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The Board, which seeks to promote the
Group's long-term
success, deliver sustainable value to shareholders
and promote a culture of openness and debate, comprises
diverse, high-calibre members who have experience in
our global markets.
Chairman and executive
Directors
Mark
E Tucker (66) 4C
Group Chairman
Appointed to the Board: September 2017
Group Chairman since: October 2017
Skills and
experience: With over 35 years of
experience in financial services in Asia, Africa, the US, the EU
and the UK, including 30 years living and working in Hong Kong,
Mark has a deep understanding of the industry and markets in which
we operate.
Career: Mark was previously
Chairman, Group Chief Executive and President of AIA Group Limited
('AIA'), and prior to AIA he was Group Chief Executive of
Prudential plc. Mark previously served as a non-executive Director
of the Court of the Bank of England and as an independent
non-executive Director of Goldman Sachs Group.
External appointments:
- Non-executive Chairman
of Discovery Limited
- Supporting Chair of
Chapter Zero
- Member of the UK
Investment Council
- Member of the Advisory
Group on Trade Finance to the International Chamber of
Commerce
- Member of the Trade
Advisory Group on Financial Services to the UK Government's
Department for International Trade
- Member of the Asia
Business Council
- Member of Hong Kong's
Chief Executive's Advisory Council on Economic
Development
- Member of the
Investment Advisory Council of the Supreme National Investment
Committee of the Kingdom of Saudi Arabia
- Chairman of the
Multinational Chairman's Group
- Director, Peterson
Institute for International Economics
- Director, Institute of
International Finance
- Asia Society Global
Board of Trustees
- International Advisory
Council of the China National Financial Regulatory
Administration
- Hong Kong Academy of
Finance International Council of Advisors
- Member of the Asia
Global Institute
- International Business
Leaders' Advisory Council to the Mayor of Beijing - Adviser to the
Mayor
- International Business
Leaders' Advisory Council to the Mayor of Shanghai - Adviser to the
Mayor
Noel
Quinn (62)
Group Chief Executive
Appointed to the Board: August 2019
Group Chief Executive since: March 2020
Skills and experience: Having
qualified as an accountant in 1987, Noel has more than 30 years of
banking and financial services experience, both in the UK and
Asia.
Career: Noel was appointed
Group Chief Executive in March 2020, having held the role on an
interim basis since August 2019. Since joining HSBC and its
constituent companies in 1987, Noel has held a variety of roles
including Chief Executive Officer, Global Commercial Banking;
Regional Head of Commercial Banking for Asia-Pacific; Head of
Commercial Banking UK; and Head of Commercial Finance
Europe.
External appointments:
- Independent
non-executive Director of Sustainable Markets Initiative Limited
and Chair of the Financial Services Task Force
- Principal member of the
Glasgow Financial Alliance for Net Zero
- Member of the World
Economic Forum's International Business Council
- Member of the World
Bank Private Sector Investment Lab
- Member of the Advisory
Board of the China Children Development Fund
- Founding member of CNBC
ESG Council
- Member of the British
Infrastructure Council
Georges Elhedery (49)
Group Chief Financial Officer
Appointed to the Board: January 2023
Skills and experience: Georges
has over 25 years of experience in the banking industry across
Europe, the Middle East and Asia, and has held a number of
executive roles at both a regional and global business
level.
Career: Georges was appointed
Group Chief Financial Officer and executive Director with effect
from 1 January 2023. He is also responsible for the oversight of
the Group's transformation initiatives, strategy and corporate
development activities. Georges was previously co-Chief Executive
Officer, Global Banking and Markets and also Head of the Markets
and Securities Services division of the business. Georges joined
HSBC in 2005 with extensive trading experience in London, Paris and
Tokyo. He has since held a number of senior leadership roles,
including Head of Global Banking and Markets, Middle East and North
Africa; Chief Executive Officer for HSBC, Middle East, North Africa
and Türkiye; and Global Head of Markets based in
London.
Board committee membership key
C. Committee Chair
1.
Group Audit Committee
2.
Group Risk Committee
3.
Group Remuneration Committee
4.
Nomination & Corporate Governance
Committee
For full biographical details of our Board members, see
www.hsbc.com/who-we-are/leadership-and-governance.
Independent non-executive
Directors
Geraldine Buckingham (46) 2,3,4
Independent non-executive Director
Appointed to the Board: May 2022
Skills and experience:
Geraldine is an experienced executive within the global financial
services industry, with significant leadership experience in
Asia.
Career: Geraldine is the former
Chair and Head of Asia-Pacific at BlackRock, where she was
responsible for all business activities across Hong Kong, mainland
China, Japan, Australia, Singapore, India and Korea. After stepping
down from this role, she acted as senior adviser to the Chairman
and Chief Executive Officer of BlackRock. She earlier served as
BlackRock's Global Head of Corporate Strategy, and previously was a
partner within McKinsey & Company's financial services
practice.
External appointments:
- Independent
non-executive Director of Brunswick Group Partnership
Ltd
- Independent
non-executive Director of H.R.L. Morrison & Co
Limited
- Member of the Advisory
Board of ClimateWorks Centre Australia
- Member of the Advisory
Board of the McKinsey Health Institute
Rachel Duan (53) 1,3,4
Independent non-executive Director
Appointed to the Board: September 2021
Skills and experience: Rachel
is an experienced business leader with exceptional international
experience in the US, Japan, mainland China and Hong
Kong.
Career: Rachel spent 24 years
at General Electric ('GE'), where she held positions including
Senior Vice President of GE, and President and Chief Executive
Officer of GE's Global Markets where she was responsible for
driving GE's growth in Asia-Pacific, the Middle East, Africa, Latin
America, Russia and the Commonwealth of Independent States. She
also previously served as President and Chief Executive Officer of
GE Advanced Materials China and then of the Asia-Pacific; President
and CEO of GE Healthcare China; and President and CEO of GE
China.
External appointments:
- Independent
non-executive Director of Sanofi S.A.
- Independent
non-executive Director of AXA S.A.
- Independent
non-executive Director of the Adecco Group AG
Dame
Carolyn Fairbairn (63) 2,3C,4
Independent non-executive Director
Appointed to the Board: September 2021
Skills and experience: Carolyn
has significant experience across the media, government and finance
sectors, and a deep understanding of the macroeconomic, regulatory,
and political environment.
Career: An economist by
training, Carolyn has served as a partner at McKinsey &
Company, a member of the UK prime minister John Major's Number 10
Policy Unit, and as Director-General of the Confederation of
British Industry, and held senior executive positions at the BBC
and ITV plc. She has extensive board experience, having previously
served as non-executive Director of Lloyds Banking Group plc, The
Vitec Group plc, Capita plc and BAE Systems plc. She has also
served as a non-executive Director of the UK Competition and
Markets Authority and the Financial Services Authority.
External appointments:
- Independent
non-executive Director of Tesco plc
- Chair of Royal Mencap
Society
- Honorary Fellow of
Gonville and Caius College, Cambridge
James Forese (60) 1,2C,4
Independent non-executive Director
Appointed to the Board: May 2020
Skills and experience: Jamie
has over 30 years of international business and management
experience in the finance industry working in areas including
global markets, investment and private banking.
