Barclays 2008 Annual Report Download - page 168

Corporate governance
Corporate governance report
Board Risk Committee
Sir Richard Broadbent (Chairman)
David Booth
Dr Danie Cronjé (to 24th April 2008)
Sir Andrew Likierman
Stephen Russell
Secretary: Lawrence Dickinson
The Board Risk Committee terms of reference are available from the
Corporate Governance section at: www.aboutbarclays.com.
In addition to the Members of the Committee, all meetings are usually
attended by the Group Finance Director and Group Risk Director. Barclays
Internal Audit Director, Group General Counsel and Barclays external
auditor, as well as other senior executives, also attend meetings of the
Board Risk Committee, where appropriate.
The Board recognises that risk is a key parameter for the business.
The Board Risk Committee provides monitoring and oversight of all Barclays
risk activities. During 2008, the Committee received presentations and
updates on key aspects of the external market conditions to ensure it was
able to maintain an appropriate level of oversight and report effectively
to the Board.
Activities in 2008
The Committee met four times in 2008 and Figure 7 shows how the
Committee allocated its time at those meetings. During 2008, the Committee:
– received regular reports on, and considered, Risk Appetite and the
Group’s risk profile, including key indicators for Risk Appetite, Group
Impairment, Retail Credit Risk, Wholesale Credit Risk, Market Risk,
Financial Crime, Operational Risk and Economic Capital;
– reviewed at each meeting updates on asset backed securities and leveraged
credit markets, including the Group’s exposures to sub-prime and Alt-A
markets, monoline insurers and leveraged loan underwriting positions;
– reviewed updates on liquidity risk;
– reviewed risk trends and risk management in GRCB – Emerging Markets
and South Africa;
– received regular Forward Risk Trends reports, which set out the internal
and external indicators that are showing signs of strain;
– reviewed the internal control framework;
– examined the risk control framework, and approved Group policies
including the trading book policy, large exposures policy, liquidity policy,
retail and wholesale credit impairment policies and the Group’s principal
risks policy;
– reviewed Group-wide stress testing scenarios and results;
– reviewed in greater detail the process around setting annual Risk
Appetite to establish the effectiveness of the process in responding
to significant changes in economic and market conditions;
– reviewed the programme of actions being taken Group-wide to mitigate
risk in view of deteriorating economic conditions in our major markets,
such as the UK, US, South Africa and Spain;
– reviewed the Risk Appetite for the Group for 2009 and made
recommendations to the Board; and.
– received updates on Basel II.
166 Barclays PLC Annual Report 2008 |Find out more at www.barclays.com/annualreport08
Fig 7: Board Risk Committee allocation of time
1
2
3452008 2007
1Risk Profile/Risk Appetite
(including capital
management) 55 40
2Key Risk Issues (including
ABS and Leveraged
Credit Markets) 35 40
3Internal Control/Risk Policies 43
4Regulatory Frameworks 512
5Other 15
Board Risk Committee Chairman’s Statement
2008 was a challenging year for risk management and this was reflected
in the work of the Committee, which is detailed below. Particular areas
worthy of note were:
– The Committee monitored the Group’s sub-prime exposures
throughout the year. The reduction in limits and scale of the sub-prime
business in 2007 reduced the impact of the crisis, although substantial
write-downs were still required during 2008, reflecting a further
deterioration in the markets and underlying performance of the assets.
– The Committee also monitored the Group’s exposure to other areas
affected by the crisis, including other asset-backed securities,
commercial mortgages and monoline insurers.
– The Committee reviewed and compared the write-downs being taken
in the sub-prime and related areas with those being taken by the
industry.
– The Committee monitored carefully the Group’s overall risk exposure
in the light of the anticipated worsening in economic conditions and
reviewed management plans to manage and mitigate the effects of
the expected downturn in multiple markets.
– The Committee also monitored the capital position throughout the
year relative to regulatory requirements and the Group’s overall risk
appetite. Several steps were taken throughout the year to strengthen
the capital base prior to the events of October 2008 when the regulator
changed the capital requirements for banks, requiring a further and
substantial capital raising.
– The Committee played an active role in informing Board debate about
Risk Appetite and capital planning for 2009.
Sir Richard Broadbent
Chairman of the Board Risk Committee
5th March 2009
In March 2009, the Committee will review its activities in 2008 against
its terms of reference.
More information on risk management and the internal control
framework can be found in the Risk management report on pages 69
to 149.