The Risk Committee of the Board of Directors

The Board of Directors has risk management responsibilities that are defined not only by best practices and guidelines, but also by laws and regulations. The Risk Committee must assist the Boards in assessing the different types of risk to which the organization is exposed.

Management is responsible for executing the organization's risk management policy. The Risk Committee must exercise oversight, and must provide evidence about it. The members of the committee must have direct access to, and receive regular reports from management.

The Risk Committee must be composed of at least three members and must have a majority of non-executive directors, at least one of whom shall also be a member of the Audit
Committee. At least one person must be a risk expert. The Chairman of the Committee must be a non-executive Director

The Risk Committee is responsible to:

1. Learn about the actual risks and the control deficiencies in the organization.

2. Help the board define the risk appetite of the organization.

3. Exercise oversight of management’s responsibilities, and review the risk profile of the organization to ensure that risk is not higher than the risk appetite determined by the board.

4. Monitor the effectiveness of risk management functions throughout the organization. Ensure that infrastructure, resources and systems are in place for risk management and are adequate to maintain a satisfactory level of risk management discipline.

5. Monitor the independence of risk management functions throughout the organization.

6. Review the strategies, policies, frameworks, models and procedures that lead to the identification, measurement, reporting and mitigation of material risks.

7. Review issues raised by Internal Audit that impact the risk management framework.

8. Ensure that the risk awareness culture is pervasive throughout the organization.

9. Fulfill  its statutory, fiduciary and regulatory responsibilities. This is usually the most difficult task.

Risks to serving directors have risen exponentially after the new Basel Capital Accord, the US Sarbanes Oxley Act, the European Sarbanes Oxley (8th Company Law Directive, E-SOX), the Japanese Sarbanes Oxley (Financial Instruments and Exchange Law, J-SOX), the European Union's Financial Services Action Plan (FSAP) that includes MiFID (Markets in Financial Services Directive, and so many other Acts, Directives, Regulations.

The members of the board have to understand the new environment and the new responsibilities in order to protect their reputation and wealth and their organization. They have to be aware of the risks and to perform their duties according to the highest principles and implementation practices.

But, they can do more: They can use compliance as a competitive advantage.

CASE STUDY - BARCLAYS PLC BOARD RISK COMMITTEE
TERMS OF REFERENCE
Revised by the Board on 10 December 2009

The Board Risk Committee (the Committee) is a committee of the Board of directors of Barclays PLC (the Board), from which it derives its authority and to which it regularly reports.

The principal purpose of the Committee is to review, on behalf of the Board, management’s recommendations on risk, in particular:

• Consider and recommend to the Board the Group’s Risk Appetite;
• Review, on behalf of the Board, the Group’s Risk Profile;
• Satisfy itself on the design and completeness of the Group’s internal control and assurance framework relative to the risk profile, including the Principal Risk Categories; and
• Commission, receive and consider reports on key risk issues.

In areas where the Committee reviews and evaluates reports from management, but does not formally approve such items, the Committee may either:

(i) receive the report, being satisfied that either no management action is required or that existing actions being taken by management are appropriate; or

(ii) receive the report and, after discussion with management, satisfy itself that actions to be taken by management following the discussion are appropriate; or

(iii) receive the report and, following discussion with management, elevate situations to the Board where is it not satisfied that the appropriate actions are being taken by management.

The Committee will decide, on a case by case basis, whether to report items under (i) and (ii) above to the Board.

1. Constitution, meetings etc.
1.1 Membership - will comprise at least two non-executive directors of Barclays PLC.

The Board may also appoint the Group Chairman as a member of the Committee.

There will be some cross-membership between the Committee and the Board Audit Committee, with, typically, the Chairman of one of the committees serving as a member of the other.

1.2 Quorum - shall be two, comprising the Chairman of the Committee and one non-executive director.

In the event of difficulty in relation to achievement of a quorum, non-executive directors who are not members of the Committee may be co-opted as members for individual meetings.

