The Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued Internal Control – Integrated Framework to help businesses and other entities assess and enhance their internal control systems. That framework has since been incorporated into policy, rule, and regulation, and used by thousands of enterprises to better control their activities in moving toward achievement of their established objectives. Companies have recently increased their focus on risk management and it became clear that there an urgent need exists for a framework to effectively identify, assess and manage risk. The need for an enterprise risk management framework, providing key principles and concepts, a common language, and clear direction and guidance, became even more compelling. COSO believes this Enterprise Risk Management – Integrated Framework fills this need, and expects it will become widely accepted by companies and other organizations and indeed all stakeholders and interested parties. The framework is becoming more and more popular and being used by organizations of all calibers. The methodology is based on the building-block approach. The building-block process enables organizations to evolve ERM as they establish a risk culture and offers better opportunities for efficient and effective allocation of resources for ERM activities. The building block approach consists of: (1) implementing the ERM frame- work on a limited basis across each of the framework’s eight interrelated components, and (2) placing initial emphasis on entity-wide risks across all four risk categories—strategic, operations, reporting, and compliance. The ERM framework can be expanded, including an eventual cascading of the framework throughout other levels of the organization as senior management becomes comfortable with the culture the framework creates. There exist several benefits which COSO ERM framework provides: size of a company plays no role at all – all organizations can benefit from it; provision of better resources allocation. In this report, I will conduct a research on Barclays PLC using the above-mentioned method. Risk factors, which influence objectives and strategies of the company will be revised and analyzed.
Short overview of the Company:
Barclays PLC (LSE: BARC, NYSE: BCS) is a global financial services company headquartered in Canary Wharf, London, United Kingdom. As of 2010, it is the world's 10th-largest banking and financial services group and 21st-largest company according to a composite measure by Forbes magazine.
COSO ERM framework implementation
Component: Risk response
At a strategic level, the company’s risk management objectives are: * To identify the Group’s significant risks.
* To formulate the Group’s Risk Appetite and ensure that business profile and plans are consistent with it. * To optimize risk/return decisions by taking them as closely as possible to the business, while establishing strong and independent review and challenge structures. * To ensure that business growth plans are properly supported by effective risk infrastructure. * To manage risk profile to ensure that specific financial deliverables remain possible under a range of adverse business conditions. * To help executives improve the control and co-ordination of risk taking across the business.
The following information describes the risk factors, which the Group believes could cause its future results to differ materially from expectations:
1.Wholesale Credit Risk and Retail Credit Risk
Credit Risk is the risk of the Group suffering financial loss if any of its customers, clients or market counterparties fails to fulfill their contractual obligations to the Group. This can also arise when an entity’s credit rating is downgraded, leading to a fall in the value of Barclays investment in its issued financial instruments.
Specific areas and scenarios...