Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 179 report information sustainability report Governance review review statements Annual Report 2022 Directors’ report: Board Risk Committee report (continued) In 2022, the BoE returned to its annual Treasury and Capital risks have been Operational risk cyclical scenario (ACS) stress testing actively monitored by the Committee, Operational risk remained heightened in (paused for two years during the including, in particular, the appetite for risk 2022, driven by an increase in risks pandemic), which assesses the UK banking going into this higher-rate environment associated with geopolitical instability and system and its capital resilience to a severe and the adequacy of liquidity levels to uncertain economic conditions, as well as but plausible shock. The Committee mitigate risks associated with a potential changes to working practices following the reviewed and approved the results of the UK sovereign downgrade. The Committee COVID-19 pandemic. Against this ACS 2022, and approved its use, subject to reviewed and approved the Group’s backdrop, the Committee discussed certain adjustments, for the Group’s Internal Capital Adequacy Assessment updates on a multi-year effort to increase internal stress test (IST). Process (ICAAP) and Internal Liquidity Barclays’ Operational Risk capabilities, and Adequacy Assessment Process (ILAAP) The Committee received a briefing on the on management actions to enhance the during the course of 2022, concluding that results of the IST and was satisfied that the security and resilience of the Group, the Group was appropriately capitalised Group would meet internal and regulatory including the risks associated with third and had adequate liquidity resources, requirements for capital and liquidity. party reliance, hybrid working and including allowing for the impact of the ransomware cyber-attack. The Financial risk Over-issuance of Securities. Committee oversaw the Group’s The Committee continued to monitor participation in the PRA’s cyber stress test Conduct risk closely the rapidly changing and will continue to oversee related The risk of poor outcomes or harm to macroeconomic environment, including management actions and preparations for customers, clients and markets arising the broad range of impacts stemming US legislative changes in the cyber sphere from the delivery of Barclays’ products and from the war in Ukraine, inflationary in 2023. services continued to be an area of pressures and rising interest rates. The The Committee also considered ongoing focus for the Committee. The Committee discussed updates on the Committee considered the heightened management of risks associated with new multi-faceted response required to the inherent risk associated with the rapidly activities, including the onboarding of a Russian invasion of Ukraine, including the changing Russian sanctions regime and significant new partnership business in the Group’s response to rapidly imposed the impact on customers and clients of US Consumer Bank, the Barclays UK digital global sanctions and the management of transformation programme and the challenging market conditions. the Group’s financial exposures to Russia- announced acquisition of Kensington The introduction by the FCA of the new specific market, credit and liquidity risks. Mortgage Company; the Committee will Consumer Duty in July 2023, aimed at The Committee also oversaw action taken continue to oversee execution risk relating setting higher and clearer standards of by management to assess and mitigate to these as they progress. In addition, the consumer protection across financial the financial risks associated with the Committee continues to oversee services and requiring firms to put Over-issuance of Securities. management’s review of the New and customers’ needs first, will increase the The Committee considered assessments Amended Product Approval (NAPA) regulatory focus on conduct issues and of the potential impacts of heightened process, which is designed to ensure that customer outcomes. Current cost of living inflation and the evolving interest rate any new activity and change pressures also re-enforce the need to environment on consumer spending and implementation is appropriately controlled remain focused on ensuring Barclays affordability, with a view to ensuring the and supported. delivers good customer outcomes. The consumer and business banking portfolios Committee received briefings on the Climate risk were appropriately positioned for the Group’s plans for implementation of the emerging environment and to identify Acknowledging the importance of this Consumer Duty and will continue to areas of stress where customers and global issue, at the start of 2022, Climate receive updates as this work progresses clients might be facing financial pressures risk became a Principal Risk within our Oversight of the management of financial and the actions taken to support them. ERMF and the Committee has overseen crime risk was also a core focus of the The Committee also continued to monitor the continued development and Committee, reflecting the increase in the the risks associated with the collection and embedment of Climate risk risks of money laundering, sanctions recovery of loans provided under the methodologies and capabilities. The circumvention and organised crime taking government loan schemes during the Committee approved the Group’s Round 2 advantage of economic pressure on pandemic. Throughout the year, the submission to the BoE's industry-wide companies and individuals. Committee received regular updates on Climate Biennial Exploratory Scenario Credit and Market risk within the Corporate (CBES) and received updates on the and Investment Bank (CIB), with particular regulatory feedback received and follow- consideration given to the structured up actions to be taken by management, lending and finance and leveraged finance including that Climate risk is adequately portfolios, including management’s considered as part of business planning actions to manage the size of these activities across the Group. In particular, portfolios in light of the deterioration in the Committee has discussed with senior market conditions. management of both Barclays International and Barclays UK their respective climate strategies and plans for the embedment and delivery of those strategies within their businesses, in line with Barclays' ambition to become a net zero bank by 2050.