HSBC 2015 Annual Report Download - page 226

Report of the Directors: Risk (continued)
Appendix to Risk – Policies and practices
HSBC HOLDINGS PLC
224
Reputational risk
The Global Head of Financial Crime Compliance and the Global Head of Regulatory Compliance are the risk stewards for
reputational risk. The development of policies and an effective control environment for the identification, assessment,
management and mitigation of reputational risk are co-ordinated through the Group Reputational Risk Policy Committee
(‘GRRPC’), which is chaired by the Group Chairman. In parallel, the Global Risk Resolution Committee (‘GRRC’), chaired by
the Chief Risk Officer, is the highest decision-making forum in the Group for dealing with matters arising from clients or
transactions that either present a serious potential reputational risk to the Group or merit a Group-led decision to ensure a
consistent risk management approach across the regions and global businesses. Both committees are responsible for keeping
the RMM apprised of areas and activities presenting significant reputational risk and, where appropriate, for making
recommendations to the RMM to mitigate such risk. Significant issues posing reputational risk are also reported to the Board
and the Conduct & Values Committee, where appropriate.
Overseeing all reputational risk matters, the Reputational Risk sub-function is responsible for setting policies to guide the
Group’s management of reputational risk, devising strategies to protect against reputational risk and advising the global
businesses and global functions in helping them identify, assess and mitigate such risks, where possible. This sub-function is
led by a central headquarters-based team and supported by teams within each business line and region who help to ensure
that issues are directed to the appropriate forums, that decisions are made and implemented effectively, and that
management information is generated to aid senior management in the businesses and regions in understanding where
reputational risk exists within the Group. Each global business has established a governance process that empowers the
Reputational Risk and Client Selection committees to address reputational risk issues at the appropriate level, escalating
decisions where appropriate. The global functions manage and escalate reputational risks within established operational risk
frameworks.
Standards for all major aspects of business are set for the Group and for individual subsidiaries, businesses and functions.
Reputational risks, including environmental, social and governance matters, are considered and assessed by the Board, the
GMB, the RMM, subsidiary company boards, Board committees and senior management during the formulation of policy and
the establishment of our standards. These policies, which form an integral part of the internal control system (see page 275),
are communicated through manuals and statements of policy and are promulgated through internal communications
and training. The policies set out our risk appetite and operational procedures for all areas of reputational risk, including
financial crime prevention (money laundering, terrorist and proliferation financing, sanctions-breaking and bribery and
corruption deterrence), regulatory compliance, conduct-related concerns, environmental impacts, human rights matters and
employee relations. The policy manuals address risk issues in detail and co-operation between Group departments and
businesses is required to ensure a strong adherence to our risk management system and our sustainability practices.
Fiduciary risk
Business activities in which fiduciary risk is inherent are only permitted within designated lines of business. Fiduciary risk is
managed within the designated businesses via a comprehensive policy framework and monitoring of key indicators. The
Group’s principal fiduciary businesses and activities (‘designated businesses and activities’) are:
• HSBC Securities Services, which is exposed to fiduciary risk through its funds services and corporate trust and loan agency
activities;
• HSBC Global Asset Management, which is exposed to fiduciary risks through its investment management activities on behalf
of clients;
• HSBC Global Private Banking, which is exposed to fiduciary risks through its private trust division and discretionary
investment management;
• HSBC Insurance, which is exposed to fiduciary risks through the investment management activities it undertakes when
providing insurance products and services;
• RBWM Trust Investment Wrappers, required by regulation for the provision of normal RBWM Wealth Management
products and services; and
• HSBC Employee Pension Scheme activities, where fiduciary duties may arise as part of carrying out a function of discretion
or control over an HSBC employee pension scheme's operations.
The Group’s requirements for the management of fiduciary risk are laid down in the fiduciary section of the Global Risk
Functional Instruction Manual, which is owned by Global Operational Risk. No business other than the designated businesses
may undertake fiduciary activities without notifying Global Operational Risk and receiving specific dispensations from the
relevant fiduciary policy requirements.
Other policies around the provision of advice, including investment advice and corporate advisory, and the management of
potential conflicts of interest, also mitigate our fiduciary risks.