Barclays 2015 Annual Report Download - page 10

08 I Barclays PLC Annual Report 2015 home.barclays/annualreport
To protect Barclays from a volatile and weak external environment, a
strong risk capability is needed. At Barclays the Risk teams:
 provide critical risk capabilities, including directing risk appetite and
the risk profile
 set frameworks, policies and standards
 provide strong and independent second line challenge on a business
by business basis
 lead implementation of critical regulatory risk initiatives.
In the execution of our strategy, some of the risks we face arise as a
result of our decisions, and some result from operational processes, or
the external environment. We classify risks under five types:
 Credit risk: Financial loss should customers not fulfil contractual
obligations
 Market risk: Earnings or capital impact due to volatility of trading book
positions or as the consequence of running a banking book balance
sheet and liquidity funding pool
 Funding risk: Failure to maintain adequate capital and liquidity
 Operational risk: Cost from human factors, inadequate processes and
systems or external events
 Conduct risk: Detriment through inappropriate judgement in
execution of business activities.
In the course of business we identify and assess these risks, determine
the appropriate risk response, and monitor the effectiveness of these
actions and changes to the risk profile:
 Evaluate: Individuals and teams who manage processes identify and
assess the proposed risks
 Respond: Ensures risks are kept within appetite, the level of risk the
Group is prepared to accept while pursuing its business strategy, and
where appropriate taking necessary mitigation actions
 Monitor: Monitoring the risks identified is on-going and proactive, and
can often mean re-evaluating risks as well as changing our response.
In 2015, the Risk function and the businesses carried out detailed
evaluations of the risks Barclays faces using tools such as stress testing.
These risks included lower global energy and commodity prices, a slow
down in China’s economic growth, or of any risks from the EU referendum
in the UK. We have responded to changing market conditions by
tightening lending criteria in riskier areas and re-deploying risk capacity
toward sectors offering better returns on risk. Senior management and
the Board are actively engaged in monitoring these risks, and provide
high-level direction.
Responsibilities for the management of risk and control are aligned to
a 3 lines of defence activity-based model:
 first line of defence responsibilities rest with the colleagues who
manage operational or business processes. They are responsible for
identifying the related risks, and designing, operating, testing and
remediating appropriate controls to manage those risks
 designing frameworks and policies and providing independent
oversight and challenge to ensure compliance constitute the second
line of defence role
 Barclays Internal Audit, the third line, provides independent assurance.
When performed appropriately by all colleagues, these responsibilities
ensure that there is a strong risk and control environment at Barclays.
Our approach to risk
underpins our journey
to commercial success
Top down:
Setting parameters
Supporting business
decisions and growth by
setting high standards and
an appropriate risk appetite
Bottom up:
Aiding decision making
Continuously evaluating,
responding to and
monitoring our risks
Our approach
…and underpinned by our robust
approach to risk management…
The role of Risk is to support the Board in
setting commercial appetite and direction;
and as a tool in the businesses for better
decision making.