Barclays 2013 Annual Report Download - page 387

Conformance and assurance
Conformance and assurance is undertaken to assess the control
environment:
Conformance: Activities undertaken to check the degree to which
defined processes are being followed.
 Conformance testing – is a planned, systematic and documented
programme of checking, that has the objective of providing evidence
that controls have been operated in accordance with documented
process. Testing results provide management with a view of the
effectiveness of the control environment supporting their operations.
 Conformance review – is a planned, risk based programme of activity
to assess the quality of conformance testing. Conformance review is
undertaken by individuals who are independent of the management
team running the operations. Review results enable management to
assess how much assurance they can place on the results of
conformance testing. Conformance testing and conformance review
may also identify opportunities for improvement to policies and
standards.
Assurance: Undertaken to independently assess the overall enterprise
risk management framework, which includes testing specific elements
of the control environment documented in standards and checking
that conformance activities are reliable, to provide the Board
confidence in the risk and control framework.
Internal Audit is responsible for the independent review of risk
management and the control environment. Its objective is to provide
reliable, valued and timely assurance to the Board and Executive
Management over the effectiveness of controls, mitigating current and
evolving high risks and in so doing enhancing the controls culture
within the Group. The BAC reviews and approves Internal Audit’s plans
and resources, and evaluates the effectiveness of Internal Audit. An
assessment by external advisers is also carried out periodically.
The Executive Models Committee (EMC) is chaired by the Chief Risk
Officer. The EMC, reports into the Enterprise Wide Risk Management
Committee and fulfils the specific requirement of approving the Group’s
most material (A*) models, as required by the PRA. The EMC receives
submissions from the businesses responsible for the A* models and
reviews and approves A* models and Post Model Adjustments (PMAs)
related to those models.
The Disclosure Committee reviews and evaluates the Group’s
disclosure controls and procedures and has responsibility for
considering the materiality of information and determining disclosure
obligations on a timely basis. It is chaired by the Group Finance
Director. It reports into the Group Executive Committee and the BAC.
Risk management in the setting of strategy
The planning cycle is centred on the medium term planning (MTP)
process, performed once a year. This embeds the Group’s objectives
into detailed business plans which take account the likely business and
macroeconomic environment. The risk functions at Group and
business levels are heavily involved in this process.
The planning cycle
Plan
Businesses submit their five year
Medium-Term Plans (MTP) based
on agreed macroeconomic/
business base case
Respond
Risk recommends to BRFC, for
agreement by the Board, top-down
financial constraint parameters
and Group risk appetite for the
following year
Limit setting
Mandate and Scale (M&S) limits
reviewed by Risk and submitted to
BRFC annually. M&S limits monitored
quarterly with breaches reported to
senior management
Monitor
Group Risk Profile monitored against
agreed risk appetite and presented
to BRFC quarterly
Stress
Group Risk undertakes regular
stress testing of portfolio to assess
performance against various
scenarios and to explicitly identify
actions to mitigate risk
Evaluate
Risk reviews and challenges
businesses MTP and makes
recommendations to ExCo
and Board
The planning cycle
In addition to supporting transaction decisions, the measurement and
control of credit, market, operational and other risks have considerable
influence on Barclays’ strategy. The Board is solely responsible for
approving the MTP, the associated risk appetite statement, and the
capital plans. As such, the business plans of Barclays must incur a level
of risk that falls within the Board’s tolerance, or be modified
accordingly. The BFRC has been in place since 1999 and is devoted to
review the firm’s risk and make appropriate recommendations to the
Board. For details of the activities of the Board and the BFRC in 2013
see the Governance Structure section on page 380 and 381 and the
BFRC Chairman’s report on page 70.
The risk appetite and the Group-wide stress testing processes,
described below, are closely linked to the MTP process and also
support strategic planning and capital adequacy. The risk appetite
process ensures that senior management and the Board understand
the MTP’s sensitivities to key risk types, and includes a set of M&S
limits to ensure the Group stays within appetite. Stress testing informs
management on the impact to the business of detailed scenarios.
Integral to the Group-wide stress testing process is to explicity identify
a set of actions that management would take to mitigate the impact of
a stress.
One of the main objectives of managing risk is to ensure that Barclays
achieves an adequate balance between capital requirements and
resources. The capital planning cycle is fully integrated within strategic
planning.
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