Career: Jamie formerly served
as President of Citigroup. He began his career in securities
trading with Salomon Brothers, one of Citigroup's predecessor
companies, in 1985. In addition to his most recent role as
Citigroup's President, he was Chief Executive Officer of
Citigroup's Institutional Clients Group. He has held the positions
of Chief Executive of its Securities and Banking division and Head
of its Global Markets business.
External appointments:
- Non-executive Chair of
HSBC North America Holdings Inc
- Non-executive Chairman
of Global Bamboo Technologies
Ann
Godbehere (68) 3,4
Independent non-executive Director
Appointed to the Board: September 2023
Skills and experience: Ann brings deep financial acumen and extensive financial
services experience over a 30-year career spanning insurance,
retail and private banking, and wealth management. She also
provides global perspectives, drawing upon experiences and insights
gained from a long career in international business.
Career: After joining Swiss Re
in 1996, Ann served as the company's Chief Financial Officer from
2003 to 2007. She was also Interim Chief Financial Officer of
Northern Rock Bank from 2008 to 2009 in the period immediately
after its nationalisation. Ann also has extensive board experience,
including with FTSE 100 companies, having previously served as
non-executive Director of Prudential plc, British American Tobacco
plc, UBS AG, UBS Group AG and as Senior Independent non-executive
Director of Rio Tinto plc and Rio Tinto Limited.
External appointments:
- Non-executive Director
and Chair of the Audit Committee of Stellantis N.V.
- Non-executive Director
and Chair of the Audit Committee of Shell plc
Steven Guggenheimer (58) 2,4
Independent non-executive Director
Appointed to the Board: May 2020
Skills and experience: Steven
brings extensive insight into technologies ranging from artificial
intelligence to Cloud computing, through his experience advising
businesses on digital transformation.
Career: Steven has more than 25
years of experience at Microsoft, including more than a decade as
Corporate Vice President, where he led teams focused on original
equipment manufacturers, developers and independent software
vendors and artificial intelligence solutions.
External appointments:
- Independent
non-executive Director of BT Group plc
- Independent
non-executive Director of Leupold & Stevens, Inc
- Independent
non-executive Director of Forrit Holdings Limited
Dr
José Antonio Meade Kuribreña (54) 3,4
Independent non-executive Director
Appointed to the Board: March 2019
Workforce engagement non-executive Director since: June
2022
Skills and experience: José has
extensive experience in public administration, banking and
financial policy.
Career: José has held
Cabinet-level positions in the federal government of Mexico,
including as Secretary of Finance and Public Credit, Secretary of
Social Development, Secretary of Foreign Affairs and Secretary of
Energy. Prior to his appointment to the Cabinet, he served as
Undersecretary and as Chief of Staff in the Ministry of Finance and
Public Credit. José is also a former Director General of Banking
and Savings at the Ministry of Finance and Public Credit, and
served as Chief Executive Officer of the National Bank for Rural
Credit.
External appointments:
- Independent non-executive Director of Alfa S.A.B. de
C.V.
- Independent non-executive Director of Grupo Comercial
Chedraui, S.A.B. de C.V.
- Board member of the Global Center on Adaptation
- Member of the Advisory Board of the University of California,
Centre for US Mexican Studies
- Member of the UNICEF Mexico Advisory Board
Kalpana Morparia (74) 2,4
Independent non-executive Director
Appointed to the Board: March 2023
Skills and experience: Kalpana
is a skilled business leader with significant experience gained
through a 45-year career in banking across Asia, primarily in
India.
Career: Kalpana's most recent
executive role was as Chair of J.P. Morgan, South and Southeast
Asia and a member of J.P. Morgan's Asia executive committee, which
she held until her retirement in 2021. Before J.P. Morgan, she was
the Joint Managing Director of ICICI Bank, India's second-largest
bank, from 2001 to 2007.
External appointments:
- Independent non-executive Director of Hindustan Unilever
Limited
- Independent non-executive Director of Dr. Reddy's Laboratories
Ltd.
- Independent non-executive Director of Philip Morris
International Inc
- Governing board member of the Bharti Foundation
- Governing board member of Foundation for Audit
Quality
- Governing board member of the Generation India
Foundation
- Governing council member of Krea University
Eileen Murray (65) 1,3,4
Independent non-executive Director
Appointed to the Board: July 2020
Skills and experience: Eileen
has extensive knowledge in financial services, technology and
corporate strategy from a career spanning more than 40
years.
Career: Eileen previously
served as co-Chief Executive Officer of Bridgewater Associates, LP.
Before this, she was Chief Executive Officer for Investment Risk
Management LLC, and President and co-Chief Executive Officer of
Duff Capital Advisors. Eileen started her professional career at
Morgan Stanley, where she held positions including Controller,
Treasurer, and Global Head of Technology and Operations, as well as
Chief Operating Officer for its Institutional Securities Group. She
was also Head of Global Technology, Operations and Product Control
at Credit Suisse.
External appointments:
- Independent
non-executive Director of Guardian Life Insurance Company of
America
- Independent
non-executive Director of Broadridge Financial Solutions,
Inc
- Member of the Advisory
Board of Mobilize Capital Partners
Brendan Nelson (74) 1,2,4
Independent non-executive Director
Appointed to the Board: September 2023
Skills and experience: Brendan
brings UK and international financial and auditing expertise, and
significant experience in auditing and as audit committee chair of
UK-listed companies.
Career: Brendan spent over 25
years as a partner at KPMG LLP, served on the board from 2000 and
as Vice Chairman from 2006, until his retirement in 2010.
Internationally, he held various senior positions including Global
Chairman of the financial services practice. Subsequently, Brendan
joined the boards of bp plc and NatWest Group plc where he also
served as Chairman of both companies' audit committees.
During his career, Brendan was
President of the Institute of Chartered Accountants of Scotland, a
member of the Financial Reporting Review Panel and a member of the
Financial Services Authority's Practitioner Panel. As current
Chairman of the Board of BP Pension Fund Trustees Ltd, Brendan has
received training in ESG considerations for investment decisions
and helped set an ambition to be net zero in terms of greenhouse
gas emissions from investments by 2050.
External appointments:
- Chairman of BP Pension
Trustees Ltd
David Nish (63) 1C,2,4
Independent non-executive Director
Appointed to the Board: May 2016
Senior Independent non-executive Director since: February
2020
Skills and experience: David
has international experience in financial services, corporate
governance, strategy, financial reporting, and operational
transformation.
Career: David served as Group
Chief Executive Officer of Standard Life plc between 2010 and 2015,
having joined the company in 2006 as Group Finance Director. He is
also a former Group Finance Director of Scottish Power plc and was
a partner at Price Waterhouse. David has also previously served as
a non-executive Director of HDFC Life (India), Northern Foods plc,
Thus plc, London Stock Exchange Group plc, the UK Green Investment
Bank plc and Zurich Insurance Group.
External appointments:
- Senior Independent
non-executive Director of Vodafone Group plc and Chairman of the
Audit and Risk Committee
- Honorary Professor of
University of Dundee Business School
Swee Lian Teo (64) 2,4
Independent non-executive Director
Appointed to the Board: October 2023
Skills and experience: Swee
Lian brings extensive experience within the international financial
services industry, having previously spent over 27 years with the
Monetary Authority of Singapore ('MAS').
