Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 269 report information sustainability report Governance review review statements Annual Report 2022 Material existing and emerging risks In particular: growth, higher unemployment and Material existing and emerging falling property prices, which could risks to the Group’s future • Global GDP growth in 2022 was severely lead to increased impairments in hampered by inflationary pressures performance relation to a number of the Group’s resulting from; (a) the disruptive legacy The Group has identified a broad range of portfolios (including, but not limited of the COVID-19 pandemic on supply risks to which its businesses are exposed. to, the UK mortgage portfolio, chains; (b) restricted labour markets and Material risks are those to which senior unsecured lending portfolio (including upward pressure on employment costs; management pay particular attention and credit cards) and commercial real and (c) escalating energy and food which could cause the delivery of the estate exposures. prices intensified by the conflict in Group’s strategy, results of operations, Ukraine. These pressures have led to – increased market volatility (in financial condition and/or prospects to the on-going 'cost of living' pressures in particular in currencies and interest differ materially from expectations. much of the world, but particularly in the rates), which could impact the Emerging risks are those which have Group’s trading book positions and UK and Europe. unknown components, the impact of affect the underlying value of assets in • In response to persistent inflationary which could crystallise over a longer time the banking book and securities held pressures, throughout 2022, central period. In addition, certain other factors by the Group for liquidity purposes banks pursued policies of raising interest beyond the Group’s control, including rates while also curtailing quantitative – a credit rating downgrade for one or escalation of global conflicts, acts of more members of the Group (either easing and in some cases commencing terrorism, natural disasters, pandemics quantitative tightening. directly or indirectly as a result of a and similar events, although not detailed downgrade in the UK sovereign credit below, could have a similar impact on the • Both the elevated inflationary ratings), which could significantly Group. environment and higher interest rates increase the Group’s cost of funding are likely to adversely affect economic Material existing and emerging and/or reduce its access to funding, growth globally in 2023, particularly in risks potentially impacting more widen credit spreads and materially developed markets, with the possibility than one principal risk adversely affect the Group’s interest of elevated unemployment as a result, i) Business conditions, general economy margins and liquidity position and/or with potentially negative implications for and geopolitical issues the Group's performance, including – a widening of credit spreads more The Group’s operations are subject to generally or reduced investor appetite through increased impairment changes in global and local economic and allowances. It remains possible that a for the Group’s debt securities, which market conditions, as well as geopolitical resurgence in COVID-19 and/or could negatively impact the Group’s developments, which may have a material restrictions on movement imposed cost of and/or access to funding impact on the Group’s business, results of locally to combat outbreaks or new • A significant proportion of the Group's operations, financial condition and strains, could exacerbate the expected portfolio is located in the US, including a prospects. slowdown in global economic major credit card portfolio and a range performance. A deterioration in global or local economic of corporate and investment banking and market conditions may result in • In the UK and Europe, governments exposures. The possibility of significant (among other things): (i) deteriorating responded to escalating energy prices changes in US policy in certain sectors business, consumer or investor via short term subsidies for consumers (including trade, healthcare and confidence and lower levels of investment and industry, in part funded by windfall commodities) may have an impact on and productivity growth, which in turn may taxes on targeted sectors. Revisions to the Group’s associated portfolios. lead to lower customer and client activity, these schemes during 2023 may cause Stress in the US economy, weakening including lower demand for borrowing; (ii) upward pressure on household and GDP and the associated exchange rate higher default rates, delinquencies, write- corporate finances, which could result in fluctuations, heightened trade tensions offs and impairment charges as borrowers higher impairment charges. (such as between the US and China), and struggle with their debt commitments; (iii) increased interest rates (particularly if • Trading arrangements between the UK subdued asset prices, which may impact accompanied by rise in unemployment) and the European Union (EU), following the value of any collateral held by the could lead to increased levels of the UK's exit from the EU, may: (i) raise Group and require the Group and its impairment, which may have a material costs for UK customers trading with the customers to post additional collateral in adverse effect on the Group's results of EU, and/or otherwise adversely affect order to satisfy margin calls; (iv) mark-to- operations and profitability. their business; and (ii) impact the market losses in trading portfolios Group's EU operations. • An escalation in geopolitical tensions or resulting from changes in factors such as increased use of protectionist measures • Further, any trading disruption between credit ratings, share prices and solvency of (such as the US and China implementing the EU and the UK may have a significant counterparties; and (v) revisions to reciprocal trade tariffs) may have a impact on economic activity in the EU calculated ECLs leading to increases in material adverse effect on the Group’s and the UK which, in turn, could have a impairment allowances. In addition, the business in the affected regions. material adverse effect on the Group’s Group’s ability to borrow from other business, results of operations, financial • In China the level of debt, particularly in financial institutions or raise funding from condition and prospects. Unstable the property sector, remains a concern, external investors may be affected by economic conditions could result in given the high level of leverage and deteriorating economic conditions and (among other things): despite government and regulatory market disruption. Geopolitical events can action. The rapid unwinding of “zero also cause financial instability and affect – a deeper recession in the UK and/or COVID-19” policies may initially result in economic growth. one or more member states of the EU economic slowdown should large in which it operates, with lower