated with health, safety and wellbeing.

Significant Financial Control Failure Risk

Financial controls, and the assurance that exists over them, play an important part in our ability to prevent and detect inappropriate behaviour and error.financial errors. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Potential impact

Failures in our financial control framework could result in financial misstatement, financial loss including a failure to prevent fraud, or key decisions being taken based on incorrect information.

What’s changed over the last year?Focus areas for 2020/21

A new central financial controlsIn 2018/19 management undertook a continuous improvement and assurance team has been created with responsibility for setting and maintaining finance controls, policies and standards. During the year, the team continued the improvements and commenced a significant Sarbanes-Oxley control enhancement programme whichin relation to its framework of internal control over financial reporting. This programme identified two particular areas requiring remediation:remediation, specifically, IT general controls and risk assessment, which were reported as material weaknesses in particular, documentation of information used2018/19. While management have made good progress in controls. Although significant improvements haveremediating these material weaknesses during 2019/20, the remediation activity had not fully been made, remediation and testing of all remediating plans was not complete at 31 March 2019 and will be a significant focus for 2019/20. Wecompleted in the year. Therefore management has concluded that unremediated deficiencies in the two areas resulted in a material weakness in our internal control over financial reporting was not effective as atof 31 March 2019 as defined by2020 due to the Sarbanes-Oxley Act.material weaknesses in relation to IT general controls and risk assessment. As a result, management concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or furnish under the Exchange Act is recorded, processed, summarisedsummarized and reported, within the time periods specified in the applicable rules and forms.

Management also carried out an assessmenthas been implementing, and continues to implement, measures designed to ensure that control deficiencies contributing to the remaining material weaknesses in the areas of our close procedures, which resulted in more detailed and holistic quarterly reviews, improved quality and timeliness of reviews, as well as reduced duplication and increased standardisation.

The central financialIT general controls and assurance teamrisk assessment are remediated, and that these controls are designed, implemented, and operating effectively. This will continue to be a focus for 2020/21. The Group will also supportfocus on the BT units’ first line compliance teams in the enhancementongoing implementation of technology enablers and compliance with their financial processexpanding our use of data analytic procedures.

Privacy and related control frameworks. The programme of detailed balance sheet reviews, including in our operations outside the UK have continued in 2018/19. All actions resulting from these reviews are tracked and monitored and the reviews performed in 2018/19 have not identified significant issues or areas of concern.

KPMG became our new external auditors this year. We have also brought together, under new management, our risk management, compliance, internal audit and some second line assurance functions with the intention of creating more integrated and aligned assurance activity.

Privacy, Data Protection and Governance

We control and process huge quantities of customer data around the world, so observing data privacy laws is something we take extremely seriously. It’s essential that individuals and businesses can trust us to do the right thing with their data.

We make sure our customers’ data is secure and protected against both internal and external threats (e.g. cyber-attacks). Being trusted with our customers’ data goes further than that though. It means preserving the integrity of the personal data we process, and only keeping the things we need to provide customers with the services they’ve signed up for. It also means being transparent around how we use customer data, who we share it with, making sure the way we process personal data is legal, fair and in line with customers’ rights and wishes, and ensuring that we fulfil the legal obligations we have when customers want to exercise their rights under data legislation.

As a communications provider we currentlyWe operate under a stringent reporting regime to tell the UK Information Commissioner’s Office (ICO) if we become aware of a personal data security breach. We must also tell any affected individuals as quickly as possible if the incident is likely to have an impact on them.

An individual’s fundamental right to privacy is reflected in the fact that data privacy laws are in force in more than 100 countries. The nature of those laws varies across different parts of the world. Increasingly we (and other multinationals) have to show that we’re handling personal data in line with a complex web of national data laws and society’s ethical expectations.

As a result of Covid-19 an increased number of our colleagues are currently working from home, which presents additional data security and privacy related risks.

Potential impact

Failing to stick to data protection and privacy laws could result in regulatory enforcement action, significant fines, class-action lawsuits, prison sentences and thea regulator telling us to stop processing data.

On top of that,In addition, we could see hugeexperience both significant reputational damage and big financial losses. Those losses could come from fines and damages if we fail to meet our legal requirements, as well as the subsequentincreased customer churn. Companies who’ve had high profile data incidents have seen a significant impact to their share price and suffered ongoing costs from theirnon-compliance.

