HSBC 2011 Annual Report Download - page 243

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
management of the significant risks faced by HSBC
have been in place throughout the year and up to
27 February 2012, the date of approval of the Annual
Report and Accounts 2011. In the case of companies
acquired during the year, the internal controls in
place are being reviewed against HSBC’s
benchmarks and integrated into HSBC’s processes.
Key internal control procedures include the
following:
• Delegation of authority within limits set by
the Board. Authority to operate the various
subsidiaries and responsibilities for financial
performance against plans and for capital
expenditure are delegated to their respective
chief executive officers within limits set by the
Board. Delegation of authority from the Board
to individuals requires those individuals to
maintain a clear and appropriate apportionment
of significant responsibilities and to oversee
the establishment and maintenance of systems
of control appropriate to the business. The
appointment of executives to the most senior
positions within HSBC requires the approval
of the Board.
• Group standards. Functional, operating,
financial reporting and certain management
reporting standards are established by global
function management committees, for
application across the whole of HSBC. These
are supplemented by operating standards set by
functional and local management as required for
the type of business and geographical location
of each subsidiary.
• Risk identification and monitoring. Systems
and procedures are in place in HSBC to identify,
control and report on the major risks including
credit, market, liquidity, capital, financial
management, model, reputational, pension,
strategic, sustainability and operational risk
(including accounting, tax, legal, compliance,
fiduciary, information security, security and
fraud, systems and people risk). Exposure to
these risks is monitored by risk management
committees, asset and liability committees and
executive committees in subsidiaries and, for
HSBC as a whole, by the GMB. Risk
Management Meetings, chaired by the Group
Chief Risk Officer, are held in each month
(except August) to address asset, liability and
risk management issues. The minutes of these
meetings are submitted to the GAC, the GRC
and the Board.
• Global Operational Risk and Control
Committee. The Global Operational Risk and
Control Committee (‘GORCC’), which reports
to the Risk Management Meeting, meets at least
quarterly to monitor HSBC’s operational risk
profile and review the effective implementation
of the Group’s operational risk management
framework. The GORCC receives quarterly
reports on the Group’s operational risk profile,
including performance against risk appetite, top
and emerging risks, control issues, operational
risk loss events and key risk indicators.
• Disclosure Committee. The Disclosure
Committee reviews material public disclosures
made by HSBC Holdings for any material
errors, misstatements or omissions. The
membership of the Disclosure Committee,
which is chaired by the Group Company
Secretary, includes the Heads of the Finance,
Legal, Risk, Compliance, Corporate
Communications, Investor Relations and
Internal Audit functions and representatives
from the principal regions and global
businesses. The integrity of disclosures is
underpinned by structures and processes within
the Finance and Risk functions that support
expert and rigorous analytical review of
financial reporting complemented by certified
reviews by Heads of global businesses, global
functions and certain legal entities.
• Financial reporting. The Group financial
reporting process for preparing the consolidated
Annual Report and Accounts 2011 is controlled
using documented accounting policies and
reporting formats, supported by a chart of
accounts with detailed instructions and guidance
on reporting requirements, issued by Group
Finance to all reporting entities within the
Group in advance of each reporting period end.
The submission of financial information from
each reporting entity to Group Finance is subject
to certification by the responsible financial
officer, and analytical review procedures at
reporting entity and Group levels.
• Changes in market conditions/practices.
Processes are in place to identify new risks
arising from changes in market conditions/
practices or customer behaviours, which could
expose us to heightened risk of loss or
reputational damage. During 2011, attention was
focused on:
– embedding further risk appetite and stress
testing into the business of HSBC through
refining processes around risk identification
and forward-looking risks;