Barclays 2010 Annual Report Download - page 80

Risk management
Risk factors continued
Principal Risk Factor Principal Risk Management Key Specific Risks and Mitigation
8. Regulatory Risk
Regulatory Risk arises from a
failure or inability to comply
fully with the laws, regulations
or codes applicable specifically
to the financial services
industry. Non-compliance
could lead to fines, public
reprimands, damage to
reputation, increased
prudential requirements,
enforced suspension of
operations or, in extreme
cases, withdrawal of
authorisations to operate.
Regulatory Risk is owned and managed by the
Compliance Function. Business Unit compliance
functions monitor and control compliance risks,
applying a range of Compliance policies under the
co-ordination and oversight of Group Compliance.
The primary focus is on adherence to the
regulatory framework currently in place.
Specific reports on regulatory compliance are
prepared on a regular basis for the Group
Operating Committee, the Group Governance
and Control Committee and the Board Audit
Committee.
Compliance risk and control issues are also
included in quarterly reporting by the Legal and
Compliance functions to the Executive Committee
and the Board.
Not all risks that might be considered to be
regulatory in origin fall under the Regulatory
Principal Risk. Most notably, prudential regulatory
risks are managed and mitigated in the manner
outlined in the sections on Wholesale and Retail
Credit Risk, Market Risk, Operations Risk, Capital
Risk and Liquidity Risk.
Regulatory Change
The regulatory response to the financial crisis has led to
very substantial regulatory change in the UK, EU and US
and in the other countries in which the Group operates.
It has also led to a change in the style of supervision in
a number of territories, with a more assertive approach
being demonstrated by the authorities.
Anti-bribery and Corruption
Among other things, the Bribery Act 2010, which applies to
UK companies worldwide, has created an offence of failure
by a commercial organisation to prevent a bribe being paid
on its behalf. However, it will be a defence if the organisation
has adequate procedures in place to prevent bribery. In
anticipation of the entry into force of the Bribery Act later
in 2011, the Group has been enhancing its framework of
controls to comply with the provisions of the Act.
Payment Protection Insurance (PPI)
PPI has been under scrutiny by the UK competition
authorities and financial services regulators. The UK
Competition Commission (CC) has undertaken an in-depth
enquiry into the PPI market which has resulted in the CC
introducing a number of remedies including a prohibition
on sale of PPI at the point of sale. In addition a judicial
review has been launched regarding the treatment of PPI
complaints by the FSA and Financial Ombudsman Services.
US Economic Sanctions
As announced on 18th August 2010, Barclays reached
settlements with US Authorities in relation to the
investigation by those agencies into compliance with
US sanctions and US dollar payment practices.
In addition, an Order to Cease and Desist has been issued
upon consent by the Federal Reserve Bank of New York
and the New York State Banking Department. Barclays has
taken significant steps to enhance further its compliance
programmes including: the further development and
implementation of its Sanctions Policy; substantial
investment in advanced payment and customer screening
technology; and the delivery of mandatory sanctions
training for more than 100,000 staff around the world.
For further information, see pages 139 to 142 and 228.
9. Operations Risk
Operations Risk has a broad
scope and, for that reason, it
is defined at a more granular
level. The risks are:
– Transaction operations
– New product development
– Premises and security
– External suppliers
– Payments process
– Information, data quality
and records management
These risks are managed by Business Units in
accordance with control requirements articulated
via mandated Group Policies and/or Risk Control
Frameworks. The adequacy and effectiveness of
the controls operated in the Business Units is
overseen by the Group Principal Risk Owner teams
in the Group Centre via regular management
information, conformance reviews and quarterly
Risk Review for meetings (attended by Business
Unit representatives). The Group Operating
Committee is responsible for oversight of
these risks.
During 2010 there were enhancements to the
management of external suppliers and transaction
operations risks.
78 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10