Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 291 report information sustainability report Governance review review statements Annual Report 2022 Principal risk management (continued) Committee. Economic scenarios are the day-to-day limit management of responsible for implementing the risk regenerated at a minimum twice annually market risk exposures through control framework for market risk. but more frequently if deemed governance processes which are outlined For more information on market risk appropriate, and also to align with the in supporting market risk policies and management, refer to the Barclays PLC Group’s medium term planning exercise. standards. Pillar 3 Report 2022 (unaudited). Each model used in the estimation of ECL, Market risk oversight and challenge is Management value at risk (VaR) including key inputs, are governed by a provided by business committees and VaR is an estimate of the potential loss series of internal controls, which include Group committees, including the Market arising from unfavourable market the validation of completeness and Risk Committee (MRC). movements if the current positions were accuracy of data in golden source The objectives of market risk management to be held unchanged for one business systems, documented data are to: day. For internal market risk management transformations and documented lineage purposes, a historical simulation • identify, understand and control market of data transfers between systems. methodology with a one-year equally risk by robust measurement, limit i) The Group Impairment Committee, weighted historical period, at the 95% setting, reporting and oversight formed of members from both Finance confidence level is used for all trading • facilitate business growth within a and Risk and attended by both the Group books and some banking books. controlled and transparent risk Finance Director and the Group CRO, is Limits are applied at the total level as well management framework responsible for overseeing impairment as by risk factor type, which are then policy and practice across the Group and • control market risk in the businesses cascaded down to particular trading desks will approve impairment results. Reported according to the allocated appetite. and businesses by the market risk results and key messages are To meet the above objectives, a management function. communicated to the BAC, which has an governance structure is in place to oversight role and provides challenge of See the market risk performance section for a manage these risks consistent with the + review of management VaR. key assumptions, including the basis of the ERMF. scenarios adopted. Impairment results are Treasury and capital risk The BRC recommends market risk then factored into management decision management appetite to the Board for their approval. making, including but not limited to, The Market Risk Principal Risk Lead (PR This comprises: business planning, risk appetite setting and Lead) is responsible for the Market Risk portfolio management. Liquidity risk: The risk that the Group is Control Framework and, under delegated unable to meet its contractual or Market risk management authority from the Group CRO, agrees contingent obligations or that it does not (audited) with the business CROs a limit framework have the appropriate amount, tenor and within the context of the approved market The risk of loss arising from potential composition of funding and liquidity to risk appetite. adverse changes in the value of the support its assets. Group’s assets and liabilities from The Market Risk Committee (MRC) reviews Capital risk: The risk that the Group has an fluctuation in market variables including, and makes recommendations concerning insufficient level or composition of capital but not limited to, interest rates, foreign the group-wide market risk profile. This to support its normal business activities exchange, equity prices, commodity includes overseeing the operation of the and to meet its regulatory capital prices, credit spreads, implied volatilities Market Risk Framework and associated requirements under normal operating and asset correlations. policies and standards, monitoring market environments and stressed conditions and regulatory changes, and reviewing limit Overview (both actual and as defined for internal utilisation levels. The committee is chaired Market risk arises primarily as a result of planning or regulatory testing purposes). by the PR Lead and attendees include the client facilitation in wholesale markets, This also includes the risk from the Group’s business heads of market risk and business involving market-making activities, risk pension plans. aligned market risk managers. management solutions and execution of Interest rate risk in the banking book: The In addition to MRC, the Corporate and syndications. Upon execution of a trade risk that the Group is exposed to capital or Investment Bank Risk Committee (‘CIBRC’) with a client, the Group will look to hedge income volatility because of a mismatch is the main forum in which market risk against the risk of the trade moving in an between the interest rate exposures of its exposures are discussed and reviewed adverse direction. Mismatches between (non-traded) assets and liabilities. with senior business heads. The client transactions and hedges result in The Treasury function manages treasury Committee is chaired by the CRO of market risk due to changes in asset prices, and capital risk exposure on a day-to-day Barclays International and meets weekly, volatility or correlations. basis with the Group Treasury Committee covering current market events, notable Organisation, roles and responsibilities acting as the principal management body. market risk exposures, and key risk topics. Market risk in the businesses resides The Treasury and Capital Risk function is New business initiatives are generally primarily in Barclays International and responsible for oversight and provides socialised at CIBRC before any changes to Treasury. These businesses have the insight into key capital, liquidity, interest risk appetite or associated limits are mandate to assume market risk. The front rate risk in the banking book (IRRBB) and considered in other governance office and Treasury trading desks are pension risk management activities. committees. responsible for managing market risk on a The head of each business is accountable day-to-day basis, where they are required for all market risks associated with its to understand and adhere to all limits activities, while the head of the market risk applicable to their businesses. The Market team covering each business is Risk team supports the trading desks with