HSBC 2007 Annual Report Download - page 306

HSBC HOLDINGS PLC
Report of the Directors: Governance (continued)
Board of Directors > Board committees / Internal control
304
Corporate Sustainability Committee
The Corporate Sustainability Committee is
responsible for overseeing corporate responsibility
and sustainability policies, principally
environmental, social and ethical matters and for
advising the Board, committees of the Board and
executive management on such matters. The terms of
reference of the Committee are available at
www.hsbc.com/boardcommittees. The members of
the Committee throughout 2007 were Lord Butler
(Chairman), W K L Fung and Sir Mark Moody-
Stuart (each of whom is a non-executive Director)
and G V I Davis and Lord May, who are non-
director members of the Committee. S Hintze was a
member of the Committee until her retirement as a
Director at the conclusion of the 2007 Annual
General Meeting.
There were five meetings of the Corporate
Sustainability Committee during 2007. Following
each meeting the Committee reports to the Board on
its activities.
Further information will be in HSBC’s
Sustainability Report 2007, available in May 2008.
Internal control
The Directors are responsible for internal control in
HSBC and for reviewing its effectiveness.
Procedures have been designed for safeguarding
assets against unauthorised use or disposition; for
maintaining proper accounting records; and for the
reliability of financial information used within the
business or for publication. Such procedures are
designed to manage rather than eliminate the risk of
failure to achieve business objectives and can only
provide reasonable and not absolute assurance
against material misstatement, errors, losses or fraud.
The procedures also enable HSBC Holdings to
discharge its obligations under the Handbook of
Rules and Guidance issued by the Financial Services
Authority, HSBC’s lead regulator.
The key procedures that the Directors have
established are designed to provide effective internal
control within HSBC and accord with the Internal
Control: Revised Guidance for Directors on the
Combined Code issued by the Financial Reporting
Council. Such procedures for the ongoing
identification, evaluation and management of the
significant risks faced by HSBC have been in place
throughout the year and up to 3 March 2008, the date
of approval of the Annual Report and Accounts
2007. 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.
HSBC’s key internal control procedures include
the following:
• Authority to operate the various subsidiaries and
responsibilities for financial performance
against plans and for capital expenditure is
delegated to their respective chief executive
officers within limits set by the Board of
Directors of HSBC Holdings. Sub-delegation of
authority from the Board to individuals requires
these individuals, within their respective
delegation, to maintain a clear and appropriate
apportionment of significant responsibilities and
to oversee the establishment and maintenance of
systems of controls appropriate to the business.
The appointment of executives to the most
senior positions within HSBC requires the
approval of the Board of Directors of HSBC
Holdings.
• Functional, operating, financial reporting and
certain management reporting standards are
established by Group Head Office 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.
• Systems and procedures are in place in HSBC to
identify, control and report on the major risks
including credit, changes in the market prices of
financial instruments, liquidity, operational
error, breaches of law or regulations,
unauthorised activities and fraud. Exposure to
these risks is monitored by risk management
committees, asset and liability committees and
executive committees in subsidiaries and by the
Group Management Board for HSBC as a
whole. A risk management meeting of the Group
Management Board, chaired by the Group
Finance Director, is held monthly. These risk
management meetings address asset, liability
and management issues. Minutes of the risk
management meetings of the Group
Management Board are submitted to the
Group Audit Committee and to the Board of
Directors.
• A Disclosure Committee has been established to
review material disclosures made by HSBC
Holdings for any 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