Career: During Swee Lian's time
at the MAS, she worked in foreign reserves management, financial
sector development, strategic planning and financial supervision,
before she became the Deputy Managing Director for Financial
Supervision. She retired from the MAS in 2015 after serving as
Special Advisor, focused on MAS's role in the international
regulatory framework, in the Managing Director's office. Swee Lian
previously served as a non-executive Director on the boards of AIA
Group Limited and the Dubai Financial Services
Authority.
External appointments:
- Non-executive Director
of Singapore Telecommunications Limited and Chair of the Risk
Committee
- Non-executive Director
of Avanda Investment Management Pte Ltd
- Director of Clifford
Capital Pte Ltd
- Director of Clifford
Capital Holdings Pte Ltd
- Chair of CapitaLand
Integrated Commercial Trust Management Limited.
Aileen Taylor (51)
Group Company Secretary and Chief Governance
Officer
Appointed: November 2019
Skills and experience: Aileen
is a solicitor with significant governance and regulatory
experience across various roles in the banking industry. She is a
member of the European Corporate Governance Council, the GC100 and
the Financial Conduct Authority's Listing Authority Advisory
Panel.
Career: Prior to joining HSBC,
Aileen spent 19 years at the Royal Bank of Scotland Group, holding
various legal, risk and compliance roles. She was appointed Group
Secretary in 2010 and subsequently Chief Governance Officer and
Board Counsel.
Former Directors who served during the year
Jackson Tai
Jackson Tai retired from the Board on
5 May 2023
For full biographical details of our Board members, see
www.hsbc.com/who-we-are/leadership-and-governance.
Senior management, which includes the
Group Executive Committee, supports the Group Chief Executive in
the day-to-day management of the business and the implementation of
strategy.
Elaine Arden (55)
Group Chief Human
Resources Officer
Elaine joined HSBC as Group Chief
Human Resources Officer in June 2017. Prior to joining HSBC, she
was Group Human Resources Director at the Royal Bank of Scotland
Group for six years in the aftermath of the global financial
crisis. She has held a number of human resources roles throughout
her career in financial services, including Head of Human Resources
for Direct Line Group. Elaine is a member of the Chartered
Institute of Personnel and Development, and a Fellow of the
Chartered Institute of Banking in Scotland.
Jonathan Calvert-Davies
(55)
Group Head of Internal Audit
Jonathan is a standing attendee of
the Group Executive Committee, having joined HSBC as Group Head of
Internal Audit in October 2019. He has over 30 years of experience
providing assurance, audit and advisory services to the banking and
securities industries in the UK, the US and Europe. Jonathan's
previous roles included leading KPMG UK's financial services
internal audit services practice and PwC's UK internal audit
services practice. He also previously served as interim Group Head
of Internal Audit at the Royal Bank of Scotland Group.
Colin Bell
(56)
Chief Executive Officer,
HSBC
Bank plc and HSBC Europe
Colin joined HSBC in July 2016 and
was appointed Chief Executive Officer, HSBC Bank plc and HSBC
Europe in February 2021, having previously held the role of Group
Chief Compliance Officer. He is also a Director of HSBC Bank
(Singapore) Limited. Colin worked at UBS as Global Head of
Compliance and Operational Risk Control. He served for 16 years in
the British Army, where he held a variety of command and staff
positions, including operational tours of Iraq and Northern
Ireland, and roles in the Ministry of Defence and NATO.
Greg Guyett
(60)
Chief Executive Officer,
Global Banking and Markets
Greg joined HSBC in October 2018 as
Head of Global Banking and became co-Chief Executive Officer of
Global Banking and Markets in March 2020, before assuming sole
responsibility in October 2022. Before joining HSBC, he was
President and Chief Operating Officer of East West Bank. Greg began
his career as an investment banker at J.P. Morgan, where positions
included: Chief Executive Officer for Greater China; Chief
Executive Officer, Global Corporate Bank; Head of Investment
Banking for Asia-Pacific; and Co-Head of Banking for
Asia-Pacific.
Dr Celine Herweijer
(46)
Group Chief Sustainability Officer
Celine joined HSBC as Group Chief
Sustainability Officer in July 2021, and is responsible for the
Group's execution of its sustainability strategy. She was
previously a partner at PwC for over a decade, where she held
global leadership roles including acting as its global innovation
and sustainability leader. Before joining PwC in 2009, Celine
worked as Director of Climate Change and Consulting for Risk
Management Solutions. She is a World Economic Forum Young Global
Leader, a co-chair of the We Mean Business Coalition, a PhD climate
scientist and NASA Fellow.
Steve John
(50)
Group Chief Communications and Brand Officer
Steve joined HSBC in December 2019
and was appointed to the Group Executive Committee in April 2021.
He has a wealth of senior communications, public policy and
leadership experience acquired across a number of multinational and
charitable organisations. Steve was previously a partner and Global
Director of Communications at McKinsey & Company from 2014 to
2019. He has also held roles with Bupa as Global Director of
Corporate Affairs and PepsiCo as Director of Corporate Affairs for
their UK and Ireland franchises.
John Hinshaw
(53)
Group Chief Operating Officer
John became Group Chief Operating
Officer in February 2020, having joined HSBC in December 2019. He
is Chairman of HSBC Global Services Limited and a Director of HSBC
Innovation Bank Limited. John was previously Executive Vice
President of Technology and Operations and Chief Customer Officer
at Hewlett Packard and Hewlett Packard Enterprise, and has held
senior executive positions at Verizon and Boeing. John serves on
the boards of Sysco Corporation and Illumio, Inc., and has
previously served on the boards of BNY Mellon, DocuSign and the
National Academy Foundation.
Pam Kaur
(60)
Group Chief Risk and
Compliance Officer
Pam was appointed Group Chief Risk
and Compliance Officer in 2021, having been Group Chief Risk
Officer since 2020. She is a Director of the Hongkong and Shanghai
Banking Corporation Limited. Since joining HSBC in 2013, her roles
included Group Head of Internal Audit and Head of Wholesale Market
and Credit Risk. Since qualifying as a chartered accountant with
Ernst & Young, Pam held various senior audit, compliance,
finance and operations roles with Deutsche Bank, the Royal Bank of
Scotland Group, Lloyds TSB and Citigroup. She serves as a
non-executive Director of abrdn plc.
Bob Hoyt
(59)
Group Chief Legal Officer
Bob joined HSBC as Group Chief Legal
Officer in January 2021. He was previously Group General Counsel at
Barclays from 2013 to 2020. Prior to that, he was General Counsel
and Chief Regulatory Affairs Officer for PNC Financial Services
Group. Bob has served as General Counsel and Senior Policy Adviser
to the US Department of the Treasury under Secretary Henry M.
Paulson Jr, and as Special Assistant and Associate Counsel to the
White House under President George W. Bush.
David Liao
(51)
Co-Chief Executive,
The
Hongkong and Shanghai Banking Corporation Limited
David was appointed Co-Chief
Executive of the Asia-Pacific region in 2021. He is also a Director
of the Bank of Communications Co., Limited, and Hang Seng Bank
Limited. David joined HSBC in 1997, with previous roles including:
Head of Global Banking Coverage for Asia-Pacific; President and
Chief Executive of HSBC China; Head of Global Banking and Markets,
HSBC China; and Treasurer and Head of Global Markets, HSBC
China.
