Reputational and operational risks
HSBC regularly updates its policies and procedures for safeguarding against reputational and operational risks.
Protection of HSBC's reputation is of paramount importance to its continued prosperity and is the responsibility of every member of staff. HSBC has always aspired to the highest standards of conduct and, as a matter of routine, takes account of reputational risks to its business. Reputational risks can arise from many aspects of HSBC’s activities and operations. As a banking group, HSBC’s good reputation depends upon the way in which it conducts its business, but it can also be affected by the way in which clients to whom it provides financial services, conduct themselves. The training of Directors on appointment includes reputational matters.
Reputational risks are considered and assessed by the Board, the Group Management Board, the Risk Management Meeting, the Group Reputational Risk Policy Committee, subsidiary company boards and board committees and/or senior management during the formulation of policy and the establishment of HSBC standards. Standards on all major aspects of business are set for HSBC and for individual subsidiary companies, businesses and functions. These policies, which form an integral part of the internal control systems, are communicated through manuals and statements of policy and are promulgated through internal communications and training. The Policy manuals address risk issues in detail and co-operation between Head Office departments and businesses is required to ensure a strong adherence to HSBC's risk management system and its corporate responsibility practices.
Internal controls are an integral part of how HSBC conducts its business. HSBC's manuals and statements of policy are the foundation of these internal controls. There is a strong process in place to ensure controls operate effectively. Any significant failings are reported through the control mechanisms, internal audit and compliance functions to subsidiary company audit committees and to the Group Audit Committee, which keeps under review the effectiveness of the system of internal controls and reports regularly to HSBC Holdings' Board. In addition, all HSBC businesses and major functions are required to review their control procedures and to make regular reports about any losses arising from operational risks.
HSBC is committed to countering bribery and corruption with suitable policies and procedures to reflect this and to making a positive contribution to improving standards of business integrity. A summary of HSBC's Group Business Policy and Principles for Countering Bribery is available at www.hsbc.com/antibribery. An established mechanism is in place for employees to report suspicions, including allegations of bribery and corruption. An executive committee has been established at Group level with responsibility for considering bribery and corruption risk issues and there are procedures in place for escalation of concerns. A process is underway to mirror this executive committee structure in principal subsidiaries and business units throughout the Group.
HSBC provides information in its Sustainability Report and website (www.hsbc.com/sustainabilityreport) on its policies and performance in relation to social and environmental risks and opportunities. Aspects covered include: how HSBC is implementing its sector policies and applying the Equator Principles to manage the environmental and social risks in project finance; employee engagement; environmental management; and the business opportunities that arise from adapting to, and mitigating climate change. HSBC is also listed in the Dow Jones Sustainability Index and FTSE4Good Index. HSBC's Sustainability Report 2010 is available at www.hsbc.com/sustainabilityreport.
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