Barclays 2014 Annual Report Download - page 7

barclays.com/annualreport Barclays PLC Annual Report 2014 I 05
Our approach
Operating environment and approach to risk
Barclays is a global financial services provider operating in
50 countries, with home markets in the UK, US and South
Africa, governed by global and local regulatory standards.
Our environment continues to change. Central banks have launched
unprecedented monetary policies such as Quantitative Easing and near-
zero interest rates to stimulate growth. Further regulatory change,
such as structural reform in the UK and US will require banks to segregate
activities in order to create a safer banking environment and increase focus
on capital, liquidity and funding. Conduct issues have hurt Barclays –
and the banking industry – causing loss of trust amongst stakeholders.
Rebuilding trust is vital, enabling us to meet and exceed the growing
needs of customers and clients. The power of technology has raised
customer and client expectations, but also reduced the cost-to-serve
through automation, process improvement and innovation while
making customer experiences faster, more personalised and lower risk.
Without active risk management to address these external factors, our
long-term goals could be adversely impacted. See page 09 to see how
the strategy adapted in 2014.
The Barclays risk management framework, organised by our Principal
Risks, sets out the activities, tools, techniques and arrangements we
can employ to better identify, monitor and manage actual and potential
risks facing the Bank. Risk appetite is set and verified at an appropriate
level and procedures established to protect Barclays and prevent
detriment to its customers, colleagues and communities. Barclays
also manages human rights risk via our environmental and social risk
procedures and guidance and reputational risk framework, and
integrates human rights issues into business decision-making.
Our Principal Risks
Credit Risk: Financial loss should customers not fulfil contractual
obligations to the Group.
Market Risk: Earnings or capital impact due to volatility of trading
book positions or inability to hedge the banking book balance sheet.
Funding Risk: Failure to maintain capital ratios and liquidity
obligations leading to inability to support normal business activity
and meet liquidity regulatory requirements.
Operational Risk: Losses or costs resulting from human factors,
inadequate internal processes and systems or external events.
Conduct Risk: Detriment caused to our customers, clients,
counterparties, or the Bank and its employees through inappropriate
judgement in execution of business activities.
Reputation Risk: Damage to Barclays brand arising from any
association, action or inaction perceived by stakeholders as
inappropriate or unethical. From the 1st January 2015, Reputation
Risk will be combined with Conduct Risk.
For further information on how we
assess and monitor risks, please see
the Risk review on page 113
Becoming ‘Go-To’
Regulatory change
Regulatory focus has shifted, affecting the sustainability and
profitability of products, businesses and the structural formation
of banks. The impact of regulatory change is a permanent shift.
Trust and conduct
We continue to work to put our legacy issues behind us.
The cost of legacy conduct issues has negative repercussions
but the changes we are making in response to them will have
a positive effect in the long-term.
Technology and rising expectations
Technological improvements enhance the experience of
customers and clients and can reduce costs. The investment
required can be expensive in the short-term but will generate
long-term rewards.
A proactive
approach
We continually take action to achieve our
goal and deliver value to our shareholders
For more information,
please see page 09
Economic environment
Global economic growth is expected to be subdued for
a prolonged period. This makes income growth more
challenging for banks.
In this operating environment
We continue to be proactive in adapting to the external environment
Our approach to value creation is consistent
The Strategic Report Governance Risk review Financial review Financial statements Shareholder information