Barclays 2011 Annual Report Download - page 45

Board Risk Committee Chairman’s report
Member Independent
Meetings
eligible to
attend
Meetings
attended
David Booth (Chairman) I99
Reuben Jefferya I98
Sir Andrew Likierman
a
I98
Dambisa Moyo
a
I97
Sir Michael RakeaI97
Secretary
Lawrence Dickinson
Key
OA on appointment
I independent
a unable to attend certain meetings either because of illness or prior commitments
Chairman’s overview of 2011
2011 has seen some particular challenges for the Committee in its
oversight of risk management. Global economic conditions have
continued to be difficult. Concerns over the economic prospects for the
Eurozone, specific countries within it and the possibility of a break up,
have greatly influenced our agenda. The regulatory environment has
also evolved, as our regulators continue to seek assurance as to the
robustness of risk management and the financial viability of financial
institutions in a stressed environment.
Understanding, monitoring and mitigating risk is a fundamental task
for any board. We play a critical role in setting the tone and culture
that promotes the achievement of effective risk management across
the Group. It is important to differentiate, however, between those risks
that a company actively seeks to take and manage in order to generate
income – for Barclays, credit, market and funding risk – and those risks
that it seeks to minimise in order to manage costs – what we know as
operational risk. The Committee’s principal focus is on the former – those
risks we take in order to generate income – although we also consider
the latter. This year, as Chairman of the Committee, I have sought to
refocus the Committee’s agenda on key strategic, forward looking risk
issues. I have worked with the Chief Risk Officer and Company Secretary
to ensure that the Committee’s time is used appropriately and that the
right information is being provided to the Committee at the right time.
I have continued to meet regularly with the Chief Risk Officer, and also
with the Group Treasurer and Chief Internal Auditor, to discuss any
emerging issues. This year I have also had a number of meetings with
representatives of our regulators in the UK and the US to discuss our
approach to risk management, and I expect this increased level of
interaction to continue in the future. I present written reports to the
Board of the main issues that the Committee discusses and any
Director may contact me at any time to discuss any particular issues
in more detail.
Who is on the Committee?
Membership of the Committee and attendance at meetings held in
2011 are shown in the table. Collectively the Committee has a depth of
experience in finance and financial risk management. Both Reuben
Jeffery and I have a background in investment banking, with careers at
Goldman Sachs and Morgan Stanley respectively. Sir Michael Rake is the
former Chairman of KPMG International and has a wealth of financial and
business experience. Sir Andrew Likierman has held number of roles in
the public financial services sector, including roles at HM Treasury and
that of non-executive Director of the Bank of England. Dambisa Moyo is
an international economist, who writes on the macroeconomy, having
formerly worked at Goldman Sachs.
What are our responsibilities?
The Committee’s role is to:
– recommend to the Board the total level of risk the Group is prepared
to take (risk appetite) to achieve the generation of shareholder value;
– monitor risk appetite, including setting limits for individual types of
risk, e.g., credit, market and funding risk;
– monitor the Group’s risk profile;
– ensure that management properly identifies principal risks and that
they are being appropriately managed;
– ensure that risk is taken into account during the due diligence phase
of any strategic transaction; and
– provide input from a risk perspective into the deliberations of the
Board Remuneration Committee.
The Committee’s full Terms of Reference are available from the
corporate governance section of our website. More information on
risk management and the internal control framework can be found in
the Directors’ Report on page 48 and in the Risk Management section
on pages 67 to 158.
How did we discharge our responsibilities in 2011?
We met 9 times in 2011 and the chart on page 44 shows how we
allocated our time at our meetings. Our meetings are attended by
management, including the Group Finance Director, Chief Internal
Auditor, Chief Risk Officer and Group General Counsel. The external
auditor also attends each meeting. This year meetings have also been
attended by senior management below Board and Executive Committee
level, including representatives of the risk management function at both
Group and business unit level. We have been especially interested in
hearing from those who are responsible at an operational level for
implementing risk management in the Group.
I describe below how the Committee discharged its responsibilities
during 2011:
Risk Profile/Risk Appetite
Our role is to recommend risk appetite to the Board and then to monitor
performance against appetite and the Group’s overall risk profile. The
main issues we reviewed in 2011 were:
– We received quarterly Group Risk Profile Reports, which provide an
update on credit and market risk performance in our main businesses
and across our key geographies of the UK, US, Spain and South Africa.
The focus of our discussions was on the potential impact of
macroeconomic factors, particularly the Eurozone crisis and any
impact arising from austerity measures being taken by governments
around the world. In late 2011, this report was extended to cover
Operational Risk in more detail, in line with the changes made to the
Group’s Principal Risks Policy, which I describe below.
David Booth, Chairman of the Board Risk Committee, gives you his insight into the work of that Committee in 2011.
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 43
The strategic report Governance Risk management Financial review Financial statements Shareholder information