Post Forum

Robert Guest, US Editor - The Economist, in conversation with: Hans-Jörg Rudloff, Former Chairman - Barclays Investment Bank.


Hans-Jörg Rudloff, ex-Barclays

RG: At the Zamyn Forum, you spoke about Barclays’ business in Africa. Given the unpredictable political environment and persistent corruption in some African countries, many companies find it hard to maintain the kind of ethical standards that stakeholders now expect. You said that "in probing, in judging, in making constantly new surveys in how to behave and what to do, we are making progress." Could you please give some examples?
HJR: As a global business operating in many different jurisdictions we are always mindful of the risks of unpredictability and corruption. These risks are not restricted to a particular region or exclusively government-related. Sometimes they are more perceived than real. But even so, they can affect our business.
We use external surveys and benchmarks to inform our approach to operating in certain countries; these help us track each country and region’s progress in addressing these challenges. For example, Transparency International’s Global Corruption Barometer provides a useful annual country-by-country update of the extent to which bribery afflicts everyday transactions. Several of the countries where we operate scored well on this index in 2013.
Last year, Barclays Group Chief Executive Antony Jenkins launched Barclays’ new “Purpose and Values” blueprint. All of our staff around the world have to abide by this code—or we would rather they quit. Our values support our goal of becoming the ‘Go-To’ bank by building a sustainable, trustworthy business that customers see as their first choice for financial services.
Our ‘One Africa’ strategy, born of the merger of Barclays Africa and Absa in mid-2013, defines how we will achieve this goal in Africa. Our new Code of Conduct, called ‘The Barclays Way’, outlines how colleagues should behave. To ensure that our Purpose and Values are upheld, we use something called balanced scorecard reporting, which measures performance across five key areas: Citizenship, Customer/Client, Colleague, Company and Conduct.
There are a number of other tools available to help our staff make the right decisions. For example, our reputation risk framework explains how we expect them to identify, manage and mitigate the risk that something they do might damage the company’s good name. Our Citizenship Lens, which is currently being rolled out, provides decision-makers with an assessment tool to ensure we move beyond simply doing what the law requires and consider the broader societal impact of our business. This could be in relation to new product development, individual transactions or the way we welcome new clients. These tools will help ensure that our operations in Africa and elsewhere are conducted responsibly and with consideration for our stakeholders as well as our profits.
RG: You also argued that, although doing business in Africa sometimes leads to controversy, it is better to invest and work there than to stay away. Please could you elaborate?
HJR: Barclays Africa Group Limited is one of Africa’s major financial-services providers. We have an extensive, well-established local presence in 15 countries. We offer personal and business banking, credit cards, corporate and investment banking, wealth and investment management as well as bancassurance. According to the latest World Bank ‘Africa Pulse’ report, Africa’s economy is forecast to grow at a rate of 4.9 per cent in 2013, rising to 5.4 per cent by 2014 (compared with global rates of 2.2 per cent and 3.3 per cent). Consequently, our operations in the region present significant opportunities for Barclays. If explored in the right way, they will help grow our business in a sustainable way as well as boost economic growth and support local communities. As Maria Ramos explained in her conversation with yourself, the success of our African business depends on the development of strong institutional capacity and investment in our people. We are working hard on both of these.

A minority of African markets in which we operate present challenges as well as growth opportunities, whether that is political instability, corruption or lack of access to financial services. Examples include Kenya, Egypt and Zimbabwe, all of which are testing environments to operate in as an international bank, for very different reasons. However it is our aim to help address the socio-economic and political challenges faced there whilst growing our business. We believe that by working with local stakeholders and investing in that market, we can help change things for the better. The alternative, which is to divest and leave, can often do more harm than good.

Many of our flagship citizenship and banking programmes are designed to address the socio-economic challenges faced by African countries. For example, our Banking on Change programme, a partnership between Barclays, Plan UK and Care International UK, focuses on providing financial access and enterprise skills to young people, building on the successful model linking Village Savings and Loan Associations to the formal financial system. This partnership is running in a number of our African markets – Egypt, Ghana, Kenya, Tanzania, Uganda and Zambia. We have committed £20m to this programme, reaching over 500,000 people to help them manage their finances more effectively.

We recently launched a partnership with GlaxoSmithKline which aims to increase access to affordable healthcare and medicines for people in Zambia, while at the same time creating better economic conditions for growth. It is a £7m commitment over three years, aiming to build a cost-effective private sector supply chain, establish small private health outlets, test a micro-insurance product and integrate health-education services into community finance networks.

RG: Corporate social responsibility can be time-consuming and expensive. How do you balance the need to make profits with the duty to avoid harming local people or the environment? Please describe an occasion where your company has faced a difficult trade-off between profit and duty, and how you tackled it.

HJR: Barclays has a clear sense of its purpose: to help people achieve their ambitions – in the right way. Our citizenship agenda takes into account the needs of all our stakeholders and promotes informed decision-making which, in the long-term, is good for our customers and clients, shareholders, colleagues and the communities in which we operate.

In February 2013 Barclays announced the outcomes of a big strategic review, which involved an analysis of 75 business units to determine not only their ability to generate returns but also their strategic attractiveness, including their possible impact on our reputation. The results of this review led to the closure of our Structured Capital Markets tax-related business unit. The view was that, while many tax services provided to clients are not controversial, there were some that relied on sophisticated and complex structures where transactions were carried out with the primary objective of reducing a client’s tax bill. Although this activity is legal, it was considered incompatible with the Barclays’ purpose and our published tax principles.
This is a good example of how the Barclays Purpose and Values is changing the way the bank behaves.

More generally, a crucial way that we can improve our impact on the environment and society is through responsible lending activities. Our approach to managing environmental and social risks in our lending is via a combination of policy and guidance and is incorporated into our core credit decision-making process. We were a founding signatory to the Equator Principles, a framework for assessing the risks associated with Project Finance which has recently been updated to include project loans, bridge loans and project-finance advisory services as well. If we see potential risks with a specific loan or transaction, we try to engage with the client to identify suitable measures to mitigate them. If we deem the risks too great, however, we just say ‘no’—and don’t proceed with the transaction.