HSBC 2012 Annual Report Download - page 22

HSBC HOLDINGS PLC
Report of the Directors: Overview (continued)
Risk
20
Exposure to risks arising from the business activities of global businesses
RBWM CMB GB&M GPB
HSBC
• HSBC holding
company and
central operations
• Deposits
• Accounts services
• Credit and lending
• Asset management
• Wealth solutions and
financial planning
• Broking
• Life insurance
manufacturing
• Deposits
• Payments and cash
management
• Credit and lending
• International trade
and receivables
finance
• Commercial
insurance and
investments
• Deposits
• Payments and cash
management
• Balance sheet
management
• Credit and lending
• Asset and trade
finance
• Corporate finance
• Markets
• Securities services
• Deposits
• Account services
• Credit and lending
• Asset management
• Financial advisory
• Broking
• Corporate finance
(via GB&M)
• Alternative
investments
Global
business
Business
activities
Risk
profile
Balance
sheet
22
US$bn
• Assets 535
• Customer
accounts 562
US$bn
• Assets 363
• Customer
accounts 338
US$bn
• Assets 1,859
• Customer
accounts 332
US$bn
• Assets 118
• Customer
accounts 106
US$bn
• Assets 187
• Customer
accounts 2
Liquidity and funding risk, Pension risk, Fiduciary risk, Reputational risk, Compliance risk,
Sustainability risk and Insurance risk, which is predominantly in RBWM and CMB.
US$bn
• Credit risk 232
• Operational risk 45
US$bn
• Credit risk 366
• Operational risk 31
US$bn
• Credit risk 259
• Counterparty
credit risk 48
• Operational risk 41
• Market risk 55
US$bn
• Credit risk 18
• Operational risk 4
US$bn
• Credit risk 25
• Operational risk –
Other
(including Holding
Company)
RWAs
For footnote, see page 120.
In carrying out its business activities, HSBC
incurs a range of risks, some of which are measured
and managed via capital, some by other mechanisms.
For the former, we use both regulatory and economic
capital. Currently, the Group’s risk appetite is most
affected by the regulatory capital dimension as it
exceeds economic capital. The table above shows the
Pillar 1 regulatory capital demand for those risks and
is represented by RWAs. Under this regulatory
capital framework, the capital invested in our
Insurance business is deducted from regulatory
capital; as at 31 December 2012, the capital invested
in our Insurance business was US$10.1bn. HSBC is
also exposed to other risks as shown in the table
above. The regulatory capital required against these
other risks is covered within the total capital that
HSBC holds.
We have identified a comprehensive suite of
risk factors which encompasses the broad range of
risks we are exposed to, but may not necessarily be
deemed as top or emerging risks. The risk factors
inform our ongoing assessment of our top and
emerging risks. This assessment may result in our
risk appetite being revised.
Risk factors
Our businesses are exposed to a variety of risk
factors that could potentially affect the results of
our operations or financial condition. These are:
Macroeconomic and geopolitical risk
• Current economic and market conditions may
adversely affect our results.
• We have exposure to the ongoing economic crisis
in the eurozone.
• We are subject to political and economic risks in
the countries in which we operate, including the
risk of government intervention.
• Changes in foreign currency exchange rates may
affect our results.
Macro-prudential, regulatory and legal risks
to our business model
• Failure to comply with certain regulatory
requirements would have an adverse material
effect on our results and operations.
• We are subject to a number of legal and
regulatory actions and investigations, the
outcomes of which are inherently difficult to