Nuno Matos
(56)
Chief Executive Officer,
Wealth and Personal Banking
Nuno was appointed Chief Executive
Officer of Wealth and Personal Banking in 2021. Since joining HSBC
in 2015 from Santander Group, he has held various roles, most
recently as Chief Executive Officer of HSBC Bank plc and HSBC
Europe. He has also held the positions of Chief Executive Officer
of HSBC Mexico and Regional Head of Retail Banking and Wealth
Management for Latin America. He is currently the Chairman of MP
Payments Group Limited.
Michael Roberts
(63)
Chief Executive Officer,
HSBC
USA and Americas
Michael was appointed Chief Executive
Officer of HSBC USA when he joined HSBC in 2019. He became Chief
Executive Officer of the Americas with oversight responsibility for
Canada and Latin America in 2021. He is a Director of HSBC Bank
Canada; Director, President and Chief Executive Officer of HSBC
North America Holdings Inc.; and Chairman of HSBC Bank USA, N.A.,
HSBC USA Inc and HSBC Latin America Holdings (UK) Limited.
Previously, Michael spent over 30 years at Citigroup in a number of
senior leadership roles, most recently as Global Head of Corporate
Banking and Capital Management and Chief Lending
Officer.
Stephen Moss
(57)
Regional Chief Executive Officer, Middle East, North Africa
and Türkiye
Stephen was appointed Regional Chief
Executive Officer for the Middle East, North Africa and Türkiye in
2021. He has held a series of roles in Asia, the UK and the Middle
East since joining HSBC in 1992, including as Chief of Staff to the
Group Chief Executive and overseeing the Group's mergers and
acquisitions, and strategy and planning activities. Stephen is a
Director of HSBC Bank Middle East Limited, HSBC Middle East
Holdings B.V, HSBC Bank Egypt S.A.E., HSBC Saudi Arabia and Saudi
Awwal Bank.
Surendra Rosha
(55)
Co-Chief Executive,
The
Hongkong
and
Shanghai Banking
Corporation Limited
Surendra was appointed Co-Chief
Executive of the Asia-Pacific region in 2021. He is a Director of
The Hongkong and Shanghai Banking Corporation Limited, HSBC Global
Asset Management Limited and HSBC Bank Malaysia Berhad. Surendra
joined HSBC in 1991 and has held several senior positions within
Global Banking and Markets, including Head of Global Markets in
Indonesia and Head of Institutional Sales, Asia-Pacific. He
previously held the position of Chief Executive for HSBC India and
Head of HSBC's financial institutions group for
Asia-Pacific.
Barry O'Byrne
(48)
Chief Executive Officer,
Global Commercial Banking
Barry was appointed Chief Executive
Officer of Global Commercial Banking in 2020, having served in the
role on an interim basis since August 2019. He joined HSBC in 2017
as Chief Operating Officer for Commercial Banking. Before joining
HSBC, Barry worked at GE Capital for 19 years where he held a
number of senior leadership roles, including Chief Executive
Officer and Chief Operating Officer for GE Capital
International.
John David
Stuart
(known as Ian Stuart) (60)
Chief Executive Officer,
HSBC
UK Bank plc
Ian has been Chief Executive Officer
of HSBC UK Bank plc since 2017, having joined HSBC as Head of
Commercial Banking in the UK and Europe in 2014. He has worked in
financial services for over 40 years, previously holding roles at
the Royal Bank of Scotland Group and Barclays.
Ian holds an Honorary Masters and
Honorary Doctorate degree for his services to the banking sector.
He is a member of the UK Finance Board, the UK Investment Council
and a business ambassador for Meningitis Now.
Additional members of the Group Executive
Committee
Noel
Quinn
Georges Elhedery
Aileen Taylor
Biographies are provided on pages
239 and 243.
Board and senior management
diversity
We value difference
Diversity and inclusion are embedded
within the culture of HSBC. The Board remains committed to having
an inclusive culture that recognises the importance of
gender, social and ethnic diversity, and the benefits gained from
different perspectives.
This section outlines the key
diversity and inclusion metrics for Board members and executive
management as at 31 December 2023. This includes tenure, age,
skills and experience, as well as gender and ethnic
representation.
Gender and ethnic
diversity
The Financial Conduct Authority
requires all listed companies to publish in their Annual Report and Accounts information
on female and ethnic heritage representation on the Board and in
senior management. The tables below outline the current gender and
ethnic diversity of the HSBC Holdings Board and executive
management reflecting data gathered through
self-identification.
Gender
Ethnic diversity
|
Board members
|
|
Executive
management2
|
|
Number
|
%
|
Number of
senior positions1
|
Number
|
%
|
Male
|
8
|
53
|
4
|
15
|
79
|
Female
|
7
|
47
|
0
|
4
|
21
|
Other
|
-
|
-
|
-
|
-
|
-
|
Not specified/prefer not to
say
|
-
|
-
|
-
|
-
|
-
|
|
Board members
|
|
Executive
management2
|
|
Number
|
%
|
Number of
senior positions1
|
Number
|
%
|
White British or other White
(including minority-White groups)
|
10
|
67
|
4
|
13
|
69
|
Mixed/multiple ethnic
groups
|
-
|
-
|
-
|
1
|
5
|
Asian/Asian British
|
3
|
20
|
-
|
3
|
16
|
Black/African/Caribbean/Black
British
|
-
|
-
|
-
|
-
|
-
|
Other ethnic groups, including
Arab
|
2
|
13
|
-
|
1
|
5
|
Not specified/prefer not to
say
|
-
|
-
|
-
|
1
|
5
|
1 Senior positions on the Board comprise the Group
Chairman, Group Chief Executive, Group Chief Financial Officer and
Senior Independent non-executive Director.
2 Executive management comprises the Group Chief
Executive, his direct reports, and the Group Company Secretary and
Chief Governance Officer.
|
Board composition, tenure and
age
2 Executive
Directors
|
13 Non-executive Directors
|
1 Tenure of a non-executive Director is calculated
by reference to the date of their election by shareholders
following their appointment.
Skills and experience
The summary below provides an
overview of the skills and experiences held by the non-executive
Directors on the Board. This is based on the current skills matrix,
which is reviewed annually by the Nomination & Corporate
Governance Committee to ensure that the Board has the skills and
experience required to effectively discharge its duties and to
support succession planning discussions. The skills and experiences
of the newly appointed non-executive Directors are also included in
the below extract.
We are committed to high standards of
corporate governance. The Group has a comprehensive range of
policies and procedures in place designed to help ensure that it is
well managed, with effective oversight and
controls.
Board and executive
governance
The Board, led by the Group Chairman,
is responsible among other matters for:
- promoting the Group's long-term success and delivering
sustainable value to shareholders;
- establishing and approving the Group's strategy and
objectives, and monitoring the alignment of the Group's purpose,
strategy and values with the desired culture and
standards;
- setting the Group's risk appetite and monitoring the Group's
risk profile;
- approving and monitoring capital and financial resource plans
for achieving strategic objectives, including material
transactions;
- considering and approving the Group's technology and
environmental, social and governance strategies;
- ensuring effective engagement with, and encouraging
participation from, shareholders and other key
stakeholders;
- approving the appointment and remuneration of Directors,
including Board roles;
- reviewing the Group's overall corporate governance
arrangements; and
- providing entrepreneurial leadership of the Group within a
framework of prudent and effective controls.
The Board's responsibilities are set
out in a schedule of matters reserved within its terms of
reference, which are available on our website at
www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities.
The Board's powers are subject to relevant laws, regulations and
HSBC's articles of association.
