Barclays 2013 Annual Report Download - page 73

Role and responsibilities
The Committee’s responsibilities include:
 Recommending to the Board Enterprise Wide Risk Committee and
the Board the total level of financial risk the Group is prepared to take
(risk appetite) to achieve the creation of long-term shareholder value;
 Monitoring financial risk appetite, including setting limits for
individual types of financial risk, e.g. credit, market and funding risk;
 Monitoring the Group’s financial risk profile;
 Ensuring that financial risk is taken into account during the due
diligence phase of any strategic transaction; and
 Providing input from a financial risk perspective into the deliberations
of the Board Remuneration Committee.
Committee composition
Mike Ashley joined the Committee in September 2013 and Sir Andrew
Likierman left the Committee in April 2013 on retiring from the Board.
David Booth retired from the Committee on 31 December 2013 on
retiring from the Board, and was succeeded as Chairman by Tim
Breedon with effect from 1 January 2014. Steve Thieke joined the
Committee in early 2014 on his appointment to the Board. Details of
the skills and experience of the Committee members can be found in
their biographies on pages 83 to 85.
The Committee’s work
The Committee met six times in 2013. The chart on the previous page
shows how the Committee allocated its time during 2013. Committee
meetings were attended by management, including the Group Chief
Executive, Group Finance Director, Chief Internal Auditor, Chief Risk
Officer, Barclays Treasurer and General Counsel, as well as
representatives from the businesses. The lead audit partner from the
external auditor also attended each meeting. During the year the
Committee held one of its meetings in New York and another in
Johannesburg. In addition to the formal Committee meetings, the
Committee held a briefing session on Pillar 3 reporting.
In discharging its responsibilities during 2013, the Committee:
Risk Appetite
 Examined the proposed financial risk appetite for 2014 before
recommending it to the Board Enterprise Wide Risk Committee for
approval. Taking a 1 in 7 scenario and a 1 in 25 scenario, the
Committee assessed the performance of agreed financial volatility
parameters in those scenarios to establish any potential constraints.
The financial volatility parameters are largely unchanged from 2013,
although they have been updated to include the Common Equity
Tier 1 ratio and leverage ratio in light of regulatory requirements.
The Committee concluded that the proposed financial risk appetite
affords some headroom should any additional conduct risk issues
crystallise in 2014;
Risk Profile
 Debated the quarterly Financial Risk Profile Report, which provided
an update on credit, market, funding and liquidity risk in each of
Barclays’ main businesses, in order to satisfy itself that the financial
risk profile of the Group remained appropriate. The Committee was
especially concerned to understand the potential impact of
continuing weak economic conditions in each of Barclays’ main
markets, in particular, the continuing possibility of a Eurozone crisis
and the potential impact of a slowdown in monetary stimulus by one
or more governments on economic performance. Redenomination
risk in the Eurozone was scrutinised regularly by the Committee and
further details of the Committee’s activity in this area are given
below;
 Approved scenarios for Barclays’ internal stress testing exercise and
later evaluated the outputs. The scenario of a severe global recession
was in line with the scenario operated by the PRA in its stress testing
exercise. The Committee also endorsed a recommendation by
management to run a sensitivity analysis on the potential impact of a
disorderly cessation of quantitative easing. The stress testing
exercises demonstrated that Barclays maintains acceptable leverage
and capital ratios at the low points of the stress and the Committee
was content with the results of the exercise;
 Regularly examined actual and forecast performance against the
capital plan and capital targets, actual and forecast performance
against liquidity risk appetite and the leverage ratio, via discussion of
regular reports from Barclays Treasurer. In view of evolving regulatory
requirements, the Committee encouraged management to develop a
range of contingency options in order to ensure that the targets can
continue to be met. Further details of Barclays’ capital and liquidity
risk management framework can be found in the Risk Management
section of the Annual Report;
 Requested a ‘deep dive’ into pension risk. The Committee evaluated
the impact of volatility in the defined benefit pension scheme’s
liabilities on Core Tier 1 capital, given the sensitivity to inflation and
interest rates. The main potential risks arise from any increase in
inflation and the Committee considered whether there were any
opportunities to reduce inflation risk over the next few years and the
potential cost of doing so; and
 Regularly debated tax risk during 2013, in particular, the status of
discussions with key tax authorities relating to matters that remain
outstanding with regard to transactions from prior periods and the
implementation of new tax principles within the Group. The
Committee was content with the new tax risk governance framework
that has been implemented, which is aligned to Barclays’ Purpose
and Values, and asked to be kept updated on the status of settlement
discussions with key tax authorities on prior period transactions.
barclays.com/annualreport Barclays PLC Annual Report 2013 71
The Strategic Report Governance Risk review Financial review Financial statements Shareholder informationRisk management