Operational risk

At HSBC, we have policies to measure, monitor and manage our operational risk. Planning ahead enables us to identify potential problems and take action to prevent them. We also need to be able to detect when things go wrong so that we can react quickly and put them right, then learn from them.

Banks take risks when they lend money and make investments. People may be unable to repay what they borrow and some investments fail. Banks assess these risks – known as credit risk and market risk – as a normal part of doing business.

But banks also have to cope with mistakes and events that disrupt everyday business. They could include a failure to comply with regulations or losses caused by poor computer systems. These are known as operational risks. They can arise from inadequate internal processes and systems as well as from external events.

Operational risk comes in different forms and its effects can last for many years. In 2018 we continued our ongoing work to strengthen those controls that manage our most material risks. Among other measures, we:

  • Further enhanced our controls to help ensure that we know our customers, ask the right questions, monitor transactions and escalate concerns to detect, prevent and deter financial crime risk
  • Implemented a number of initiatives to raise our standards in relation to the conduct of our business
  • Increased monitoring and enhanced detective controls to manage fraud risks which arise from new technologies and new ways of banking
  • Strengthened internal security controls to help prevent cyberattacks
  • Improved controls and security to protect customers when using digital channels
  • Enhanced our third-party risk management capability to help enable the consistent risk assessment of any third-party service

The objective of our operational risk management is to manage and control operational risk in a cost-effective manner within targeted levels of operational risk consistent with our risk appetite, as defined by the Group Management Board.

More from HSBC

Our conduct

Operating with high standards of conduct is central to our long-term success. We have processes, policies and a culture designed to ensure fair outcomes for customers and protect the integrity of financial markets.

Financial crime risk

In line with our ambition to be recognised as the world’s leading international bank, we aspire to set the industry standard for knowing our customers and detecting, deterring and protecting against financial crime.

Working with suppliers

We are committed to the fair treatment of the businesses who supply goods and services to HSBC – and expect them to operate responsibly, in line with our values.

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