What’s changed over the last year?Focus areas for 2020/21

The EU General Data Protection Regulation (EU GDPR) came into forceIn 2020/21, we will be focused on 25 May 2018. It is deemed one of the biggest shake ups in data law for over a decade. It’s been created to update the existing lawfurther developing our operating model to ensure that individuals’ data is protectedregulatory requirements and securedcompliance expectations are consistently and gives people a greater say asappropriately ascertained, communicated and monitored across our business. Further, we will seek to how their data is used. It also increases their rights as to how their personal data is kept, usedevaluate and retained by businesses. The sanctions for breaching the GDPR are significantly higher than under the previous regime, which could result in a substantial fine in the event of a breach.

Scrutiny from national regulators is increasing as companies are monitored to ensure they are working in compliance with the new law. In addition within the last 12 months several large companies have suffered further well-publicised data incidents.

Health, Safety and Wellbeing

Our colleagues are crucialenhance systems related to our businessevolving data processing operations, develop new and if they feel safe, healthytargeted training and happy they will perform better for our customersengagement and our shareholders. Workingfurther enhance the clarity and consistency around its governance and assurance programmes. Our ability to reduce themanage privacy and data protection risk of harm to our people helps us comply with health and safety laws wherever we operate.

Many of our people, especially our UK engineers, work for much of the timeeffectively is dependent in community settings where we have limited control over the working environment. Much of the network is carried above ground level and temporary work at height is a major risk for us. All of our people work in a fast-paced and highly competitive sector where change is constant and psychological pressures are significant. Managing physical and psychological hazards is therefore complex.

There is a risk we might fail to ensure the health, safety and wellbeing of our people or members of the public, in breach of health and safety laws and regulations.

Potential impact

We work to make sure our people go home safely every day. Any health and safety failure could result in injury to our people or members of the public, financial penalties, hindered or stopped operations and/or reputational damage.

The wellbeing of our colleagues is important if we’re to transform our business while continuing to recruit, retain and engage our workforce to deliver a great customer experience and grow the business. An adverse reaction to change could impact talent retention, resulting in a loss of critical skills and greater need for external recruitment, which would add cost to the business. Poor engagement also raises the risk of general industrial unrest and action.

What’s changed over the last year?

We aim to adapt our technology and working practices to help reduce the physical risks to our people, although there can be no assurances that these changes will be successful. For example, this year we introduced new TETRA ladders to the Openreach workforce to support safer working at height.

In parallel, a change in our workforce is increasing risks in areas such as driving. We’ve had a mature workforce with little labour turnover for many years. That cadre is reaching retirement age and so we’re recruiting large numbers of younger people. The new intake may have a different risk attitude, combined with less experience, so we need to make sure we put in additional safeguards with less reliance on expertise and individual judgement.

The pace of upgrading the network, fixed and mobile, has continued to accelerate. That increases our civil engineering workload and the hazards and risks associated with that type of work.

The pace and scale of change within the business has also continued to accelerate and we’re aware this has a psychological impactpart on our people. Finally, we’ve also appointed a new Director of Health, Safety and Wellbeing this year.ability to successfully implement these initiatives.

Ethical Culture

It’s crucial that we maintain high ethical standards. We respect human rights and we don’t tolerate fraud, bribery, any form of corruption or any illegal or other unethical activity.

We follow local and international law, including anti-corruption and bribery laws. The UK Bribery Act and US Foreign Corrupt Practices Act (FCPA) have extraterritorial reach, so cover our global operations. We also have to make sure we follow trade sanctions and import and export controls. We comply with the Modern Slavery Act and follow international

standards on human rights, such as the International Labour Organisation’sOrganization’s Principles and the UN Guiding Principles on Business and Human Rights.

We also face the risks associated with inappropriate and unethical behaviour in local and other markets by our peoplecolleagues or associates, such as suppliers or agents, which can be difficult to detect. ThereFor instance, there is also a risk that the prevailing culture in BT leads to the failure to recognize or promptly report wrongdoing by our controls, which are designedcolleagues or those working for us or on our behalf. This includes a failure to prevent, detect and correct such behaviour, may be circumvented. Controlscomply with our internal policies and procedures or the laws to which we are subject, such as anti-bribery and corruption, trade sanctions and human rights. Such policies, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and there can be no assurance that any design will succeed in achieving its stated goals under all potential conditions, regardless of how remote.