1.3 Meetings - will be held at least four times per year.

The remit of the Committee will be synchronised, as far as practicable, with that of the Board Audit Committee.

The Chairman of the Committee and the Group Chairman may each request that a meeting should be held at any time. Any other member of the Committee and the Group Risk Director may each request the Chairman of the Committee to convene a meeting at any time.

1.4 Chairman - shall be appointed by the Board and shall be a non-executive Director.

1.5 Secretary and Support - the Company Secretary and/or the Deputy Secretary or an Assistant Secretary shall attend all meetings of the Committee.

The Committee will be supported by the Company Secretary.

1.6 Minutes - will be circulated to all directors and, as appropriate, to attendees.

Reports shall be made to the Board from the Chairman of the Committee following each meeting of the Committee.

1.7 Disclosure - the membership of the Committee and a description of its duties and activities during the year shall be disclosed in the Annual Report of the Company.

The Chairman of the Committee, or a deputy chosen from its membership, shall be available at the Annual General Meeting of the Company to answer questions which relate to the work of the Committee.

1.8 Attendees
(a) Mandatory
Group Risk Director
Group Finance Director
(b) Right to attend
All members of the Board
(c) By invitation of the Committee - Any Director, officer or employee of the Group

1.9 Advice – the Committee shall have the power to engage independent counsel and other professional advisers at the expense of the Group, and to invite them to attend meetings.

1.10 Training – the Committee, via the Company Secretary, shall make available to new Members of the Committee a suitable induction process and, for existing Members, ongoing training as discussed with the Committee.

1.11 Committee Effectiveness
(a) The Committee shall conduct an annual self-assessment and report any conclusions and recommendations for change to the Board.

(b) As part of this assessment, the Committee shall consider whether or not it receives adequate and appropriate support in fulfilment of its role and whether or not its current workload is manageable.

2. Scope of authority
2.1 The Committee is a Committee of the Board of the Company, to which Board it will report on a regular basis. The Committee is concerned with the business of the whole Barclays Group and its authority extends to all relevant matters relating to the Company and to Barclays Bank PLC and their business groups and subsidiaries.

3. Responsibilities of the Committee
In carrying out their responsibilities Committee members must act in accordance with the statement of Directors’ Duties set out in ss. 171-177 of the Companies Act 2006.

The Committee’s main responsibilities are:
3.1 To evaluate annually the Group’s internal control and assurance framework to satisfy itself on the design and completeness of the framework relative to the Group’s activities and risk profile.

3.2 To consider and recommend to the Board for approval the Group’s Risk Appetite and in particular

(a) To recommend to the Board on an annual basis the Group’s Total Financial Volatility Risk Appetite, including Risk Type Limits for Wholesale Credit Risk, Retail Credit Risk and Market Risk for the following year;

(b) To ratify any cumulative change over 10% to the approved Risk Type Limits within the Group’s Total Financial Volatility Risk Appetite set for each year;

(c) To receive reports of any change less than 10% to the approved Risk Type Limits within the Group’s Total Financial Volatility Risk Appetite set for each year;

(d) To consider any breaches of the Group’s Total Financial Volatility Risk Appetite and each of the approved Risk Type Limits and to recommend that the Board approve the reduction plan and/or ratify the excess request; and

(e) To delegate to the Chairman of the Committee authority to approve urgent material change requests in between meetings of the Committee, with all such material changes being reported to the members of the Committee promptly.

In recommending to the Board the Group’s overall risk appetite, the Committee will ensure that account has been taken of the current and prospective macro economic and financial environment, drawing on financial stability assessments such as those published by the Bank of England, the FSA and other authoritative sources that may be relevant.

