HSBC 2010 Annual Report Download - page 199

197
Overview Operating & Financial Review Governance Financial Statements Shareholder Information
policies and practices, including approval of the
critical accounting policies; reports on proposed
changes to the Group’s disclosures in the
financial statements; reports from the Disclosure
Committee; reports on the adequacy of
procedures to identify transactions and matters
requiring disclosure under certain accounting
standards; and reports on the audit process; and
• the Committee undertook a review of its terms
of reference and its effectiveness.
Some of the activities of the GRC described on
page 200 were carried out by the GAC prior to the
establishment of the GRC in February 2010. Since
February 2010 some of those activities are carried
out by the GRC and the GAC. The description of
these activities is not repeated in the list above.
Arrangements relating to the external
auditor
The Committee has recommended to the Board that
KPMG Audit Plc be reappointed auditor at the
forthcoming Annual General Meeting.
An analysis of the remuneration paid in respect
of audit and non-audit services provided by KPMG
Audit Plc and its affiliates (‘KPMG’) for each of the
past three years is disclosed in Note 8 on the
Financial Statements.
The Board has approved, on the
recommendation of the Committee, a policy for the
employment by us of former employees of KPMG
and an annual report is received by the Committee
on such former employees who are employed by us
and the number of such former employees who are
employed by us in senior positions. This report
enables the Committee to consider whether there has
been any impairment, or appearance of impairment,
of the auditor’s judgement or independence in
respect of the audit.
The policies for the pre-approval of specific
services that may be provided by the principal
auditor are kept under review by the Committee and
amended as necessary to meet the dual objectives of
ensuring that we benefit in a cost effective manner
from the cumulative knowledge and experience of
our auditor, while also ensuring that our auditor
maintains the necessary degree of independence and
objectivity. These pre-approval policies apply to all
services where any HSBC company pays for the
service, or is a beneficiary or addressee of the
service and has selected or influenced the choice of
KPMG. All services provided by KPMG during 2010
were pre-approved by the Committee or were
entered into under pre-approval policies established
by the Committee.
The pre-approved services relate to regulatory
reviews, agreed-upon procedures reports, other types
of attestation reports, the provision of advice and
other non-audit services allowed under SEC
independence rules. They fall into the categories of
audit services, audit-related services, tax services
and other services.
Group Risk Committee
The Report of the Group Risk Committee is set out
below.
Role and membership of the Group Risk
Committee
The GRC, whose members are all independent non-
executive Directors, is responsible for advising the
Board on material risk matters and providing non-
executive oversight of risk. The Committee was
established in February 2010 following publication
of the final recommendations of Sir David Walker’s
Review of Corporate Governance in UK Banks and
other Financial Industry Entities, to focus on risk
governance and to provide an increasingly forward-
looking view of risks and their mitigation.
Historically the GAC has provided non-
executive oversight of risk as well as financial
reporting. As noted in the section headed ‘Group
Audit Committee’ above there is currently a degree
of overlap between responsibilities of the GAC and
the GRC in relation to risk governance and oversight
matters and internal controls. Each committee is
reviewing its terms of reference with the aim of
minimising the overlap.
The members of the GRC are R A Fairhead
(Chairman), J D Coombe, J W J Hughes-Hallett
and J R Lomax.
The Committee’s terms of reference, which
are reviewed annually, are available at
www.hsbc.com/boardcommittees.
To ensure consistency of scope and approach
by subsidiary company committees, the GRC
has established core terms of reference to guide
subsidiary companies when adopting terms of
reference for their risk committees (or their audit
committees if those committees are also responsible
for risk oversight). The Committee’s endorsement is
required for any proposed changes to the terms of
reference of any subsidiary committee relating to
risk oversight and for appointments to such
committees.