Typically, an unsheathed sword is a tacit threat; it can be used readily. Since the functions of a feudal lord are fundamentally to conduct war and to execute (pun intended) justice, having the bared sword readily available indicates that formal judgment, possibly leading to conflict, is imminent.
It's analogous to US military personnel at the Pentagon being directed to wear combat uniforms in the wake of 9/11, rather than the office-type uniforms they had previously worn. Symbolic readiness for conflict.