HSBC 2012 Annual Report Download - page 23

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
predict, but unfavourable outcomes could have a
material adverse effect on our operating results
and brand.
• Unfavourable legislative or regulatory
developments, or changes in the policy of
regulators or governments, could generate model
risk and could have a significant adverse effect on
our operations, financial condition and prospects.
• The UK Government has proposed draft
legislation for banking reforms based on the
recommendations of the Independent
Commission on Banking. Additional proposals
are being considered in France, Germany and
the EU and any resulting structural changes
could have a material adverse effect on us.
• We are subject to tax-related risks in the countries
in which we operate which could have a material
adverse effect on our operating results.
Risks related to our business operations,
governance and internal control systems
including compliance
• Our risk management measures may not be
successful.
• Operational risks are inherent in our business.
• Our operations are subject to the threat of
fraudulent activity.
• Our operations are subject to disruption from the
external environment.
• Our operations utilise third party suppliers.
• Our operations are highly dependent on our
information technology systems.
• Our operations have inherent reputational risk.
• We may suffer losses due to employee
misconduct.
• We rely on recruiting, retaining and developing
appropriate senior management and skilled
personnel.
• Our financial statements are based in part on
assumptions and estimates which, if inaccurate,
could cause material misstatement of the results
and financial position of the Group.
• Third parties may use us as a conduit for illegal
activities without our knowledge, which could
have a material adverse effect on us.
• We may not achieve all the expected benefits of
our strategic initiatives.
Risks related to our business
• We have significant exposure to counterparty risk
within the financial sector and to other risk
concentrations.
• Market fluctuations may reduce our income or
the value of our portfolios.
• Liquidity, or ready access to funds, is essential to
our businesses.
• Any reduction in the credit rating assigned to
HSBC Holdings, any subsidiaries of HSBC
Holdings or any of their respective debt securities
could increase the cost or decrease the availability
of our funding and adversely affect our liquidity
position and interest margins.
• Risks concerning borrower credit quality are
inherent in our businesses.
• Our Insurance business is subject to risks relating
to insurance claim rates and changes in insurance
customer behaviour.
• HSBC Holdings is a holding company and,
as a result, is dependent on dividends from its
subsidiaries to meet its obligations, including
obligations with respect to its debt securities, and
to provide profits for payment of future dividends
to shareholders.
• We may be required to make substantial
contributions to our pension plans.