Potential impact

If our people,colleagues, or associates like suppliers or agents, breach anti-corruption, bribery, sanctions or other legislation there could be significant penalties, criminal prosecution, and damage to our brandreputation and reputation.loss of customers and revenue. This could have an impact on future revenue and cash flow depending on the nature of the breach, the legislation concerned and any penalties. If we were accused of corruption, bribery, human rights abuses, violating sanctions regulations or other laws, it could lead to reputational damage with investors, regulators, civil society and customers. A breakdown in our financial control framework could result in financial misstatement.

What’s changed overFocus areas for 2020/21

In 2020/21, we will continue to focus on due diligence, monitoring and review activities on higher risk areas and third parties, including agents, resellers and distributors (ARDs), joint ventures and subsidiaries. We will seek to develop a new and targeted approach to Senior Manager training and engagement on ethics and compliance and implement the last year?

We’ve seen an increase in Speak Up (BT’s confidential whistleblowing service) reportsBT Integrity and conflict of interest registrations. This is indicative of a culture where people are more awareCompliance programme (BTIC) to enhance the clarity, consistency and confident to tell us about their concerns.

In terms of anti-corruptiongovernance around how BT sets and bribery enforcement generally, we’ve continued to see a steady flow of significant cases from both the UK Bribery Actgoverns policy, and the FCPA. There’s also been an increase in legislation (either enacted or proposed) to address and report on human rights abuses by companies.

OPERATIONAL RISKS

Customer Experience

There is a riskensuring that our customer experience (products and services,organizational culture brand, processes, leadership, technology, people and policies) may not be brand enhancing nor drive sustainable profitable revenue growth.is fit for purpose everywhere we operate.

Potential impactEMERGING RISKS

If we don’t deliverWe face a great customer experience it could damage our brand, cause customers to leave and so reduce our revenue, or even lead to financial penalties. It could also impact our people’s pride in working for BT. Perceptions around poor customer experience alsonumber of uncertainties that have the potential to influence politicalbe materially significant to our long-term strategy but cannot be fully defined as a specific risk at present and regulatory discussionstherefore cannot be fully assessed or managed. These emerging risks typically have a long time horizon, such as climate change, technology evolution and interventions, whichlong-term geopolitical trends.

Our enhanced risk management framework places greater emphasis on the identification of emerging risks, so that we can in turn thenproactively monitor them and ensure they inform our strategic planning and resilience activities.

A focus on climate change:

The physical impacts of climate change and the actions taken by governments and society to try and limit global warming to well below 2°C by 2100 may impact our business.

What’s changed over the last year?

Customer complaints to Ofcom reduced by a third for both BT’s consumer broadband and EE’s mobile customers when measured on a year on year basis. From the 1^st April, Consumer has chosen to automatically compensate BT brand customers if we miss our provision or repair promises. EE will join this scheme in 2020 with Plusnet to follow.

Our consumer brands came together under a new Consumer Unit and we combined Business & Public Sector with Wholesale & Ventures to create a new ‘Enterprise’ division. Our One BT change programme includes activity to simplify the way we work. However, as that and other change programmes progress, there emerges an associated risk that the volume of change across BT could result in a loss of focus on delivering for the customer.

We also launched our new Be There brand positioning and launch new and innovative products to further enhance our customers’ experience.

Major Contracts

We have a number of complex and high-value national and multinational customer contracts. The revenue and profitability of these contracts are affected by things like: variation in cost; achieving costsavings anticipated in contract pricing (both in terms of scale and time); delays in achieving agreed milestones owing to factors either in or out of our control; changes in customers’ needs, their budgets, strategies or businesses; and our suppliers’ performance. Any of these factors could make a contract less profitable or even loss-making.

The degree of risk varies with the scope and life of the contract and is typically higherassets in the early stages. Some customer contracts need investment in the early stages, which we then expect to recover over the life of the contract.

Major contracts often involve implementing new systemsUK and communications networks, transforming legacy networks, managing customer networks and developing new technologies. Delays or missed milestones might have an impact on us recovering these upfront costs. There’s a substantial performance risk throughout the term of some of these highly-complex contracts.