The role of the independent
non-executive Directors is to support the development of strategy,
oversee risk, hold management to account and ensure the executive
Directors are discharging their responsibilities properly, while
creating the right culture to encourage constructive challenge.
Further details on the independence of the Board can be found in
the Nomination & Corporate Governance Committee report on page
262. Non-executive Directors also review
the performance of management in meeting agreed goals and
objectives. The Group Chairman meets with the non-executive
Directors without the executive Directors in attendance after Board
meetings and otherwise, as necessary.
The roles of Group Chairman and Group
Chief Executive are separate. There is a clear division of
responsibilities between the leadership of the Board by the Group
Chairman, and the executive responsibility for day-to-day
management of HSBC's business, which is undertaken by the Group
Chief Executive.
The majority of Board members are
independent non-executive Directors. At 31 December 2023, the Board
comprised the Group Chairman, 12 non-executive Directors, and two
executive Directors who are the Group Chief Executive and the Group
Chief Financial Officer. As previously announced, David Nish will
not stand for
re-election at the Annual General Meeting ('AGM') on 3 May
2024.
For further details of Board members'
career backgrounds, skills, experience and external appointments,
see their biographies on page 239, and
for a breakdown of the diversity and skills of the Board and senior
management, see page 247.
Operation of the Board
The Board is ordinarily scheduled to
meet nine times a year. In 2023, the Board held 11 meetings. For
further details on attendance at those meetings, see page
249. The Board agenda is agreed by the
Group Chairman, working with both the Group Chief Executive and the
Group Company Secretary and Chief Governance Officer. For further
information, see 'Board matters considered and shareholder
engagement' on page 254.
The Group Company Secretary and Chief
Governance Officer, the Group Chief Risk and Compliance Officer and
the Group Chief Legal Officer are regular attendees at Board
meetings. The non-executive Chairman of The Hongkong and Shanghai
Banking Corporation Limited is also a regular attendee at most
Board meetings. The chief executive officers of the three global
businesses attend Board strategy discussions, and other senior
executives attend Board meetings for specific items as
required.
In addition, as agreed by the Board,
the Board Oversight Sub-Group is called on an ad hoc basis where
necessary. Such meetings are an informal mechanism for a smaller
group of Board members and management to discuss emerging issues
and upcoming Board matters. The Board Oversight Sub-Group was not
convened in 2023.
Board roles, responsibilities and
meeting attendance
The table below sets out the Board
members' respective roles, responsibilities and attendance at Board
meetings and the AGM in 2023. For a full description of key Board
members' responsibilities, see
www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities.
|
|
|
Group Chairman
Mark E
Tucker2,3
|
12/12
|
- Provides
effective leadership of the Board and promotes the highest
standards of corporate governance practices.
- Leads the Board
in providing strong strategic oversight and setting the Board's
agenda, culture and values.
- Leads the Board
in challenging management's thinking and proposals, and fosters
open and constructive debate among Directors.
- Maintains
internal and external relationships with key stakeholders, and
communicates investors' views to the Board.
- Organises
periodic monitoring and evaluation, including externally
facilitated evaluation, of the performance of the Board, its
committees and individual Directors.
- Leads on
succession planning for the Board and its committees, ensuring
appointments reflect diverse cultures, skills and
experiences.
|
Executive Director
Group Chief Executive
Noel Quinn3
|
12/12
|
- Leads and directs
the implementation of the Group's business strategy, embedding the
organisation's culture and values.
- Leads the Group
Executive Committee with responsibility for the day-to-day
operations of the Group, under authority delegated to him from the
Board.
- Maintains
relationships with key internal and external stakeholders including
the Group Chairman, the Board, customers, regulators, governments
and investors.
- Maintains
responsibility and accountability for the Group's and its
employees' compliance with applicable laws, codes, rules and
regulations, good market practice and HSBC's own
standards.
|
Executive Director
Group Chief Financial Officer
Georges
Elhedery3,4
|
12/12
|
- Supports the
Group Chief Executive in developing and implementing the Group
strategy, and recommends the annual budget and long-term strategic
and financial resource plan.
- Leads the Finance
function and is responsible for effective financial and regulatory
reporting, including the effectiveness of the processes and
controls, to ensure the financial control framework is robust and
fit for purpose.
- Maintains
relationships with key stakeholders including
shareholders.
|
Non-executive Director
Senior Independent Director
David Nish3,5,6
|
10/12
|
- Supports the
Group Chairman, acting as intermediary for non-executive Directors
when necessary.
- Leads the
non-executive Directors in the oversight of the Group Chairman,
supporting the clear division of responsibility between the Group
Chairman and the Group Chief Executive.
- Listens to
shareholders' views if they have concerns that cannot be resolved
through the normal channels.
|
Non-executive Directors
|
|
- Develop and
approve the Group strategy.
- Challenge and
oversee the performance of management in achieving agreed corporate
goals and objectives.
- Approve the
Group's risk appetite and review risk profile and
performance.
- Contribute to the
assessment and monitoring of culture.
- Maintain internal
and external relationships with the Group's key
stakeholders.
-
|
Geraldine
Buckingham3,5
|
12/12
|
Rachel Duan3,5
|
12/12
|
Dame Carolyn
Fairbairn3,5,6
|
10/12
|
James Forese3,5
|
12/12
|
Ann
Godbehere4,5
|
3/3
|
Steven
Guggenheimer3,5,6
|
11/12
|
Dr José Antonio Meade
Kuribreña3,5,7
|
12/12
|
Kalpana
Morparia3,4,5
|
10/10
|
Eileen
Murray3,5,6
|
11/12
|
Brendan
Nelson4,5
|
3/3
|
Jackson
Tai3,5,6,8
|
6/7
|
Swee Lian
Teo4,5
|
2/2
|
Group Company Secretary and Chief Governance
Officer
Aileen Taylor
|
|
- Maintains strong
and consistent governance practices at Board level and throughout
the Group.
- Supports the
Group Chairman in ensuring effective functioning of the Board and
its committees, and transparent engagement between senior
management and non-executive Directors.
- Facilitates
induction and professional development of non-executive
Directors.
- Advises and
supports the Board and management in ensuring effective end-to-end
governance and decision making across the Group.
|
1 The total number of meetings
comprised nine scheduled meetings, two ad hoc meetings and the
AGM.
2 The non-executive Group Chairman was
considered to be independent on appointment.
3 Attended the AGM on 5 May
2023.
4 Georges Elhedery joined the Board
effective 1 January 2023. Kalpana Morparia joined the Board
effective 1 March 2023. Ann Godbehere and Brendan Nelson joined the
Board effective 1 September 2023. Swee Lian Teo joined the Board
effective 1 October 2023.
5 Independent non-executive Director.
All of the non-executive Directors are considered to be independent
of HSBC. There are no relationships or circumstances that are
likely to affect any individual non-executive Director's judgement.
All non-executive Directors have confirmed their independence
during the year.
6 Meetings held on 9 March 2023, 16 March 2023 and
8 November 2023 were called at short notice. Due to prior
commitments Dame Carolyn Fairbairn was unable to attend on 9 March
2023, David Nish, Jackson Tai and Dame Carolyn Fairbairn were
unable to attend on 16 March 2023, and David Nish and Steven
Guggenheimer were unable to attend on 8 November 2023. Due to prior
commitments Eileen Murray was unable to attend the Board meeting in
September 2023.
