Barclays 2003 Annual Report Download - page 112

110
Risk Factors
This document contains certain forward-looking statements within the
meaning of section 21E of the US Securities Exchange Act of 1934, as
amended and section 27A of the US Securities Act of 1933, as amended,
with respect to certain of the Group’s plans and its current goals and
expectations relating to its future financial condition and performance.
The Group may also make forward-looking statements in other written
materials, including other documents filed with or furnished to the SEC.
In addition, the Group’s senior management may make forward-looking
statements orally to analysts, investors, representatives of the media and
others. In particular, among other statements, certain statements in the
Financial Review and Business Description with regard to management
objectives, trends in results of operations, margins, costs, return on
equity, risk management, and competition are forward looking in nature.
These forward-looking statements can be identified by the fact that
they do not relate only to historical or current facts. Forward-looking
statements often use words such as ‘anticipate,’ ‘target’, ‘expect’,
‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’, or other words of
similar meaning.
By their nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will
occur in the future. The Group’s actual future results may differ
materially from those set out in the Group’s forward-looking statements.
There are many factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-
looking statements. Any forward-looking statements made by or on
behalf of the Group speak only as of the date they are made. Barclays
does not undertake to update forward-looking statements to reflect any
changes in the Group’s expectations with regard thereto or any changes
in events, conditions or circumstances on which any such statement is
based. The reader should, however, consult any additional disclosures
Barclays may make in documents it files with the SEC.
The following discussion sets forth certain risk factors that the Group
believes could cause its actual future results to differ materially from
expected results. The discussion also acknowledges a risk factor specific
to the Group’s ability to achieve its primary goal for 2004 to 2007
inclusive. The reader should also note the references to liquidity risk
(page 66) and non-financial, compliance, legal and tax risk (page 70).
However, other factors could also adversely affect the Group results and
the reader should not consider the factors discussed in this report to be
a complete set of all potential risks and uncertainties.
Business conditions and general economy
The profitability of Barclays businesses could be adversely affected by
a worsening of general economic conditions in the United Kingdom or
abroad. Factors such as the liquidity of the global financial markets, the
level and volatility of equity prices and interest rates, investor sentiment,
inflation, and the availability and cost of credit could significantly affect
the activity level of customers. A market downturn would likely lead to
a decline in the volume of transactions that Barclays executes for its
customers and, therefore, lead to a decline in the income it receives
from fees and commissions.
A market downturn or worsening of the economy could cause the
Group to incur mark to market losses in its trading portfolios. A market
downturn also could potentially result in a decline in the fees Barclays
earns for managing assets. For example, a higher level of domestic or
foreign interest rates or a downturn in trading markets could affect
the flows of assets under management. An economic downturn or
significantly higher interest rates could adversely affect the credit quality
of Barclays on balance sheet and off balance sheet assets by increasing
the risk that a greater number of the Group’s customers would be
unable to meet their obligations.
Credit risk
The Group’s provisions for credit losses provide for losses inherent in
loans and advances. Estimating potential losses is inherently uncertain
and depends on many factors, including general economic conditions,
rating migration, structural changes within industries that alter
competitive positions, and other external factors such as legal and
regulatory requirements.
Market risks
The most significant market risks the Group faces are interest rate,
foreign exchange and bond and equity price risks. Changes in interest
rate levels, yield curves and spreads may affect the interest rate margin
realised between lending and borrowing costs. Changes in currency
rates, particularly in the sterling-dollar and sterling-euro exchange
rates, affect the value of assets and liabilities denominated in foreign
currencies and affect earnings reported by the Group’s non-UK
subsidiaries and may affect revenues from foreign exchange dealing.
The performance of financial markets may cause changes in the value
of the Group’s investment and trading portfolios and in the amount of
revenues generated from assets under management. The Group has
implemented risk management methods to mitigate and control
these and other market risks to which the Group is exposed. However,
it is difficult to predict with accuracy changes in economic or market
conditions and to anticipate the effects that such changes could have
on the Group’s financial performance and business operations.
In addition, the value of assets held in the Group’s pension and
long-term assurance funds are also affected by the performance.
Non-financial risks
The Group’s businesses are dependent on the ability to process a large
number of transactions efficiently and accurately. Non-financial risk and
losses can result from fraud, errors by employees, failure to properly
document transactions or to obtain proper internal authorisation, failure
to comply with regulatory requirements and Conduct of Business rules,
equipment failures, natural disasters or the failure of external systems,
for example, the Group’s suppliers or counterparties. Although the
Group has implemented risk controls and loss mitigation actions, and
substantial resources are devoted to developing efficient procedures and
to staff training, it is only possible to be reasonably, but not absolutely,
certain that such procedures will be effective in controlling each of the
non-financial risks faced by the Group.
Other Information
Risk Factors