Barclays Plc. Audit risk Assessment Case Solution & Answer

Barclays Plc. Audit risk Assessment Case Solution

Liquidity risk and credit rating: The UK, EU and the US published a proposal for the minimum requirement for own fund during the increase in interest rate in 2015. In that proposal, the bank has to maintain higher cash reserve requirement, but many financial institution failed to maintain the liquidity and fund risk effectively. These are the reasons why several banks are are unable to support their  day-to-day business activities.

Company’s position within the industry

The Barclays is a fast growing customer’s payment industry and creating value by adding new technology in the business model and hires qualified & skilled individuals, so that banks will attract most of the customers. This new technology increased the cost of the banks and it became difficult for the bank to manage its profit. In 2015, we can see that bank revenue increased by 0.8% but the banks revenue declined by 1%; this shows that bank is not effectively managing their cost. Profitability reaches to the 2.4% in 2015, while in 2011 it was 11.7%. Along with that in 2016, the bank established an intermediate holding company, which furthered increased the operational and financial cost of the Barclays.

In addition, in recent years increased the interest rate increased, most of the customers want to deposit their money in banks, so that they get higher return. That is the reason Barclays was paying most of money to their customers and banks revenue started to decline. As the depositors was higher than the creditors; in order to meet the need of the customers, the bank will borrow from the state bank or discounted window the bank has to provide higher interest rate, as well on loan. This shows that Barclay’s business risk is increasing. The bank has more financial risk, which is 96% it shows that bank is very risky.

Moreover, when the bank is diversifying their business into different countries, the customer behaviour and cultural will change, so that the bank has to serve their customers on the basis on change in cultural and behavioural. The bank was not able to meet customers and regulatory expectation due to failure to manage challenges faced in product suitability, technology, portfolio risk, high level of operational precision enquired in order to serve effectively to their customers.

There is another risk involved to the Barclays bank, which is risk of financial crime, associate with money laundering, terrorist financing, bribery, and corruption. These all risk effect on the reputation and credit rating of the bank.

management  and  directors  related  issues  contributing  to  the  business  risk assessment

When the financial crisis accrued in 2008, it led to big regulations and forced the banks to take their eye on the customers’ needs. On the other hand, the cost of the starting technology business has increased. The risk can arise here if a board of the director of the Barclays provide their decision or the strategy to resolve the problem. They do not meet on regular basis to solve the problem; the risk can arise fromdifference in the opinion of the directors. The board of the directors fixed the meeting, so that company effectively resolve the problem.

Financial Risk Management Techniques and Tools

Many financial tools can be used to manage the business risk. However, we are going to discuss many techniques that risk managers can be used to hedge the risk. The bank has to establish an ongoing management, so that bank can effectively meet the requirement of funding and liquidly agreements. Along with that, the bank meet regulatory requirement and support business needs. This action will also increase the credit rating of the bank…………………..

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