Potential impact

If we don’t manage to meet our commitments under these contracts – or if customers’ needs, budgets, strategies or businesses change – then our expected future revenue, profitability and cash generation may go down. Unexpectedly high costs associated with fulfilling particular transformational contracts could also hit profitability. Earnings may drop. Contracts may even become loss-making through loss of revenue, changes to customers’ businesses (due to, for example, mergers or acquisitions), business failure or contract termination.

One of our highest profile contracts is providing a key element of the UK Emergency Services Network (ESN) on our EE mobile network. The complexities described above all apply to this programme. This service is delivered with several partners and managed by the Home Office. Furthermore, the criticality of this service increases our risk exposure, and given the network provides emergency services communications for the UK, anyin-life network performance issues could have reputational consequences for BT.

We’re continuing to deliver contracts with local authorities through regional fibre deployment programmes, including the Broadband Delivery UK programme (BDUK). As with our other major contracts, if we fail to deliver these contracts successfully it might lead to reduced future revenue, profitability and cash generation. Asglobally, as well as carrying a higher reputational risk, these contracts present specific risks around deployment, delivery and our ability to recover public funding. Wesource raw materials. As our customers seek to reduce their own emissions, demand for our propositions and services may also have an obligation to potentially either reinvest or repay grant funding depending on lots of different factors – including how many customers take up a new service.

What’s changed over the last year?

Governance and risk management over our major customer contracts remains a key area of focus. Initiatives over the course of the year have included a focus on: learning more about why the performance of some contracts deteriorates and how to stop it happening in future; the process for management reviewing contracts; long-term forecasting; our contract management systems and governance processes; and redefining and enhancing our controls and assurance.

On top of deploying the second and third phases of our BDUK contracts, we continued to win new BDUK work to further extend coverage of superfast broadband in rural areas. Although these third phase contracts are smaller in scale and coverage, the deployment challenges are significantly greater in terms of the geography encountered as we reach further into the final 5% of households.change.

We also agreed a new ESN contract framework withhave conducted an analysis of the Government. Whilepotential future climate-related impacts on BT; the main threats and opportunities identified are as follows:

Physical impacts

Policy decisions and reporting processes to make sure we identifylow carbon transition risks and mitigation activities and report them to management.

Service Interruption

Opportunities

In response, we continuehave pledged to develop our cyber defence capability, make use of proactive threat hunting and invest more in automatic detection and prevention systems.

Potential impact

The consequences of security risks can include major financial loss, long-term damage to reputation and loss of market share. Regulatory sanctions, fines and contract penalties might be applied, contracts might be terminated, and costly concessions might be needed, together with unplanned and rapid improvements to retainbecome a net-zero carbon emissions business and rebuild trust.by 2045. We might also miss opportunities to grow revenue and launch new services ahead of the competition.

What’s changed over the last year?

Cyber attackers are learning how to defeat conventional defences such as Anti-Virus (AV), proxy servers, and basic authentication. They are changing malware signatures faster than AV vendors can deliver matching identity files, launching Denial of Service attacks that are disguised as legitimate traffic at the application level, and using increasingly convincing phishing emails to trick users into giving access to restricted systems. The growth in ransomware attacks has made headline news and caused significant disruption to some of our corporate customers, but we have so far managed to avoid such consequences. Our incident management teams are gaining experience from these events and applying lessons learned to improve our responses. We’re also helping customers by sharing this expertise.

Major corporates have continued to fall victim to cyberattack, with a number of high-profile incidents occurring in 2018/19. Also of particular significance this year was the EU General Data Protection Regulation (EU GDPR) coming into force on 25 May 2018, which could be relevant to this risk where a cyber-attack also results in a data breach.

Supplier Risk

We operate in a global supply market. Our supply chains range from simple to very complex. It’s critical to our operations that we can guarantee their integrity and continuity.

Global markets expose us to global risks, including different standards in labour, environmental and climate change practices, increasing regulation and geopolitical events. We weigh up the impact and likelihood of external market forces on our suppliers’ ability to support us.

Globalisation means better sourcing opportunities, but brings challenges if suppliers become more geographically and culturally remote from our customers – or if governments put barriers in the way of doing business to protect national or regional economic interests.

Our dealings with suppliers follow our trading and ethical policies, from the way we choose them to the contracts we sign and how we pay them.

