Barclays 2008 Annual Report Download - page 133

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Business review
Barclays PLC Annual Report 2008 131
Risk management
Operational risk management
Measurement and capital modelling
Barclays applies a consistent approach to the identification and
assessment of key risks and controls across all business units. Managers in
the businesses use self-assessment techniques to identify risks, evaluate
control effectiveness and monitor performance. Business management
determines whether particular risks are effectively managed within
business Risk Appetite and otherwise takes remedial action. The risk
assessment process is consistent with the principles in the integrated
framework published by the Committee of Sponsoring Organisations of
the Treadway Commission (COSO).
A standard process is used Group-wide for the recognition, capture,
assessment, analysis and reporting of risk events. This process is used to
help identify where process and control requirements are needed to
reduce the recurrence of risk events. Risk events are loaded onto a central
database and reported monthly to the Group Operational Risk Executive
Committee.
Barclays also uses a database of external public risk events and is a
member of the Operational Risk Data Exchange (ORX), an association of
international banks that share anonymised loss data information to assist
in risk identification, assessment and modelling.
By combining internal data, including internal loss experience, risk and
control assessments, key indicators and audit findings, with external loss
data and expert management judgement, Barclays is able to generate Key
Risk Scenarios (KRSs), which identify the most significant operational risks
across the Group. The KRSs are validated at business unit and at Group
level to ensure that they appropriately reflect the level of operational risk.
These are the main input to our capital model. Operational risk capital is
allocated, on a risk sensitive basis, to business units in the form of
economic capital charges, providing an incentive to manage these risks
within appetite levels.