7 Dr José Antonio Meade Kuribreña was
appointed as the independent non-executive Director with
responsibility for workforce engagement on 1 June 2022. Further
information can be found on page 257.
8 Jackson Tai retired from the Board
on 5 May 2023.
Relationship between the Board and
senior management
The Board delegates day-to-day
management of the business and implementation of strategy to the
Group Chief Executive. The Group Chief Executive is supported in
his management of the Group by recommendations and advice from the
Group Executive Committee ('GEC'), an executive forum comprising
members of senior management that include chief executive officers
of the global businesses and regions, as well as functional heads.
For further details of the senior management team, see page
244.
All Directors are encouraged to have
contact with management at all levels, and have full access to all
relevant information. Visits to local business operations and
meetings with local management are arranged for the non-executive
Directors when they attend Board meetings in different locations,
and when travelling for other reasons. Senior management often
attend alongside Directors' stakeholder engagements (see 'Board
decision making and engagement with stakeholders' on page
20). The workforce engagement non-executive
Director attends the GEC on occasion to provide senior management
with updates on workforce engagements carried out by the Board,
including relevant Board observations. For further details, see
'Board stakeholder and workforce engagement' on page 257.
Executive governance
The GEC promotes the tone from the
top, set by the Board, across the organisation. This helps to
ensure that our colleagues follow our values, and foster a culture
that delivers against our purpose of opening up a world of
opportunity. At its meetings, the GEC dedicates time to reflect on
our purpose and values and how they are demonstrated in the
day-to-day course of business.
During 2023, the GEC undertook an
extensive review of the Group's strategy with a view to building
upon its unique strengths. For further details of our strategy, see
page 11.
The GEC has led and overseen the
delivery of a number of strategic projects to simplify how we get
things done, by identifying operating efficiencies, reducing
complexity and optimising costs. The GEC will continue to focus on
simplification throughout 2024.
The GEC's operating rhythm helps to
facilitate end-to-end governance between senior leadership and the
Board.
The operating rhythm has the
following three pillars:
- regular check-in meetings to review and discuss current and
emerging trends and issues;
- a
monthly meeting to review the performance of each of the global
businesses in principal geographical areas and legal entities,
supported by the development and introduction of a new key
performance indicators architecture in 2023; and
- a
strategy- and governance-focused meeting, which is generally held
two weeks in advance of each Board meeting.
Separate committees have been
established to provide specialist oversight for matters delegated
to the Group Chief Executive and senior management. For further
details of these committees, see page 252.
To further support our senior
management, we have dedicated corporate governance officers who
support and advise legal entities, global businesses and global
functions on our corporate governance practices. These corporate
governance officers serve to strengthen the consistency and
effectiveness of our end-to-end governance arrangements, and
support connectivity and information sharing.
Subsidiary governance
We are committed to maintaining high
standards of corporate governance throughout the Group. All
subsidiary boards and their respective businesses are required to
have in place effective governance arrangements with regard to the
businesses' nature, size, location and the sectors in which they
operate.
The subsidiary accountability
framework
The subsidiary accountability
framework aims to balance appropriate governance oversight by the
Group with each subsidiary's local legal and regulatory duties. The
framework supports the Group in promoting effective governance
arrangements across its subsidiaries by:
- setting out high level principles to enhance communications
and connectivity; and
- ensuring a shared and consistent understanding of the Group's
strategic objectives, culture and values.
The subsidiary accountability
framework also focuses on ensuring that each subsidiary is led by
an effective board with an appropriate balance of skills,
diversity, experience and knowledge, having regard to the nature of
the subsidiary's business and local legal and regulatory
requirements. Board composition of the Group's subsidiaries is kept
under review as part of succession planning.
The framework is subject to periodic
review by the Board and/or the Nomination & Corporate
Governance Committee and updated as required to ensure it is
aligned to best practice.
The role of principal
subsidiaries
Certain subsidiaries are designated
formally by the Board as principal subsidiaries. In addition to
their obligations under their respective local laws and
regulations, principal subsidiaries, supported by regional company
secretaries, perform a critical role in ensuring effective and high
standards of governance across the Group and in overseeing the
implementation of the subsidiary accountability framework in the
regions for which they are responsible.
Representatives from principal
subsidiaries attend the Board and its committee meetings for
relevant topics, including when the Board holds meetings outside of
the UK. Chairs of the principal subsidiary risk and audit
committees also regularly attend respective Group Risk Committee
and Group Audit Committee meetings. Attendance and participation at
these committees enhance the subsidiary directors' understanding of
the challenges facing the Group and help to identify common
challenges and share lessons learned. Such committee participation
supplements the regular reports, certifications and escalations
from principal subsidiaries' boards and their committees to the
Board and relevant committee(s) of the Board.
The Group Chairman also interacts
regularly with the chairs of the principal subsidiaries, including
through the Chairman's Forum. The Chairman's Forum comprises the
chairs of the principal subsidiaries and the chairs of the Group's
audit, risk and remuneration committees, and where relevant, the
Group Chief Executive, other non-executive Directors and relevant
executive management, advisers and/or external experts. In 2023,
the Chairman's Forum covered topics such as strategic business
considerations, geopolitical issues, resolvability assessment
requirements and separability, shareholder engagements, Group-wide
connectivity of non-executive Directors, key regulatory themes, ESG
insights, employee engagement and financial performance.
The Group Remuneration Committee
Chair also hosted dedicated forums with chairs of principal
subsidiaries to share key priorities for 2023 and the future. These
sessions also provide an opportunity for review and input on
proposed pay outcomes and allocation, before approval by the Group
Remuneration Committee.
The principal subsidiaries
are:
|
|
The Hongkong and Shanghai Banking
Corporation Limited
|
Asia-Pacific
|
HSBC Bank plc
|
Europe,
Bermuda (excluding Switzerland and UK ring-fenced
activities)
|
HSBC UK Bank plc
|
UK
ring-fenced bank and its subsidiaries
|
HSBC Middle East Holdings
BV
|
Middle
East, North Africa and Türkiye
|
HSBC North America Holdings
Inc.
|
US
|
HSBC Latin America Holdings (UK)
Limited
|
Mexico and
Latin America
|
HSBC Bank
Canada1
|
Canada
|
1 On 29 November 2022, HSBC announced the sale of
HSBC Bank Canada to Royal Bank of Canada, subject to regulatory and
governmental approvals. On 21 December 2023, the Canadian Federal
Government's Minister of Finance approved the sale, and the
transaction is expected to close in the first quarter of
2024.
Subsidiary director
development
The Group is dedicated to supporting
the continuing professional development of its subsidiary
directors. In May 2023, a two-day non-executive director summit was
held in Hong Kong, which brought together over 100 non-executive
directors from across the Group. Connectivity was a key theme
and attendees were reminded of the importance of the subsidiary
accountability framework in driving consistent governance standards
and ensuring connectivity and engagement across our non-executive
director community. The agenda included sessions on strategy and
financial performance; Asia-Pacific; subsidiary governance; the
macroeconomic environment; diversity and inclusion; sustainability;
technology; finance; and risk.
The Bank Director Programme, launched
in 2022, continues to support subsidiaries with succession planning
by developing and equipping internal talent to undertake internal
non-executive director roles on subsidiary boards.