Potential impact

If something goes wrong in our supply chain, the speed and scale of impact can vary. We need to determine the potential damage to customer experience, the likelihood of higher costs and the potential damage to our brand. If substituting a failing supplier meant that we had to disrupt our business, it could cost us a lot of time and money. If we couldn’t find an alternative supplier, it might compromise the commitments we make to our customers, which could in turn lead to breach of contract, lost revenue or penalties.

If any link in our supply chain falls foul of the law, or failsplan to meet our ethical expectations, that could damage our reputation – possibly leading to legal action, fines and lost revenue.

If we don’t meet the expectations of regulators that govern us and the data we manage, it could result in significant penalties. In the case of EU General Data Protection Regulation 2018, this could amount to 4% of our global annual turnover.

What’s changed over the last year?

We dedicate time to assessing emerging geopolitical threats and the impact they could have on our supply chain. These include the impacts of the UK vote to leave the EU, which has required extensive preparation on our part to understand our suppliers’ readiness and the impact the availability of goods and services. Other impacts of supplier risk include the threat of modern slavery and human trafficking; and the growing threat of cyber-attacks on our systems and networks where our suppliers represent a source of vulnerability.

We continue to monitor the trend for mergers and acquisitions in some of the global markets we do business in. It highlights the risk of us becoming too dependent on single or monopolistic suppliers. We also try to make sure that suppliers do not become too dependent on us. Both scenarios are unhealthy for our business.

With EU GDPR coming into force, we worked closely with our supplierstarget through the yearpurchase of 100% renewable electricity, converting our vehicle fleet to help protect our peopleultra-low emissions vehicles and customers and incorporateprivacy-by-design and default into the products and services they supply us. More broadly, we have also started work to establish a new centralised third-party risk and control capability.

Over the course of the year there has been significantgeo-political focus on Huawei, one of our major suppliers whose products include mobile handsets and also equipment for both current networks and for future 5G networks. On 15 May 2019, the U.S. government issued an Executive Order relating to the information and communications technology and services supply chain, which allows for the prohibition of certain transactions that pose a risk to U.S. national security. On 16 May 2019, the U.S. Department of Commerce amended its Entity List of restricted persons to include a number of Huawei entities. Certain transactions with the listed Huawei entities of any item subject to the Export Administration Regulations now require prior licensing. On 20 May 2019, the Department of Commerce issued a Temporary General License allowing specified activities for a period of 90 days. We have been closely monitoring these developments and will continue to do so as governments determine their future policies. In December 2018 we announced that in line with our long-standing network architecture principles around the use of Huawei, we will replace the current Huawei 4G core (inherited through the EE acquisition). This will be implemented as we move to a future new and combined 4G/5G core.

Colleague Engagement

Our people are central to everything we do and a vital part of our ambition to deliver a great customer experience and sustainable, profitable revenue growth. Our people strategy supports this ambition by creating an inclusive and enjoyable workplace so that our people can thrive as part of a dynamic business. Great employee engagement is necessary to ensure we meet our strategic aims.

Potential impact

We need to transform our business while also continuing to recruit, retain and engage our workforce to deliver a great customer experience and grow the business. An adverse reaction to change could impact talent retention resulting in a loss of critical skills and greater need for external recruitment, which would add cost to the business. Poor engagement also raises the risk of general industrial unrest and action, which in turn could cause disruption to our operations and the services that we provide to our customers.

What’s changed over the last year?

We’ve worked constructively with our unions this year to agree a number of transformation initiatives, including changes to our defined benefit pension scheme and the TUPE transfer of our people into Openreach Limited. As we create a simpler business, we’re also working closely with them to roll out a new people framework defining job families and career levels for our people.

Change Management

We are implementing a wide-ranging change programme across the entire organisation known as One BT. We need to continue to deliver differentiated customer experiences, whilst being abledecarbonize our buildings. We are also considering our global response to have the financial capacity to invest in integrated network leadership. At the same time, we want BT to be a simple and agile business where our people can thrive.

In transforming our operating model, we need to manage this change carefully to ensure it delivers the desired outcomes. We recognise that such extensive change can also be a distraction and can cause uncertainty amongst our colleagues, so it’s important that we keep focusedphysical climate impacts, building on delivering for our customers.

