Barclays 2009 Annual Report Download - page 89

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Risk management
Barclays risk management strategy
Barclays has clear risk management objectives and a well-established
strategy to deliver them, through core risk management processes.
At a strategic level, our risk management objectives are:
–To identify the Group’s material risks.
– To formulate the Group’s Risk Appetite and ensure that business profile
and plans are consistent with it.
– To optimise risk/return decisions by taking them as closely as possible
to the business, while establishing strong and independent review and
challenge structures.
– To ensure that business growth plans are properly supported by
effective risk infrastructure.
– To manage risk profile to ensure that specific financial deliverables
remain possible under a range of adverse business conditions.
– To help executives improve the control and co-ordination of risk taking
across the business.
The Group’s strategy is to break down risk management into five discrete
processes: direct, assess, control, report, and manage/challenge. Each of
these processes is broken down further, to establish end to end activities
within the risk management process and the infrastructure needed to
support it (see panel below).
Assigning responsibilities
Responsibility for risk management resides at all levels within the Group,
from the Board and the Executive Committee down through the
organisation to each business manager and risk specialist. Barclays
distributes these responsibilities so that risk/return decisions are taken at
the most appropriate level; as close as possible to the business, and subject
to robust and effective review and challenge. The responsibilities for
effective review and challenges reside with senior managers, risk oversight
committees, Barclays Internal Audit, the independent Group Risk function,
the Board Risk Committee and ultimately, the Board.
The Board is responsible for approving Risk Appetite, which is the level
of risk the Group chooses to take in pursuit of its business objectives. At
most of the Board’s scheduled meetings, the Chief Risk Officer presents a
report summarising developments in the risk environment and performance
trends in the key portfolios. The Board is also responsible for the Internal
Control and Assurance Framework. It oversees the management of the
most significant risks through the regular review of risk exposures and
related key controls. Executive Management responsibilities relating to
this are set via the Group’s Principal Risks Policy.
The Board Risk Committee (BRC) monitors the Group’s risk profile
against the agreed appetite. Where actual performance differs from
expectations, the actions being taken by management are reviewed to
ensure that the BRC is comfortable with them. After each meeting, the Chair
of the BRC prepares a report for the next meeting of the Board. Barclays first
established a separate Board Risk Committee in 1999 and all members are
non-executive directors. The Finance Director and the Chief Risk Officer
attend each meeting as a matter of course and the Chief Risk Officer has
a dotted reporting line to the Chair. The BRC receives regular and
comprehensive reports on the Group’s risk profile, the key issues affecting
each business portfolio, risk measurement methodologies and forward risk
trends. The Committee also commissions in-depth analyses of significant
risk topics, which are presented by the Chief Risk Officer or senior risk
managers in the businesses. The Chair of the Committee prepares a
statement each year on its activities (see page 166).
Process Activity
Direct
Assess
Control
Report
Manage and
Challenge
– Understand the principal risks to achieving Group strategy.
– Establish Risk Appetite.
– Establish and communicate the risk management framework including
responsibilities, authorities and key controls.
– Establish the process for identifying and analysing business-level risks.
– Agree and implement measurement and reporting standards and methodologies.
– 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.
– Interpret and report on risk exposures, concentrations and risk-taking outcomes.
– Interpret and report on sensitivities and Key Risk Indicators.
– Communicate with external parties.
– Review and challenge all aspects of the Group’s risk profile.
– Assess new risk-return opportunities.
– Advise on optimising the Group’s risk profile.
– Review and challenge risk management practices.