HSBC 2014 Annual Report Download - page 5

HSBC BANK PLC
Strategic Report: Purpose and Strategic Objectives (continued)
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in the market. We retain that spread at maturity of the
transaction if the risk management of the position has
been effective.
We then use derivatives along with other financial
instruments to constrain the risks arising from customer
business within risk limits. Normally, our customers both
buy and sell relevant instruments, in which case our
focus is on managing any residual risks through
transactions with other dealers or professional
counterparties. Where we do not fully hedge the residual
risks we may gain or lose money as market movements
affect the net value of the portfolio.
Stress tests and other risk management techniques are
also used to ensure that potential losses remain within
our risk appetite under a wide range of potential market
scenarios.
In addition, we manage risks that arise from the business
we do with customers.
Our strategy
The group’s strategy and strategic direction is embedded
in HSBC’s strategy, which is aligned to the following long-
term trends.
Long-term trends
• The world economy is becoming ever more
interconnected, with growth in world trade and cross-
border capital flows continuing to outstrip growth
in average gross domestic product. Over the next
decade we expect growth in trade and capital flows to
outstrip GDP growth, and 35 markets to generate
85% of world trade growth with a similar degree of
concentration in cross-border capital flows.
• Of the world’s top 30 economies, we expect those of
Asia, Latin America, the Middle East and Africa to
have increased by around four-fold in size by 2050,
benefiting from demographics and urbanisation. By
this time they will be larger than those of Europe and
North America combined. By 2050, we expect 18 of
the 30 largest economies will be from Asia, Latin
America or the Middle East and Africa.
Competitive advantages
What matters in this environment is:
• having an international network and global product
capabilities to capture international trade and
movements in capital; and
• being able to take advantage of organic investment
opportunities in the most attractive growth markets
and maintaining the capacity to invest.
The group’s competitive advantages come from:
• our meaningful presence in and long-term
commitment to HSBC’s key strategic markets;
• our business network;
• our balanced business portfolio centred on our global
client franchise;
• our strong ability to add to our capital base while also
providing competitive rewards to our staff and good
returns to our shareholders;
• our stable funding base; and
• our local balance sheet strength and trading
capabilities in the most relevant financial hubs.
A two-part strategy
Based on these long-term trends and its competitive
advantages, the Group strategy has two parts:
• A network of businesses connecting the world. HSBC
is well positioned to capture growing international
trade and capital flows. The Group’s global reach and
range of services place HSBC in a strong position to
serve clients as they grow from small enterprises into
large multi-nationals through our Commercial
Banking and Global Banking & Markets businesses.
• Wealth management and retail with local scale. HSBC
aim to capture opportunities arising from social
mobility and wealth creation in the Group’s priority
growth markets, through the Premier proposition and
its Global Private Banking business. The Group
expects to invest in full scale retail businesses only in
markets where it can achieve profitable scale.
HSBC Values
Embedding HSBC Values in every decision and every
interaction with customers and with each other is a top
priority for the group and is shaping the way we do
business.
The role of HSBC Values in daily operating practice is
fundamental to our culture, and is particularly important
in light of developments in regulatory policy, investor
confidence and society’s expectations of banks. HSBC
Values are integral to the selection, assessment,
recognition, remuneration and training of our
employees. We expect our executives and employees to
act with courageous integrity in the execution of their
duties in the following ways:
Be dependable and doing the right thing:
• stand firm for what is right, deliver on commitments,
be resilient and trustworthy; and
• take personal accountability, be decisive, use
judgment and common sense, empower others.
Be open to different ideas and cultures:
• communicate openly, honestly and transparently,
value challenge, learn from mistakes; and
• listen, treat people fairly, be inclusive, value different
perspectives.
Be connected with customers, communities, regulators
and each other:
• build connections, be externally focused, collaborate
across boundaries; and
• care about individuals and their progress, show
respect, be supportive and responsive.
Business principles
HSBC Values describe how we should interact with each
other and with customers, regulators and the wider
community. Our business principles shape our strategy
and commercial decisions. Together, our values and