HSBC 2012 Annual Report Download - page 335

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
of loss or reputational damage. During 2012,
attention was focused on:
− severe economic slowdown in mature
economies impacting global growth;
− eurozone members departure from the
currency union;
− increased geopolitical risk;
− emerging market slowdown;
− macroeconomic risks within developed
economies;
− regulatory developments affecting our
business model and Group profitability;
− regulatory investigations, fines, sanctions
and requirements relating to conduct of
business and financial crime negatively
affecting our results and brand;
− dispute risk;
− regulatory commitments and consent orders
including the Deferred Prosecution
Agreements;
− challenges to achieving our strategy in a
downturn;
− internet crime and fraud;
− social media risk;
− level of change creating operational
complexity and heightened operational risk;
− information risk; and
− model risk.
• Strategic plans. Periodic strategic plans are
prepared for global businesses, global functions
and certain geographical regions within the
framework of the Group’s strategy. Annual
Operating Plans, informed by detailed analysis
of risk appetite describing the types and
quantum of risk that we are prepared to take in
executing our strategy, are prepared and adopted
by all major HSBC operating companies and set
out the key business initiatives and the likely
financial effects of those initiatives.
• 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 Global Finance,
Legal, Risk and Compliance, 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 2012 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.
• Responsibility for risk management.
Management of global businesses and global
functions are primarily accountable for
managing, measuring and monitoring their
risks and controls. Processes consistent with
the Three Lines of Defence principle are in
place to ensure weaknesses are escalated to
senior management and addressed.
• IT operations. Centralised functional control
is exercised over all IT developments and
operations. Common systems are employed for
similar business processes wherever practicable.
• Functional management. Global functional
management is responsible for setting policies,
procedures and standards for the following
risks: 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). Authorities to
enter into credit and market risk exposures are
delegated with limits to line management of
Group companies. The concurrence of the
appropriate global function is required, however,
to credit proposals with specified higher risk
characteristics. Credit and market risks are
measured and reported on in subsidiaries and
aggregated for review of risk concentrations on
a Group-wide basis.
• CEO Attestation process. Global Operational
Risk coordinate the annual CEO Attestation
process under which the chief executive officer
of each of the Group’s material subsidiaries
confirms that the internal control framework
applicable to that subsidiary has been assessed
and any significant open issues have been
identified, with action plans in place to address
weaknesses. The remediation of these issues is