Following the success of the Bank
Director Programme, a Bank Chair Programme is being developed to
ensure existing and prospective chairs of subsidiary boards and
board committees have the requisite knowledge, skills and
behaviours to be effective chairs.
Board and Group Executive committees
and working groups
The Board delegates oversight of
certain audit, risk, remuneration, nomination and governance
matters to its committees. Each standing Board committee is chaired
by a non-executive Director and has a remit to cover specific
topics in accordance with their respective terms of reference. Only
the Group Chairman and the independent non-executive Directors are
members of Board committees. Details of the work carried out by
each of the Board committees can be found in the respective
committee reports from page 262.
The Chairman's Committee provides the
Board with the opportunity to consider ad hoc and routine matters
between scheduled Board meetings. All Board members are invited to
attend Chairman's Committee meetings.
As part of its ongoing review of the
effectiveness of the Group's governance arrangements, and in
response to the findings from the Board evaluation in 2023, the
Board has decided to establish a new Group Technology Committee to
oversee the Group's technology strategy and alignment with the
overall Group strategy. The committee, which will be in place from
1 March 2024, will have responsibility for areas where technology
is fundamental to strategic delivery, including innovation, data
and cyber risk frameworks. As a result, the Technology Governance
Working Group, which was established to support oversight of
technology strategy, governance and emerging risks, will be demised
from the same date. The terms of reference and membership of the
Board committees are available at
www.hsbc.com/who-we-are/leadership-and-governance/board-committees.
The GEC has established a number of
committees to support the Group Chief Executive and senior
management in their running of the business, and provide specialist
oversight for matters delegated to them, including capital and
liquidity, risk management, disclosure and financial reporting,
restructuring and investment considerations, transformation
oversight, ESG matters and talent and development. These committees
also help fulfil their responsibilities under the Senior Managers
and Certification Regime.
During 2023, new committees were
established including the Sustainability Execution Committee to
provide greater oversight of ESG matters. In addition, the
Transformation Oversight Executive Committee was demised and in its
place the Change Prioritisation Oversight Committee was formed. The
committee provides oversight of the Group's change portfolio,
focusing on investment oversight and prioritisation, as well as
delivery and execution of ongoing initiatives across the
Group.
Board Chair: Mark
Tucker
|
|
Chairman's
Committee
|
Nomination & Corporate
Governance Committee
|
Group Audit
Committee
|
Group Risk
Committee
|
Group Remuneration
Committee
|
Informal
governance
Board Oversight
Sub-Group
|
|
|
|
|
|
|
Chair:
Mark Tucker
|
Chair:
Mark Tucker
|
Chair:
David Nish1
|
Chair:
James Forese
|
Chair:
Dame Carolyn Fairbairn
|
Chair:
Mark Tucker
|
|
See page 262
|
See page 266
|
See page 274
|
See page 279
|
Technology Governance Working
Group2
|
1 Brendan Nelson will be appointed as chair from
21 February 2024.
2 The Technology Governance Working Group will be
demised on 1 March 2024. The Group Technology Committee will be
established on the same date.
|
Co-Chairs:
Eileen Murray and Steven Guggenheimer
|
Chairman's
Forum
|
Chair:
Mark Tucker
|
Group Executive Committee
Chair: Noel
Quinn
|
|
Acquisitions and Disposals
Committee
|
Group Disclosure and Controls
Committee
|
Group People
Committee
|
Group Risk Management
Meeting
|
Holdings Asset and
Liabilities Committee
|
Change Prioritisation and
Oversight Committee
|
Environmental, Social and
Governance Committee
|
|
|
|
|
|
|
|
Chair: Noel Quinn
|
Chair:
Georges Elhedery
|
Chair:
Elaine Arden
|
Chair:
Pam Kaur
|
Chair:
Georges Elhedery
|
Chair:
Georges Elhedery
|
Co-Chairs:
Celine
Herweijer and Georges Elhedery
|
|
|
|
|
|
|
Sustainability Execution
Committee
|
|
|
|
|
|
|
Co-Chairs:
Celine
Herweijer and Barry O'Byrne
|
Board induction and
training
The Group Company Secretary and Chief
Governance Officer works with the Group Chairman to ensure that all
Board members receive appropriate training, both individually and
collectively, throughout their time on the Board. On appointment,
new Directors are provided with tailored and comprehensive
induction programmes to fit with their individual experiences and
needs, including the process for managing
conflicts.
During 2023, Kalpana Morparia, Ann
Godbehere, Brendan Nelson and Swee Lian Teo were welcomed to the
Board as non-executive Directors. Biographies for each can be found
from page 239.
The Group Company Secretary and Chief
Governance Officer also helps to arrange and deliver the induction
programme through formal briefings and introductory sessions with
other Board members, senior management, legal counsel, auditors,
tax advisers and regulators, as appropriate. Topics covered in the
induction programme include, but are not limited to: purpose and
values; culture and leadership; governance and stakeholder
management; Directors' legal and regulatory duties; recovery and
resolution planning; anti-money laundering and anti-bribery;
technical and business briefings; and strategy.
The induction process is often
initiated before appointment to allow each new Board member to
contribute meaningfully from appointment, such as in February 2023
when Kalpana Morparia joined the Board meeting as an observer
before she was appointed to the Board the following month. The
structure of the induction supports good information flows within
the Board and its committees, as well as between senior management
and non-executive Directors, providing a clear understanding of our
culture and way of operating.
In January 2023, the Nomination &
Corporate Governance Committee agreed the proposed approach to
Board training for the year. It was
agreed that the training programme
would include key topics relevant to the Directors' respective
roles and recent developments, in areas such as corporate
governance, recovery and resolution, and technology. Where
appropriate, the training sessions were facilitated by external
presenters who were able to provide insights into geopolitical
matters, macroeconomic issues and investor sentiment. The training
sessions were held as part of scheduled Board meetings to allow for
in-person interactions as much as possible.
Directors were also issued routine
training modules that all colleagues must complete annually. During
2023, this training covered topics including risk management,
cybersecurity, sustainability, health, safety and well-being,
financial crime, and data.
Non-executive Directors also
discussed individual development areas with the Group Chairman as
part of their ongoing performance discussions with regard to their
contributions on the Board. The Group Company Secretary and Chief
Governance Officer makes appropriate arrangements for any
additional training needs identified using internal resources, or
otherwise, at HSBC's expense.
Members of Board committees receive
relevant training as appropriate. Further details on any specific
training commissioned by Board committees can be found in the
respective committee reports. Directors may take independent
professional advice at HSBC's expense.
Board Directors who serve on
principal subsidiary boards receive training that is pertinent to
circumstances and context relevant to those boards. Opportunities
exist for the principal subsidiary committee chairs to share their
understanding of specific areas with the Board Directors as part of
the Chairman's Forum. For further details, see 'The role of
principal subsidiaries' on page 250.
