Barclays 2011 Annual Report Download - page 153

Overview
The management of operational risk has two key objectives:
– To minimise the impact of losses suffered in the normal course of
business (expected losses) and to avoid or reduce the likelihood
of suffering a large extreme (or unexpected) loss; and
– To improve the effective management of the Barclays Group and
strengthen its brand and external reputation.
Barclays is committed to the management and measurement of
operational risk and was granted a waiver to operate an Advanced
Measurement Approach (AMA) for operational risk under Basel 2, which
commenced in January 2008. The majority of the Group calculates
regulatory capital using AMA, however, in specific areas we apply the Basic
Indicator Approach. In certain joint ventures and associates, Barclays may
not be able to apply the AMA.
Areas where the Group is working towards the rollout of AMA and the
Basic Indicator Approach is applied are: the Africa RBB businesses,
including Barclays Bank Mozambique and National Bank of Commerce
(Tanzania); Barclays Bank PLC Pakistan; Barclays Investment and Loans
India Limited; the business activities acquired from Lehman Brothers; and
the portfolios of assets purchased from Woolworths Financial Services in
South Africa, Citi Cards Portugal and Italy, Standard Life Bank, MBNA
Corporate Cards, Upromise and Egg Cards.
Barclays works to benchmark its internal operational risk practices with
peer banks and to drive the development of advanced operational risk
techniques across the industry.
Organisation and structure
Operational risk is one of four Principal Risks in the Barclays Principal Risks
Framework and comprises a number of specific key risks defined as
follows:
– External supplier risk – Inadequate selection and ongoing management
of external suppliers;
– Financial reporting risk – Reporting mis-statement or omission within
external financial or regulatory reporting;
– Fraud risk – Dishonest behaviour with the intent to make a gain or
cause a loss to others;
– Information risk – Inadequate protection of Barclays information in
accordance with its value and sensitivity;
– Legal risk – Failure to identify and manage legal risks;
– Product risk – Inadequate design, assessment and testing of products/
services;
– Payment process risk – Failure in operation of payments processes;
– People risk – Insufficient people /capabilities and/or inappropriate
behaviours and/or unsafe working environments;
– Premises & security risk – Unavailability of premises to meet business
requirements or inadequate protection of physical assets, employees
and customers against criminal, terrorist and adverse political activities;
– Regulatory risk – Failure or inability to comply fully with the laws,
regulations or codes applicable specifically to the financial services
industry;
– Taxation risk – Failure to comply with tax laws and practice which could
lead to financial penalties, additional tax charges or reputational
damage;
– Technology risk – Failure to develop and deploy secure, stable and
reliable technology solutions; and
– Transaction operations risk – Failure in the management of critical
transaction processes.
These risks can result in financial and/or non-financial impacts including
legal/regulatory breaches or reputational damage.
Risk management
Operational risk management
Operational risk
Operational risk is defined as the risk of direct or indirect impacts resulting from human factors,
inadequate or failed internal processes and systems or external events. Operational risks are
inherent in the Group’s business activities and are typical of any large enterprise. It is not cost
effective to attempt to eliminate all operational risks and in any event it would not be possible to
do so. Losses from operational risks of small significance are expected to occur and are accepted
as part of the normal course of business. Those of material significance are rare and the Group
seeks to reduce the likelihood of these in accordance with its risk appetite.
All disclosures in this section (pages 151 to 153) are unaudited
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 151
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