Barclays 2006 Annual Report Download - page 76

Barclays PLC
Annual Report 2006
72
Risk management
Risk management – overview
Risk management
The pages that follow describe how Barclays conducts risk
management, including the key risk concepts it uses and how it
manages specific types of risk.
To ensure the Group maintains effective governance and control over
its risk management processes, Group Risk sets policies and standards
for each risk type. Group Risk breaks down the risk management
process into five discrete steps: direct, assess, control, report and
manage/challenge. It is Group Risk’s responsibility to ensure that each
of the five steps is embedded across the Group for each risk type.
Responsibilities
Direct •Understand the principal risks to achieving
Group strategy.
•Establish Risk Appetite.
•Establish and communicate the risk management
framework including responsibilities, authorities
and key controls.
Assess •Establish the process for identifying and analysing
business-level risks.
•Agree and implement measurement and
reporting standards and methodologies.
Control •Establish key control processes and practices,
including limit structures, impairment allowance
criteria and reporting requirements.
•Monitor the operation of the controls and
adherence to risk direction and limits.
•Provide early warning of control or appetite
breaches.
•Ensure that risk management practices and
conditions are appropriate for the business
environment.
Report •Interpret and report on risk exposures,
concentrations and risk-taking outcomes.
•Interpret and report on sensitivities and
Key Risk Indicators.
•Communicate with external parties.
Manage and •Review and challenge all aspects of the Group’s
Challenge risk profile.
•Assess new risk-return opportunities.
•Advise on optimising the Group’s risk profile.
•Review and challenge risk management
practices.
Risk Appetite
Risk Appetite is the level of risk Barclays chooses to take to reach its
strategic objectives, recognising a range of possible outcomes, as
business plans are implemented. Barclays framework, approved by the
Board Risk Committee, combines a top-down view of its capacity to
take risk, with a bottom-up view of the business risk profile requested
and recommended by each business area.
The objectives of the Risk Appetite framework are to:
•help protect the Group’s performance;
•improve management confidence and debate regarding our risk
profile;
•help executive management improve control and co-ordination of
risk-taking across businesses; and,
•enable unused risk capacity to be identified and thus profitable
opportunities to be highlighted.
The internal control framework at Barclays is aligned with the
internationally accepted standard Internal Control – Integrated
Framework published by the Committee of Sponsoring Organisations
of the Treadway Commission (COSO). The Group’s principal risk
categories (set out below) are the subject of Board approved risk
control requirements.
Credit
Market
Capital
Liquidity
Operational risks and business risks, comprising:
– Financial Reporting, Taxation and Budgeting
– Brand Management
– Change
– Corporate Responsibility
– People
– Regulatory Compliance
– Financial Crime
– Strategic
– Technology
– Legal
– Operations
Detailed discussion of our risk management of credit, market, capital,
liquidity, operational and business risks follows, starting with credit risk
on page 76. In addition there is also discussion on insurance risk,
disclosure about certain trading activities and derivatives.