Barclays 2009 Annual Report Download - page 87

www.barclays.com/annualreport09 Barclays PLC Annual Report 2009 85
Financial reporting risk
Financial reporting risk arises from a failure or inability to comply fully
with the laws, regulations or codes in relation to the disclosure of financial
information. Non-compliance could lead to fines, public reprimands,
damage to reputation, enforced suspension of operations or, in extreme
cases, withdrawal of authorisations to operate. Further details of the Group’s
internal controls over financial reporting are included in the Accountability
and Audit Section on page 187.
Legal risk
The Group is subject to a comprehensive range of legal obligations in all
countries in which it operates. As a result, the Group is exposed to many
forms of legal risk, which may arise in a number of ways. Primarily:
– the Group’s business may not be conducted in accordance with
applicable laws around the world;
– contractual obligations may either not be enforceable as intended or
may be enforced against the Group in an adverse way;
– the intellectual property of the Group (such as its trade names) may
not be adequately protected; and
– the Group may be liable for damages to third parties harmed by the
conduct of its business.
The Group faces risk where legal proceedings are brought against it.
Regardless of whether such claims have merit, the outcome of legal
proceedings is inherently uncertain and could result in financial loss.
Defending legal proceedings can be expensive and time-consuming
and there is no guarantee that all costs incurred will be recovered even if the
Group is successful. Although the Group has processes and controls to
manage legal risks, failure to manage these risks could impact the Group
adversely, both financially and by reputation.
Further details of the Group’s legal proceedings are included in Note 35
to the financial statements on page 247.
Taxation risk
The Group is subject to the tax laws in all countries in which it operates,
including tax laws adopted at an EU level. A number of double taxation
agreements entered between two countries also impact on the taxation of
the Group. Tax risk is the risk associated with changes in tax law or in the
interpretation of tax law. It also includes the risk of changes in tax rates and
the risk of failure to comply with procedures required by tax authorities.
Failure to manage tax risks could lead to an additional tax charge. It could
also lead to a financial penalty for failure to comply with required tax
procedures or other aspects of tax law. If, as a result of a particular tax risk
materialising, the tax costs associated with particular transactions are
greater than anticipated, it could affect the profitability of those transactions.
The Group takes a responsible and transparent approach to the
management and control of its tax affairs and related tax risk, specifically:
– tax risks are assessed as part of the Group’s formal governance
processes and are reviewed by the Executive Committee, Group Finance
Director and the Board Risk Committee;
– the tax charge is also reviewed by the Board Audit Committee;
– the tax risks of proposed transactions or new areas of business are fully
considered before proceeding;
– the Group takes appropriate advice from reputable professional firms;
– the Group employs high-quality tax professionals and provides ongoing
technical training;
– the tax professionals understand and work closely with the different
areas of the business;
– the Group uses effective, well-documented and controlled processes to
ensure compliance with tax disclosure and filing obligations; and
– where disputes arise with tax authorities with regard to the
interpretation and application of tax law, the Group is committed to
addressing the matter promptly and resolving the matter with the tax
authority in an open and constructive manner.