Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 289 report information sustainability report Governance review review statements Annual Report 2022 Principal risk management (continued) implications could be an incremental operational risk profile through business as Overview factor. The potential effect of climate usual activities. The credit risk that the Group faces arises change has been considered qualitatively This includes working with Premises and from wholesale and retail loans and in the latest scenario assessment cycle, Operational Recovery Planning Horizontal advances together with the counterparty where climate has been found not to be an Owners to identify and respond to any new credit risk arising from derivative contracts immediate factor impacting most emerging climate change related impacts with clients; trading activities, including: scenarios, although greenwashing at or regulatory requirements, and debt securities, settlement balances with product level, and disclosures about our consideration of changes to approach or market counterparties, fair value through green credentials, are two topical areas taxonomy in line with regulatory other comprehensive income (FVOCI) subject to further analysis. requirements. assets and reverse repurchase loans. Climate Risk Management Reputation Risk Credit risk management objectives are to: The Group Property Standard outlines Definition • maintain a framework of controls to Barclays’ approach to addressing climate oversee credit risk Reputation risk is the risk that an action, risks with respect to the availability of transaction, investment, event, decision or • identify, assess and measure credit risk operational premises. Additionally, business relationship will reduce trust in clearly and accurately across the Group exposure to extreme weather events is the Group’s integrity and/or competence. and within each separate business, from considered during the design or Barclays is linked to clients across a wide the level of individual facilities up to the refurbishment of new and existing range of sectors and geographies, total portfolio strategic sites. including those that have the potential to • control and plan credit risk taking in line The Operational Recovery Planning cause or contribute to significant adverse with external stakeholder expectations standards outline Barclays’ requirements impacts on the climate. and avoiding undesirable concentrations to anticipate, prevent, adapt, respond to, Climate Risk Management recover and learn from internal or external • monitor credit risk and adherence to Environmental and social risks are disruption. Our focus is on continuing to agreed controls. governed and managed through our deliver Important Business Services to Organisation, roles and responsibilities ERMF, setting our strategic approach for customers and clients, and minimise any The first line of defence has primary risk management by defining standards, impact on the wider financial system, in the responsibility for managing credit risk objectives and responsibilities for all areas event of operational disruption. The within the risk appetite and limits set by the of Barclays. The ERMF is complemented Operational Recovery Planning risk from Risk function, supported by a defined set by a number of other frameworks, policies climate change is expected to manifest of policies, standards and controls. In the and standards, all of which are aligned to through premises and supplier risk in the entities, business risk committees individual Principal Risks. first instance, and if this leads to (attended by the first line) monitor and operational disruption, our operational Our assessment of environmental and review the credit risk profile of each recovery planning framework would help social risks not only helps safeguard our business unit where the most material mitigate the impacts through invocation of reputation, which supports longevity of the issues are escalated to the Retail Credit crisis management, and response and business but also enhances our ability to Risk Management Committee, Wholesale recovery plans. Our approach to serve our clients and support them in Credit Risk Management Committee and Operational Recovery Planning evolves in improving their own sustainability practices Group Risk Committee. response to the changing threat and disclosures. Our approach to Wholesale and retail portfolios are managed landscape, and this will include identification, assessment/escalation and separately to reflect the differing nature of consideration of climate change and its monitoring can be located within the the assets; wholesale balances tend to be associated impacts. Managing Impact section of this report larger and are managed on an individual basis, (from page 253) while the oversight and Barclays deploys and validates appropriate while retail balances are greater in number management of climate-related issues are recovery strategies for its critical but lesser in value and are, therefore, embedded with the Barclays governance processes, including the ability to transfer managed in aggregated segments. framework (from page 141). processing to alternative locations or The responsibilities of the credit risk premises. In addition to maintaining Credit risk management management teams in the businesses, the response plans in the event of a third party (audited) sanctioning team and other shared disruption, for our third party service The risk of loss to the Group from the services include: sanctioning new credit providers Operational Recovery Planning failure of clients, customers or agreements (principally wholesale); setting requirements are articulated through our counterparties, including sovereigns, to strategies for approval of transactions Supplier Control Obligations (SCOs). Each fully honour their obligations to the Group, (principally retail); setting risk appetite; third party service provider is required to including the whole and timely payment of monitoring risk against limits and other attest to their compliance with the SCOs principal, interest, collateral and other parameters; maintaining robust on an annual basis and further assurance is receivables. processes, data gathering, quality, storage undertaken on a risk-based approach. and reporting methods for effective credit Management, reporting and oversight is in risk management; performing effective place to monitor internal and external risk turnaround and workout scenarios for events that may be attributable to climate wholesale portfolios via dedicated change. Operational Risk continues to restructuring and recoveries teams; identify, manage and measure climate maintaining robust collections and change risks as part of the existing recovery processes/units for retail portfolios; and review and validation of