Barclays 2013 Annual Report Download - page 76

Corporate governance report
Board Conduct, Reputation and Operational Risk Committee continued
Operational risk
 At each meeting we examined the Operational Risk Profile Report,
which provides us with an overview of Operational risk across the
Group. Barclays has for the first time put in place a statement of
operational risk appetite, together with quantitative and qualitative
measures for assessment. The draft statement and assessment
approach were scrutinised by the Committee in June and we
recommended them to the Board for approval. In December we
examined and recommended the proposed 2014 Operational Risk
Appetite to the Board Enterprise Wide Risk Committee and the Board.
 During 2012 the Board Risk Committee (now the Board Financial Risk
Committee) had identified that Technology Risk is a key area of risk
for Barclays, as it is likely to be for other banks. In March, we held our
first operational risk ‘deep dive’ focused on Technology Risk. We
challenged management to further reduce the number of technology
risk incidents and increase the pace of remediation for control issues.
 Our scrutiny of the operational risk profile also highlighted the need
for a deep dive into Cyber Risk which is the risk of attacks on
Barclays, attacks on Barclays’ customers and attacks on service
availability. We debated the issue at length, probing management for
details of the resources and investment we are devoting to cyber risk,
and what contingency we have in place should a cyber attack be
successful. We asked to be kept regularly updated.
Implementing and monitoring cultural change
 Barclays is changing and a significant part of that is cultural change; our
people need to live and breathe our new purpose and values in order to
ensure that we achieve our ambition of becoming the ‘Go-To’ bank. The
Committee has therefore assumed Board oversight responsibility for
implementing and monitoring cultural change. The approach to
cultural and behavioural change focuses strongly on leadership
behaviour and during 2013 has been measured using a proprietary tool
- ‘Transforming Barclays’, which has gained insights into the conditions
for success from colleague surveys, senior leadership forums and a
pan-Barclays communication event, the Barclays Jam.
 Over the year we have seen evidence of strong belief in our Purpose
and Values and the results from internal surveys have been positive.
For example, 97% of the senior leadership group believe that they can
make decisions aligned to the Barclays Purpose and, in a Group-wide
colleague survey, the score for sustainable engagement was 74%. We
challenged management to ensure that an external perspective was
obtained in order to ensure that customers and stakeholders agree
that we are changing. We expect to see evidence of this in 2014.
Citizenship
 Our focus on Citizenship in 2013 was on the annual Citizenship Day
and developing a long-term ‘2020 Citizenship Vision’. We agreed with
management that we needed to emphasise our commitments to
society, focusing on execution and equipping leaders across the
Group to take societal impacts into account in their decision making.
We pressed management to strengthen communication of strategy
and what we are doing to deliver it.
Reputation
 Throughout 2013 the Committee monitored Reputational risk at
Barclays, asking management to provide a more thematic view of
risks to Barclays and to carry out ‘horizon scanning’ in order to
identify approaching risks early, before they crystallise, giving us the
opportunity to mitigate them.
 We also examined and recommended to the Board for approval our
new Group-wide Code of Conduct, ‘The Barclays Way’ which was
developed following extensive stakeholder engagement.
Sir David Walker
Chairman, Board Conduct, Reputation and Operational Risk Committee
3 March 2014
Governance in action
Conduct risk
We spent time at the outset in defining what Conduct risk means
for Barclays, how much Conduct risk we are prepared to accept and
how we measure and manage it.
Our first step was to scrutinise management’s proposed definition
of Conduct risk. We agreed that, for Barclays, Conduct risk is ‘the
risk that detriment is caused to our customers, clients or
counterparties or Barclays and its employees because of
inappropriate judgment in the execution of our business activities’.
We established our proposed tolerance, or appetite, for Conduct
risk, agreeing that Barclays has no tolerance for such risk.
We scrutinised the proposed accountability framework, outcome
statements and management information for Conduct risk and
emphasised that, in addition to putting in place a sound framework,
there must be focus on ensuring the right people are in place to run
the businesses and that providing the right training was crucial.
We requested that Conduct risk reports give more consideration to
forward-looking aspects and how they are shaping the thinking on
the management of Conduct risk. Management will report quarterly,
including key observations drawn from the management
information reported by each business, and commentary from the
‘second line of defence’ on risks and actions to be taken. The
reports will also draw out themes across the businesses, and any
issues escalated to the management committee responsible for
Conduct and Reputational risk, plus any developments in the
external environment. For example, where a business has decided
to exit or cease to offer a product, the focus will be on ensuring that
appropriate processes are in place to identify and manage any
potential Conduct risk arising from that decision. These reports will
allow us to monitor Conduct risk effectively going forward and allow
the Group to manage it proactively, rather than reactively.
The Committee examined the governance arrangements designed
to bring Conduct and Reputational risk issues together, and pressed
management for assurance that the structure ensured sufficient
executive level accountability. After some discussion we were
content to support the structure as proposed but emphasised the
need for regular review to ensure it remains effective. We also
emphasised that there could be greater focus on the duty of care
owed to our customers and their need to understand our products.
We scrutinised the Group’s approach to product development in
light of Conduct risk. We were assured that the new product
approval process in our UK Retail Bank had been revised and,
although now a good process, would be refined further.
Going into 2014 we are confident that we have an effectively designed
Conduct risk management framework in place. From 1 January 2014
our businesses have taken responsibility for the management of
Conduct risk and will report against the thresholds set out in the
framework. 2014 will be a transition year as the businesses embed the
new approach in decisions and processes. We will be monitoring this
transition closely and will report back to you on progress in our 2014
Annual Report.
The Committee also assessed the process in place for authorising
Directors’ conflicts of interest and concluded that they have been
effective. The processes are described in ‘Corporate Governance in
Barclays’ available on our website Barclays.com.
barclays.com/annualreport
74 Barclays PLC Annual Report 2013