Potential impact

If we do not manage our change programmes carefully then they will not deliver the business outcomes that we are trying to achieve. That could result in poorer customer experiences, negative impacts on employee engagement, or potential overspend on the projects themselves, and at the end of the programmes we may not have achieved the efficient processes needed to deliver a great customer experience, the desired cost savings, or differentiated products and services we were trying to launch.

As we describe elsewhere, we’ve been working hard on improving our customers’ experiences. If our transformation programmes do not deliver their intended customer benefits, or divert colleagues’ attention away from serving our customers, then we may suffer a reductionwork in the quality of theUK to implement flood defences and minimize service we provide, and as a result incur customer churn and even financial penalties in some cases.disruption.

There is also a risk that we could overspend on the change programme itself.

What’s changed over the last year?

Over the past year, we have progressed delivery of our BT transformation plan and reorganising our business, including establishing a new people framework for our management grades. Work has continued delivering a new Digital Global Services with a new organisational structure. We have also completed the integration of our Business and Public Sector and Wholesale and Ventures units into a single new Enterprise unit.

ITEM 4. INFORMATION ON THE COMPANY

4.A History and development of the company

Background

BT Group plc is a public limited company registered in England and Wales and listed on the London and New York Stock Exchanges.Exchange. It was incorporated in England and Wales on 30 March 2001 as Newgate Telecommunications Limited with the registered number 4190816. Its registered office address is 81 Newgate Street, London EC1A 7AJ and its telephone number is 020 7356 5000 (from within the United Kingdom) and +44 1793 596 931 (from outside the United Kingdom). The company changed its name to BT Group plc on 11 September 2001. The principal laws and legislation under which BT Group plc operates is the Companies Act 2006, as amended, and regulations made under it.

Following the demerger of mmO2 from BT in November 2001, the continuing activities of BT were transferred to BT Group plc.

British Telecommunications plc is a wholly-owned subsidiary of BT Group plc and encompasses virtually all the businesses and assets of the group. The successor to the statutory corporation British Telecommunications, it was incorporated in England and Wales as a public limited company, wholly owned by the Government, as a result of the Telecommunications Act 1984. Between November 1984 and July 1993, the Government sold all of its shareholding in British Telecommunications plc in three public offerings.

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

4.B Business overview

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

Further note on certain activities

In addition, under Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13 (r)13(r) to the Securities Exchange Act of 1934, we are required to disclose whether BT or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or certain designated individuals or entities. Disclosure is required even when the activities were conducted outside the US bynon-US entities and even when they were conducted in compliance with applicable law.

During 2018/19,2019/20, certain of the group’snon-US subsidiaries or othernon-US entities conducted limited activities in, or with persons from, certain countries identified by the US Department of State as State Sponsors of Terrorism or otherwise subject to US sanctions. These activities, which generally relate to the provision of communications services to embassies and diplomatic missions ofUS-allied governments, other Communication Providers, news organisations, multinational corporations and other customers that require global communications connectivity, are insignificant to the group’s financial condition and results of operations.

BT has a contract in place with Telecommunication Infrastructure Company (TIC), to make and receive voice calls from Iran to the UK. No payments have been released to TIC during 2019/20.

BT entered into a Framework Agreement with Rafsanjan Industrial Complex (RIC) for business consultancy services in May 2010 and provided an initial consultancy engagement under phase 1 of the agreement. In February 2011, phase 2 was agreed with RIC however BT stopped work in December 2011 due to the geopolitical situation. RIC made an advance payment to BT of €384,120 to carry out the phase 2 work.

BT’s subsidiary, EE (the acquisition of which was completed on 29 January 2016), has in place roaming partner agreements with Mobile Company of Iran (MCI), and Taliya Company (also known as Rafsanjan Industrial Complex). These bilateral agreements allow the transmission of mobile calls.calls and SMS as well as the usage of mobile data services. There has been no traffic with Taliya in 2018/19.2019/20. The value of the gross revenue to EE under these contracts is less than £25,000, although no payments have been made or received in 2018/19.2019/20.

4.C Organizational structure

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

4.D Property, plants and equipment

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

ITEM 4A. UNRESOLVED STAFF COMMENTS

As far as the Company is aware, there are no unresolved written comments from the SEC staff regarding its periodic reports under the Exchange Act received more than 180 days before March 31, 2019.2020.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5.A Operating results

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

5.B Liquidity and capital resources

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

5.C Research and development, patents and licenses

Our research programmes are carefully designed to support the strategic aims of the whole of BT’s business and, even more importantly, to deliver the absolute best for our customers.

