HSBC 2001 Annual Report Download - page 143

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The Directors, through the Group Audit
Committee, have conducted an annual review of the
effectiveness of HSBCs system of internal control
covering all controls, including financial, operational
and compliance controls and risk management.
Reputational, Strategic and
Operational Risk
HSBC continues to develop its policies and
procedures for safeguarding against reputational,
strategic and operational risks. This is an
evolutionary process in which account will be taken
of The Association of British Insurers recently
issued guidance on best practice when responding to
social, ethical and environmental (SEE) risks.
The safeguarding of HSBCs reputation is of
paramount importance to its continued prosperity
and is the responsibility of every member of staff.
HSBC has always believed in the highest standards
of conduct and, as a matter of routine, takes account
of reputational risks to its business. The training of
Directors on appointment will include reputational
matters.
Reputational risks, including SEE matters, are
considered and assessed by the Board, Group
Executive Committee, subsidiary company boards,
board committees 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 or 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 promulgated through internal
communications. The policies include
environmental, ethical and social policies and set out
operational procedures in areas of reputational risk,
ranging from the money laundering deterrence
programme to health and safety rules. The policy
manuals address risk issues in detail and co-
operation between head office departments and
businesses ensures a strong relationship between
HSBCs risk management system and its corporate
social 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 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 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 Group businesses and major functions
are required to review their control procedures and to
make regular reports of losses arising from
operational risks.
KPMG recently assisted HSBC in developing
systems to quantify the key direct environmental
impact of HSBCs principal UK operations. This
third party scrutiny of the reporting system supports
HSBC's internal risk management procedures. HSBC
is a participant in the Dow Jones Sustainability,
FTSE4Good and Business in Environment indices.
Health and Safety
The maintenance of appropriate health and safety
standards throughout HSBC is a key responsibility of
all managers and HSBC is committed to actively
managing all health and safety risks associated with
its business. HSBC's objectives are to identify,
remove, reduce or control material risks of fires and
of accidents or injuries to employees and visitors.
Health and safety policies, Group standards and
procedures are set by Group Fire and Safety and are
implemented by Health Safety and Fire Co-
ordinators based in each country in which HSBC
operates.
Following the events of 11 September health
and safety arrangements, including those to combat
terrorist activity, were reviewed. As a result,
enhanced procedures have been promulgated and
levels of preparedness improved.
Communication with shareholders
Communication with shareholders is given high
priority. Extensive information about HSBCs
activities is provided in the Annual Report and
Accounts, Annual Review and the Interim Report
which are sent to shareholders. There is regular
dialogue with institutional investors and enquiries
from individuals on matters relating to their
shareholdings and the business of HSBC are
welcomed and are dealt with in an informative and
timely manner. All shareholders are encouraged to
attend the Annual General Meeting or the informal
meeting of shareholders held in Hong Kong to
discuss the progress of HSBC.