A challenging operating environment

We believe our ability to create value is directly linked to our ability to effectively address a number of current and emerging issues. We must be responsive to the operating environment and its risks and opportunities.

The external environment continues to evolve across a broad spectrum of issues, and we assess and monitor the impacts of global, regional and local change. This set of considerations is a key input into our integrated planning process and the process of identifying and managing our material matters.

Macroeconomic conditions

  • Global economic conditions continue to negatively impact many African economies
  • New global uncertainties arising from, for example, Brexit, potential US policy changes and interest rate changes
  • Ongoing uncertainty and volatility in key economic indicators
  • Domestic economic challenges, including inflation and currency depreciation
  • In South Africa – there is persistent low growth, risk of a ratings downgrade persists, consumers remain under pressure, and business and consumer confidence is weak

Competition and technology

  • Many local banks are growing faster than global and regional banks
  • Raised expectations of customers and clients and self-service platforms are changing the nature of customer and client relationships
  • Disintermediation/non-traditional competitors are distributing financial products
  • New low-cost, fully digital banking products are being delivered faster, and at a lower cost through virtual solutions
  • Fintech continues to disrupt personal banking, which is rapidly evolving to centre around mobile applications
  • Complexity of managing technology, information and cyber risks is increasing

Regulatory change and conduct

  • Increasing active supervision and regulation of financial services, with a particular focus on customer protection and corporate conduct
  • Disparate regulatory standards across geographies and key areas of business
  • Pressure on fees and margins, due to regulatory intervention and competitive forces
  • Significant accounting and regulatory developments, including IFRS 9 (accounting for financial instruments), IFRS 4 (insurance contract accounting) and BCBS 239 (Basel Committee on Banking Supervision’s principles for effective risk data aggregation and reporting)

People and skills

  • Competition for specialised skill sets, such as IT, data analytics and risk management
  • Resource mobility and new ways of working
  • Imperative for inclusion and diversity
  • Ongoing cost pressure and process automation impacting human resource requirements
  • Evolving technological developments disconnect our future required resources and current employee skill sets
  • Employees are increasingly seeking a tailored employee value proposition including flexible and dynamic working arrangements

Social and environmental matters

  • Rapid growth in the young population and expanding mass and middle market in Africa
  • Extent of unemployment, especially among the youth
  • Persistent political uncertainty and social unrest
  • Activism in a broader range of social, environmental and governance-related matters
  • Infrastructure challenges, including electricity and water supply

Drawing from this operating environment scan, there are a number of arising key risks that influence, or have the potential to influence our business over the short, medium and long term. In addition to these risks from the external environment, there are a number of risks specific to Barclays Africa.

We continuously monitor risks arising from macroeconomic, business, political, market and country-specific developments which might impact our portfolios, and take pre-emptive risk management actions where appropriate.

The following graphic outlines the landscape of risks most material to our strategic ambitions, and the table describes the ways in which they impact/influence our business and our mitigating actions.

Theme Key risks Potential impacts Mitigating actions
Macroeconomic factors impact our ability to sustain business and achieve market commitments
  • Foreign exchange and commodity price movements
  • Increased banking sector stress in select countries
  • South African economic climate (including the risk of sovereign downgrade)
  • Subdued global growth, including the China slowdown
  • Climatic conditions e.g. Sub-Saharan Africa drought
  • Reduced revenue
  • Increased impairments
  • Continue to respond to changes in leading indicators with definitive steps to mitigate risks and unlock opportunities
Strategic changes impact our ability to execute our plans that support market commitments
  • Separation from Barclays PLC
  • Execution risk
  • Delayed completion of projects
  • Increased expenditure
  • Established a dedicated and integrated capability to address business-as-usual, transition and transformation change requirements
Technology impacting competitiveness and operational risk
  • Cyber risk
  • Fraud risk
  • Technology resilience
  • Data management
  • Model risk
  • Security breaches
  • Operational disruptions
  • Operational losses
  • Reputational damage
  • Continue to invest in technology platforms, processes and controls
New and emerging regulations
  • Policy intervention (e.g. interest rate capping legislation).
  • Impacts of significant global developments (e.g. Brexit and United States presidential elections)
  • Volatility in impairments resulting from IFRS 9 application
  • Reduced revenue and or increased expenses
  • Non-compliance with regulations, resulting in penalties
  • Maintain the coordinated, comprehensive and timely approach to identify, assess and respond to regulatory changes