We work with the very best technologists from all over the world, drawing research & technologies from partnerships with universities and academia,start-ups, strategic partners, Government bodies, other telcos and key customers. We apply our own deep research skills & expertise, combined with our business and marketknow-how, to deliver innovative solutions that better serve our customers.

Key areas of focus include the pioneering work we are driving with partners and standards bodies, in network technologies to enable our customers to get the data speeds they need at a competitive cost.

Then there’s our business and operational transformation research programmes. These have led us to transform the way we serve our customers and manage our networks.

Our industry-shaping research into the critical technologies of our time – ranging from security, cloud computing, the Internet of Things to mobility, TV & content and big data – is pioneering new products and services across BT Group.

Converged network research

The ability to provide world-class connectivity across converged networks is an absolute priority for BT. That’s why our research mission is to accelerate the adoption of converged networks. We are exploring the possibilities of virtualised environments such as cloud-centric networks and IT convergence and expanding the reach and coverage of our fixed and mobile networks into rural areas.

In particular, for connected cars and trains we are researching how 5G network slicing could help deliver dedicated,low-latency networks which are essential for the large-scale introduction of safe and secure connected vehicles.

And because 5G will be based on virtualised infrastructures, we are carrying out a broad spectrum of research initiatives looking at programmable networking and software-defined networks (SDN) and network functions virtualisations (NVF), disaggregation, open architectures and how they can empower our customers.

AI, Big Data

Our aim is to help the company become more efficient in the way we use data and information to manage our business and deliver products and services to our customers. We want to better understand how best to store, harvest and rapidly analyse data in order to transform the way we manage our networks and how to harvest the vast quantities of information being collected.services. Using analytics and data science, we are also exploring how artificial intelligence (AI) technologies can analyse data to help us better predictmake our operations and service smarter such as predicting future trends.

Cybersecurity

In cybersecurity we are investing heavily in research and development to come up withcreate robust solutions that secure our networks and help our customers do the same.services for customers.

The research we do is focused on three main areas with the first of these being prevention, working on building systems and virtual environments like cloud or IoT networks that are intrinsically very hard to break into.

Another key area for us is detection, and prediction, where AI, machine learning and big data analysis can help us to create sophisticated network ‘alarm systems’ that find anomalies in large data sets for investigation.

Finally we are researching augmentation, using interactive AI and reactdata visualisation to them orsupport expert users in rapidly assessing and responding to predict threats before they happen. We are also researching interactive visualisation technologies that allow humans to assess, review and take the necessary action in a way that’s innovative.

threats. Innovations like automatic system patching or disruptive technologies like blockchain can help speed up response times to help reduce or eliminate threats – and we’re exploring both.

Connected Entertainment

We want to make sure our customers get the samebest viewing experience regardless of location, the network they are using or however they choose to watch that content. That’s why, right now we are exploring areas such as low latency singlestreaming, converged content delivery architectures and 5G network slicing. These are the technologies that will pave the way for true, near real-time multi-screen viewing experiences. We are also carrying out research into High Dynamic Range (HDR) TV,immersive and personalised content experiences, working closely with BT Sport.

This year we invested £643m (2017/18: £632m) in innovation over the last decade we’ve been one of the largest investors in innovation in the UK,spent £662m (2018/19: £643m) on research and globally in the telecoms sector.development. We have a portfolio of more than 5,0005,104 patents and applications, with 106 patents for inventions103 filed in 2018/19.2019/20.

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

5.D Trend information

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

5.EOff-balance sheet arrangements

The information set forth under the heading “General information —Off-balance sheet arrangements” on page 97115 of the Annual Report 20192020 is incorporated herein by reference.

5.F Tabular disclosure of contractual obligations

The information set forth under the heading “Group performance — Contractual obligations and commitments” on page 3948 of the Annual Report 20192020 is incorporated herein by reference.

5.G Safe harbor

The information set forth under the heading “Additional information — Cautionary“Cautionary statement regarding forward-looking statements” on page 190208 of the Annual Report 20192020 is incorporated herein by reference.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A Directors and senior management

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

6.B Compensation

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

6.C Board practices

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

The information set forth under the heading “Remuneration Policy” on pages 139 to 145 of the Annual Report & Form20-F 2017, filed as Exhibit 15.2 to the BT Group plc Form20-F filed on May 25, 2017, is incorporated herein by reference, excluding any cross-references to other sections of the Annual Report & Form20-F 2017.

