Risk Analysis on Barclays

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Executive summary

This report provides risk analyses for Barclays Plc. by performing financial ratio analysis and comparing peers’ performance, and then it derives recommendations for risks identified previously.

By analyzing three years performance and financial data of Barclays, it has been find out that the liquidity risk, operational risk and the foreign exchange risk are relatively high compare to its major competitors in the UK, HSBC, RBS and Lloyds. More specifically, a low percentage short term funding mainly causes the liquidity risk. Operational risk is caused by the inefficient management of operating process, which also leads to a high level of operational expenses. Moreover, as a multinational bank run over 50 countries, this characteristic plants the risk of foreign exchange. On the other hand, it can also partially explain the relatively low credit concentration risk and the market risk. In addition, regards to the current ‘Go-To bank’ strategy, the strategic risk is low by considering its profit margin and the return on equity. Consequentially, the capital risk is considered as low regarding the fact that some of the announced strategy requirement has been met partially.

Regarding these high risks facing by Barclays, there are activities that Barclays can take to overcome those potential threats. Liquidity risk can be managed by increasing the level of short term funding across its major market, such as Europe, the UK and America. This will need an intensive attention on maximizing resources value through operation process, such as training employees to improve the efficiency and effectiveness of getting new clients. By doing that, while improving the capacity of increasing return, the operational risk can be managed as well. From the strategy perspective, it is important to monitor the company’s performance at a frequent timely basis in order to retain the strategic risk. Lastly, the company should diversify its investment across different countries and make adjustment according to the current global economy condition and the closely related market like real-estate market.

Table of Contents

Executive summary        

Introduction        

Part 1: Risk Assessment and Valuation        

Strategic Risk        

Credit Risk and Credit Concentration Risk        

Deposit Concentration Risk        

Liquidity Risk        

Capital risk        

Foreign exchange risk        

Market risk        

Operational risk        

Part 2: Recommendations        

Appendix        

Reference List        

Introduction

Purpose

Barclays Plc. is one of the leading commercial banks in the UK Financial Market. This report aims to analyze different risks faced by Barclays in the current economic circumstances and offer proper advises relating to risk management aspects for future development preferences.