HSBC 2015 Annual Report Download - page 45

Risk Trend Mitigants
Externally driven
Economic outlook
and capital flows
We closely monitor economic developments in key markets, undertaking business or portfolio
reviews or stress tests as required, and take appropriate action as circumstances evolve.
Geopolitical risk We continuously assess the impact of the geopolitical outlook on our country limits and exposures
to ensure we remain within our risk appetite.
Turning of the credit cycle We undertook portfolio and limit reviews and conducted stress tests on the sectors and portfolios
that are most sensitive to the credit cycle.
Regulatory developments
affecting our business
model and profitability
We actively assess the effect of relevant developments and engage closely with governments
and regulators, seeking to ensure that requirements are considered properly and implemented
in an effective manner.
US DPA and related
agreements and
consent orders
We are continuing to take concerted action to remedy anti-money laundering and sanctions
compliance deficiencies and to implement Global Standards.
Regulatory focus on
conduct of business
and financial crime
We are enhancing our financial crime and regulatory compliance controls and resources and
are implementing significant programmes to enhance the management of conduct and financial
crime risks.
Dispute risk We continue to focus on identifying emerging regulatory and judicial trends, and sharing lessons
learned globally in an effort to avoid or limit future litigation exposure.
Cyber threat and
unauthorised access
to systems
We continue to improve our governance and controls framework to protect HSBC’s information and
technical infrastructure against ever-increasing and sophisticated cyber threats.
Internally driven
People risk We continue to focus on attracting and retaining key talent and are implementing a number
of initiatives to improve employee capability, collaboration and engagement.
Execution risk We have strengthened our prioritisation and governance processes for significant strategic, regulatory
and compliance projects. Risks related to the disposals of our operations in Brazil and Turkey were
subject to close management oversight.
Third-party risk
management
We are enhancing our third-party risk management governance, processes and procedures
and have conducted enhanced risk assessments of our most critical third parties.
Model risk We have strengthened our governance framework, created centralised global analytical functions and
recruited additional subject matter experts in our modelling and independent model review teams.
Data management A number of key initiatives and projects are in progress to implement our data strategy to enable
consistent data aggregation, reporting and management.
Risk heightened during 2015
Risk remained at the same level as 2014
Our top and emerging risks
are discussed in more detail
on page 110.
Top and emerging risks
We employ a top and emerging risks
framework at all levels of the organisation
to identify current and forward-looking
risks so that we may take action that
either prevents them materialising or
limits their effect.
Top risks are those that may have a
material impact on the financial results,
reputation or business model of the Group
in the year ahead. Emerging risks are those
that have large unknown components and
may form beyond a one-year horizon. If
these risks were to occur, they could have
a material effect on HSBC.
Our current top and emerging risks
are summarised below.
During 2015, we made two changes to
our top and emerging risks to reflect our
assessment of their effect on the Group.
‘Turning of the credit cycle’ was added as a
new risk, reflecting the risk of deterioration
in the credit environment. ‘Internet crime
and fraud’ was removed as mitigating
actions taken have reduced credit and
fraud losses through digital channels.
In addition, four risks were renamed to
better reflect the issues facing HSBC.
We use the new names below.
Strategic ReportFinancial Review Corporate Governance Financial Statements Shareholder Information
HSBC HOLDINGS PLC
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Risk overview