6.D Employees

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

6.E Share ownership

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

The information set forth under the heading “Remuneration Policy” on pages 139 to 145 of the Annual Report & Form20-F 2017, filed as Exhibit 15.2 to the BT Group plc Form20-F filed on May 25, 2017, is incorporated herein by reference, excluding any cross-references to other sections of the Annual Report & Form20-F 2017.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A Major shareholders

The information set forth under the heading “Relations with shareholders”heading:

of the Annual Report 20192020 is incorporated herein by reference.

Analysis of shareholdings at 31 March 20192020

b

Under the BT Group Employee Share Investment Plan, 61.8m67.6m shares were held in trust on behalf of 39,93438,174 participants who were beneficially entitled to the shares. 378,918,106380,133,255 shares were held in the corporate nominee BT Group EasyShare on behalf of 89,06488,391 beneficial owners.

c	167.4m shares were represented by ADSs. An analysis by size of holding is not available for these.

d	45.3m85.9m shares were held as treasury shares.

ed	7.08%6.98% of the shares were in 732,034699,094 individual holdings, of which 45,51943,040 were joint holdings, and 92.92%93.02% of the shares were in 7,7137,431 institutional holdings.

As far as the company is aware, the company is not directly or indirectly owned or controlled by another corporation or by the UK Government or any other foreign government or by any other natural or legal person severally or jointly. There are no arrangements known to the company, the operation of which may at a subsequent date result in a change in control of the company.

The company’s major shareholders do not have different voting rights to those of other shareholders.

At 87 May 2019,2020, there were 9,968,127,681 ordinary shares outstanding, including 45,269,77485,921,056 shares held as treasury shares. At the same date, approximately 34m ADSs (equivalent to 174,468,805 ordinary shares, or approximately 1.75% of the total number of ordinary shares outstanding on that date) were outstanding and were held by 1,379 record holders of ADRs.

At 31 March 2019,2020, there were 3,4263,365 shareholders with a US address on the register of shareholders who in total hold 0.03% of the ordinary shares of the company.

7.B Related party transactions

The information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

7.C Interests of experts and counsel

Not applicable

ITEM 8. FINANCIAL INFORMATION

8.A Consolidated statements and other financial information

See Item 18 below.

In addition, the information set forth under the headings:

of the Annual Report 20192020 is incorporated herein by reference.

Dividends

The company’s shareholders can declare dividends by passing an ordinary resolution provided that no dividend can exceed the amount recommended by the directors. Dividends must be paid out of profits available for distribution. If the Board considers that the profits of the company justify such payments, they can pay interim dividends on any class of shares of the amounts and on the dates and for the periods they decide. Fixed dividends will be paid on any class of shares on the dates stated for the payments of those dividends.

The directors can offer ordinary shareholders the right to choose to receive new ordinary shares, which are credited as fully paid, instead of some or all of their cash dividend. Before they can do this, the company’s shareholders must have passed an ordinary resolution authorising the directors to make this offer.

Any dividend which has not been claimed for ten years after it was declared or became due for payment will be forfeited and will belong to the company.

A final dividend in respect of the year ended 31 March 2018 was paid on 3 September 2018 to shareholders on the register on 10 August 2018, and an interim dividend in respect of the year ended 31 March 2019 was paid on 4 February 2019 to shareholders on the register on 28 December 2018. The final proposed dividend in respect of the year ended 31 March 2019, if approved by shareholders, will be paid on 9 September 2019 to shareholders on the register on 9 August 2019, and an interim dividend in respect of the year ended 31 March 2020 was paid on 3 February 2020 to shareholders on the register on 27 December 2019. The final dividend for 2019/20 is suspended, as are all dividends for 2020/21, to create capacity for value-enhancing investments and managing confidently through the Covid-19 crisis.

The dividends paid or payable on BT shares and ADSs for the last five financial years are shown in the following table. The dividends on the ordinary shares exclude the associated tax credit. The amounts shown are not those that were actually paid to holders of ADSs. Dividends have been translated from Sterling into US Dollars using exchange rates prevailing on the date the ordinary dividends were paid.