Barclays 2009 Annual Report Download - page 168

166 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Corporate governance
Corporate governance report
continued
Board Risk Committee Chairman’s Statement
How the Committee goes about its business.
It has been an essential feature of the operation of the Committee that
the information flowing to the Committee is congruent with the
information flow to Executive Committee. In the case of the Group Risk
Profile Report (see below), the report is identical.
The Committee plans its forward programme and undertakes a
number of key tasks throughout the course of the year in order to ensure
it is satisfied with the way risk is being managed. A key role is to review
in detail at the end of every year the proposed Risk Appetite for the
forthcoming year, before recommending it to the Board.
The Committee monitors risk performance throughout the year to
assess whether such performance is in line with expectations when the
budget was set, adjusted for any differences in the performance of the
economy. Where actual performance differs from expectations, the
actions being taken by management are reviewed to ensure that the
Committee is comfortable with them.
The Committee also reviews sectoral limits in both the wholesale
and retail sectors and in market risk. The purpose of these limits, known
internally as Mandate and Scale limits, is to ensure that concentrations
in the risk profile do not result in unacceptable levels of losses.
The Committee, in conjunction with the risk function, also seeks
to identify potential future areas of risk in order to undertake detailed
analysis and review. A good example of this would be the Committee’s
review of the US mortgage business, which was requested at the end of
2006. The Committee will also, as part of its calendar of business, review
experience of past risk events and seek to identify any lessons learnt in
order to ensure they are embedded into business practices. It also seeks
to compare Barclays risk stance with those of others to understand the
relative risk being taken.
The Committee also monitors the Group’s capital and liquidity
position throughout the year to ensure they are within the agreed Risk
Appetite parameters.
Finally, the Committee regularly reviews how risk is measured within
the business in order to ensure it is satisfied with the risk measurement
systems in place.
Context
Barclays has long recognised the importance of ensuring that the Board
and its Committees devote sufficient attention to risk, particularly as it is
only by taking appropriate levels of risk that Banks can make a profit. A
Board level Risk Committee has been in existence since 1999 and a key role
of the Committee is to analyse, understand and monitor the key risks taken
by the business to generate profit and create shareholder value. The
Committee focuses on risks taken deliberately and overtly, such as credit,
market, capital and liquidity risk, rather than the risks of simply doing
business, such as operational risk. The Committee, in analysing and
monitoring risk, is acting on behalf of the Board and it was an essential part
of my role as Chairman to ensure that the Committee alerts the Board to
issues of concern.
The Committee itself is comprised solely of independent non-
executive directors. However, the Group Finance Director and Chief Risk
Officer attend each meeting as a matter of course and the Chief Risk
Officer has a dotted reporting line to me as Chairman of the Committee.
I have regular meetings with Robert Le Blanc, the Chief Risk Officer, who
also has the right (and indeed responsibility) to elevate issues to me where
he considers it necessary. I am also consulted by the Group Finance
Director in respect of the performance appraisal and compensation of the
Chief Risk Officer. His compensation is approved by the Board HR and
Remuneration Committee and appointment to or departures from the role
are a matter reserved to the Board.
The Committee is conscious, when undertaking its duties, that banks
are in the business of taking risk. The aim of the risk function within
Barclays and the Board Risk Committee itself is therefore not to minimise
risk but to optimise it. This requires us to ensure that risks being taken are:
– properly identified and understood, both in their own right and relative to
their interactions with other risks we are taking;
– appropriate, relative to the scale and type of our business;
– affordable, particularly in relation to the capital base of the company;
– properly controlled and managed; and
– earning an appropriate return, i.e. , one commensurate with the
risk taken.
Governance of Risk
Board Risk Committee
David Booth (Chairman from 1st January 2010)
Sir Richard Broadbent (Chairman to 31st December 2009)
Reuben Jeffery III (from 1st January 2010)
Sir Andrew Likierman
Sir Michael Rake
Stephen Russell (to 31st October 2009)
Patience Wheatcroft (1st May-16th June 2009)
Secretary
Secretary: Lawrence Dickinson
In addition to the Members of the Committee, all meetings are usually
attended by the Group Finance Director and Chief Risk Officer. Barclays
Internal Audit Director, Group General Counsel and Barclays external auditor,
as well as other senior executives, also attend meetings of the Board Risk
Committee, where appropriate.
Go online
The Board Risk Committee terms of reference
are available from the corporate governance
section of our website at:
www.barclays.com/corporategovernance