3.3 To receive, on an annual basis, a report on the Group’s Mandate and Scale Limits, including an explanation of how such limits are set, and, periodically, to receive and consider reports

(a) of trends in exposures or concentrations against the Group’s Mandate and Scale Limits; and

(b) of any material change to the Group’s Mandate and Scale Limits, where ‘material’ is defined as a change above a threshold determined by the Risk Director for each Mandate and Scale factor (such thresholds being in the range of 10-20% for any Mandate and Scale factor).

3.4 To consider target capital ratios and monitor performance against them, including the potential impact of developments in market conditions, business development and/or the regulatory framework, reporting any conclusions to the Board.

3.5 To review the Group’s liquidity profile and recommend the overall liquidity risk framework (including risk appetite) to the Board, including the results of different stress assumptions.

3.6 To evaluate the Group’s risk profile and risk monitoring; in particular with respect to the following:

(a) performance vs risk appetite;
(b) risk trends;
(c) risk concentrations;
(d) provisions’ experience against budget; and
(e) Key Performance Indicators for risk.

3.7 To evaluate the appropriateness of the Group’s risk measurement systems including economic capital, Daily Value at Risk and any significant Credit Risk Measurement System.

3.8 To evaluate on an annual basis, the completeness of the Group’s Principal Risk Categories, based on the recommendation of the Group Executive Committee.

3.9 To delegate authority to the Director of Group Risk to approve minor revisions to the Group’s Principal Risk Categories in between meetings of the Committee to ensure that the Categories are kept up to date, such revisions being reported to the next meeting of the Committee. Any significant revisions will be reported to the members of the Committee promptly.

3.10 To receive and consider reports on Key Risk Issues (including, where appropriate, the risks following the Group’s entry into new businesses or geographical areas), that assess the nature and extent of risks facing the Group, including Executive Management’s assessments of:

(a) the likelihood of the risks concerned materialising, and
(b) the completeness of the Group’s system of internal controls to manage those risks.

3.11 To consider and where necessary update and approve, at least annually, the following Policy Statements required by the Financial Services Authority on behalf of the Board:

(a) Large Exposures Group Policy Statement
(b) Liquidity Policy Statement
(c) Retail Credit and Wholesale Credit Impairment and Provisioning Policy Statements
(d) Trading Book Policy Statement

Exceptionally, where changes to the Policy Statements are required to be made urgently in between meetings of the Committee, they would go to the Group Risk Oversight Committee for interim endorsement after agreement with the Chairman of the Committee and would then be brought to the next meeting of the Committee for formal approval.

3.12 The Committee will take such steps as are appropriate to satisfy itself that the due diligence process followed for proposed strategic acquisitions or disposals (i.e., those requiring Board approval) is thorough and will review the key conclusions of the due diligence process, including the impact of the transaction on the Group’s risk profile and risk appetite, reporting its conclusions to the Board.

3.13 The Committee will review annually performance against key material risks and provide input to the Board HR and Remuneration Committee to assist it in its deliberations on appropriate risk adjustments to be made to incentive packages. The Committee will also review the risk metrics to be used in compensation schemes for the following year and make recommendations to the Board HR & Remuneration Committee.

3.14 The Chairman of the Committee will receive relevant reports that are provided to the Board Audit Committee, including the FSA’s letter to the Board on their risk assessment of Barclays and the associated management response.

3.15 The Risk Director will meet regularly with the Chairman of the Committee and will have the right and responsibility to elevate issues to the Chairman of the Committee where he/she considers it necessary in the furtherance of his/her responsibilities.

The Chairman of the Committee will be consulted by the Finance Director in respect of the Risk Director’s performance appraisal, compensation and in respect of appointments to/departures from the role.

4. Responsibilities of management
4.1 Management will ensure that all information relevant to the discharge by the Committee of its responsibilities, detailed in Section 3 above, is provided to the Committee (as requested by the Committee). Management will also ensure that matters of material concern that are relevant to the Committee’s responsibilities are brought to the attention of the Committee promptly.

5. Amendments to Terms of Reference
The Committee may recommend to the Board any amendments to these Terms of Reference.
Barclays Corporate Secretariat