Barclays 2015 Annual Report Download - page 74

72 I Barclays PLC Annual Report 2015 home.barclays/annualreport
Governance: Directors’ report
Information provided to the Board
As set out in the Code, the Chairman is responsible for ensuring that the
Board receives accurate, timely and high quality information about the
Company’s performance at appropriate intervals and in an appropriate
manner to enable it to take sound decisions, monitor effectively and
provide advice to promote the success of the Company. Our Company
Secretary supports the Chairman in ensuring good information flows
between the Board, the Board Committees and the senior executives. In
addition to providing dedicated support for the Board, the Company
Secretary maintains dialogue with our Directors in order to confirm that
the information they require in order to fulfil their responsibilities as a
member of the Board is being received. If there is a need for independent
and professional advice this can be sought by the Board, via the
Company Secretary or directly, at Barclays expense.
Directors expect to be kept informed of key developments in the
business by both the Executive Directors and senior management and
take seriously their responsibility to request any further explanations as
required. The Board and Board Committee annual forward calendars of
business are formulated to ensure that Directors receive regular reports
and presentations, in addition to periodic communications advising of
any updates to the business of the Company, current events and the
regulatory environment.
Accountability
The Strategic Report on pages 1 to 33 describes the business model and
strategy whereby the Company generates and preserves value over the
long term and delivers the objectives of the Company.
Risk management and internal control
The Directors have responsibility for ensuring that management
maintain an effective system of risk management and internal control
and for assessing its effectiveness. Such a system is designed to identify,
evaluate and manage, rather than eliminate, the risk of failure to achieve
business objectives and can only provide reasonable and not absolute
assurance against material misstatement or loss.
Barclays is committed to operating within a strong system of internal
control that enables business to be transacted and risk taken without
exposing itself to unacceptable potential losses or reputational damage.
Barclays has an overarching framework that sets out the Group’s
approach to internal governance (the Barclays Guide). The Barclays
Guide establishes the mechanisms and processes by which the Board
directs the organisation, through setting the tone and expectations from
the top, delegating its authority and assessing compliance.
A key component of the Barclays Guide is the Enterprise Risk
Management Framework (ERMF). The purpose of the ERMF is to
identify and set minimum requirements in respect of the main risks to
achieving the Group’s strategic objectives and to provide reasonable
assurance that internal controls are effective. The key elements of the
Group’s system of internal control, which is aligned to the
recommendations of The Committee of Sponsoring Organizations of the
Treadway Commission, Internal Control – Integrated Framework (2013
COSO), are set out in the risk control frameworks relating to each of the
Group’s principal and key risks. As well as incorporating our internal
requirements, these reflect material Group-wide legal and regulatory
requirements relating to internal control and assurance.
Effectiveness of internal controls
Key controls are assessed on a regular basis for both design and
operating effectiveness. Issues arising out of business risk and control
assessments and other internal and external sources are examined to
identify pervasive themes. Where appropriate, control issues are
reported to the Board Audit Committee. In addition, regular reports are
made to the Board Audit Committee by management, Barclays Internal
Audit and the Finance, Compliance and Legal functions covering, in
particular, financial controls, compliance and other operational controls.
Risk management and internal control framework
The ERMF is the Group’s internal control framework. It is refreshed
annually with an assessment of operational maturity provided to the
Board Audit Committee. In 2015, the Board Audit Committee received
quarterly reports on the effectiveness of the control environment: these
reports covered risks and controls including financial, operational and
compliance risk.
The Board Audit Committee formally reviews the system of internal
control and risk management annually. Throughout the year ending
31 December 2015 and to date, the Group has operated a system of
internal control that provides reasonable assurance of effective
operations covering all controls, including financial and operational
controls and compliance with laws and regulations. Processes are in
place for identifying, evaluating and managing the principal risks facing
the Group in accordance with the Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting published
by the Financial Reporting Council.
The review of the effectiveness of the system of risk management and
internal control is achieved through a four-step approach which is
centred on reviewing the effectiveness of the Barclays Guide and its
component parts, including the ERMF.
1. Governance Risk and Control meetings of the business and functional
executive committees monitor, review and challenge the effective
operation of key risk management and control processes, including
the results of audits and reviews undertaken by Barclays Internal Audit
(which include assessments of the control environment and
management’s control approach) and examinations and assessments
undertaken by our primary regulators, on an ongoing basis as part of
the system of risk management and internal control. The remediation
of issues identified within the control environment is regularly
monitored by management and the Board Audit Committee.
2. Testing of the Governance Risk and Control meetings held within the
executive committees provides assurance that the committees are
effectively overseeing the control environment and associated risk
management and internal control processes.
3. The owners of the key governance processes which comprise the
Barclays Guide undertake a review to confirm that processes have
been implemented and are operating effectively.
4. The annual review of the system of risk management and internal
control brings together the results of the activities completed in steps
1 to 3 to ensure that each of the key processes has been effectively
reviewed.
In 2015, the Board received regular reports covering risks of Group-level
significance. Over the year, the Board Risk Committee and the Board
Reputation Committee examined reports covering the principal risks
(credit risk, market risk, capital risk, liquidity risk, operational risk and
conduct risk) as well as reports on risk measurement methodologies and
risk appetite. Further details of risk management procedures and
potential risk factors are given in the Risk Management section on pages
119 to 142.
How we comply