Barclays 2010 Annual Report Download - page 68

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 significant 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 approach is to provide direction on: understanding the
principal risks to achieving Group strategy; establishing Risk Appetite;
and establishing and communicating the risk management framework.
The process is then broken down into five steps: identify, assess, control,
report, and manage/challenge. Each of these steps 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). The Group’s risk
management strategy is broadly unchanged from 2009.
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 (see page 69), which
is the level of risk the Group chooses to take in pursuit of its business
objectives. The Chief Risk Officer regularly presents a report to the Board
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 (Group Control 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 risk methodologies and the Group’s risk profile
including the key issues affecting each business portfolio 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 pages 163 and 164).
Steps Activity
Identify
Assess
Control
Report
Manage and
Challenge
– Establish the process for identifying and understanding 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.
66 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10