Directors' induction and ongoing
development in 2023
|
Director
|
Induction1
|
Strategy and business
briefings2
|
Risk and
control3
|
Corporate governance, ESG and
other reporting matters4
|
Board global mandatory
training5
|
Geraldine Buckingham
|
ô
|
l
|
l
|
l
|
l
|
Rachel Duan
|
ô
|
l
|
l
|
l
|
l
|
Georges Elhedery
|
l
|
l
|
l
|
l
|
l
|
Dame Carolyn Fairbairn
|
ô
|
l
|
l
|
l
|
l
|
James Forese
|
ô
|
l
|
l
|
l
|
l
|
Ann Godbehere6
|
l
|
l
|
l
|
l
|
l
|
Steven Guggenheimer
|
ô
|
l
|
l
|
l
|
l
|
José Antonio Meade
Kuribreña
|
ô
|
l
|
l
|
l
|
l
|
Kalpana Morparia
|
l
|
l
|
l
|
l
|
l
|
Eileen Murray
|
ô
|
l
|
l
|
l
|
l
|
Brendan Nelson6
|
l
|
l
|
l
|
l
|
l
|
David Nish
|
ô
|
l
|
l
|
l
|
l
|
Swee Lian Teo6
|
l
|
l
|
l
|
l
|
l
|
Noel Quinn
|
ô
|
l
|
l
|
l
|
l
|
Mark Tucker
|
ô
|
l
|
l
|
l
|
l
|
l
|
Matter considered
|
ô
|
Matter not considered
|
1 The induction programme was
delivered through formal briefings and introductory sessions
including topic-specific deep dives, with Board members, senior
management, legal counsel, auditors, tax advisers and regulators,
as appropriate. Topics covered included, but were not limited to:
purpose and values; culture and leadership; governance and
stakeholder management; Directors' legal and regulatory duties;
recovery and resolution planning; anti-money laundering and
anti-bribery; technical and business briefings; and
strategy.
2 Directors participated in business
strategy, market development and business briefings, which are
global, regional and/or market-specific. Examples of specific
sessions held in 2023 included: 'Technology and the future of
artificial intelligence', 'WPB customer-centricity improvement
plan', and 'Investor sentiments'.
3 Directors received risk and control
training and briefings. Examples of specific sessions held in 2023
included: 'Recovery and resolution' and 'Capital
management'.
4 Directors received training in Board
meetings on: 'Board stakeholder engagement and management' and
various ESG development updates. Directors received additional
training through their attendance at forums such as the Chairman's
Forum, Remuneration Committee Chairs' Forum and the Non-Executive
Director Summit.
5 Global mandatory training, issued to
all Directors, mirrored training undertaken by all employees,
including senior management. This included: management of risk
under the risk management framework; cybersecurity risk; health,
safety and well-being; sustainability; financial crime, including
understanding money laundering, terrorist financing, tax
transparency, sanctions, fraud and bribery and corruption risks;
our values, including workplace harassment; and data privacy and
data literacy.
6 Ann Godbehere and Brendan Nelson,
who joined the Board effective 1 September 2023, and Swee Lian Teo,
who joined the Board effective 1 October 2023, only
participated in training modules that were available to them since
their respective joining dates.
Board matters considered and
shareholder engagement
|
During 2023, the Board remained
focused on HSBC's strategic direction, overseeing performance, and
risk. It considered performance against financial and other
strategic objectives, key business challenges, emerging risks,
business development, investor relations and the Group's
relationships with its stakeholders. The end-to-end governance
framework facilitated discussion on strategy and performance by
each of the global businesses and across the principal geographical
areas, which enabled the Board to support executive management with
its delivery of the Group's strategy.
Key areas of focus
The Board's key areas of focus in
2023 are set out by theme below.
Strategy and business
performance
The Group remains focused on building
a sustainable platform for growth by increasing returns for
investors, enhancing customer service, and creating capacity for
future investment. The Board reviewed progress within the Group's
global businesses and regions against its four strategic pillars:
Focus, Digitise, Energise and Transition. At each Board meeting in
2023, the Board discussed the Group's strategic performance and
opportunities to track strategic execution and delivery.
Environmental, social and
governance
In 2020, the Group announced a
climate ambition to align its financed emissions to net zero by
2050, and to become net zero in its own operations and supply chain
by 2030. The Group aims to achieve this by supporting clients'
transition to a net zero carbon economy and focusing on sustainable
finance opportunities, as well as by reducing the carbon emissions
in its own operations.
The Board takes overall
responsibility for ESG strategy, overseeing executive management in
developing the approach, execution and associated reporting. The
Board considered whether to establish a Board committee dedicated
to ESG issues, but instead decided that the best way to support the
oversight and delivery of the Group's climate ambition and ESG
strategy was to retain governance at Board level. The GEC further
enhanced its governance model of ESG matters with the introduction
of a new Sustainability Execution Committee and supporting forums.
These support senior management in the operationalisation of the
Group's sustainability strategy, through the oversight of the
sustainability execution programme. For further details of the
Sustainability Execution Committee and the sustainability execution
programme, see page 88.
In 2023, the Board oversaw the
implementation of ESG strategy through regular dashboard reports
and detailed updates including: review and approval of the net zero
transition plan, deep dives on the sustainability execution
programme, reviews of net zero-aligned policies and climate-aligned
financing initiatives.
Financial decisions
The Board and its dedicated
committees approved key financial decisions throughout the year,
including the Annual Report and
Accounts 2022, the Interim
Report 2023 and the first quarter and the third quarter
Earnings
Releases.
At the end of 2022, the Board
approved the 2023 financial resource plan. The Board monitored the
Group's performance against the approved plan, as well as the plans
of each of the global businesses. The Board also approved the
renewal of the various debt issuance programmes. In January 2024,
the Board approved the financial resource plan for 2024.
The Board adopted a dividend policy
designed to provide sustainable cash dividends, while retaining the
flexibility to invest and grow the business in the future,
supplemented by additional shareholder distributions, if
appropriate. For the financial year 2023, the Group
reverted to paying quarterly
dividends, and achieved a dividend payout ratio of 50% of reported
earnings per ordinary share ('EPS'), in line with our
published target for 2023 and 2024. EPS for this purpose excludes
material notable items and related impacts, including the sale of
our retail banking operations in France, the planned sale of the
banking business in Canada and the acquisition of SVB UK. In
addition to dividend payments, HSBC announced share buy-backs of up
to $2bn each on 2 May 2023 and 1 August 2023, and a further
share buy-back of up to $3bn on 30 October 2023, bringing the
total announced for 2023 to $7bn.
On 21 February 2023, an interim
dividend of $0.23 per share for the 2022 full-year was announced,
followed by interim dividends of $0.10 each on 2 May 2023, 1 August
2023 and 30 October 2023. For further details of dividend payments,
see page 435.
Risk, regulatory and legal
considerations
The Board, advised by the Group Risk
Committee, promotes a strong risk governance culture that shapes
the Group's risk appetite and supports the maintenance of a strong
risk management framework, giving consideration to the measurement,
evaluation, acceptance and management of risks, including emerging
risks.
The Board considered the Group's
approach to risk including its regulatory obligations. A number of
key frameworks, control documents, core processes and legal
responsibilities were also reviewed and approved as required by the
Board and/or its relevant committees. These included:
- the
Group's risk appetite framework and risk appetite
statement;
- the
individual liquidity adequacy assessment process;
- the
individual capital adequacy assessment process;
- the
Group's obligations under the Modern Slavery Act and approval of
the Modern Slavery and Human Trafficking Statement;
- review and approval of the self-assessment to address the
BoE's Resolvability Assessment Framework;
- review and approval of the Group's risk data aggregation and
risk reporting framework aligned to the Basel Committee on Banking
Supervision 239 Principles;
- review of the latest PRA Operational
Resilience self-assessment regulatory submission;
- annual review and approval of the internal controls framework;
and
- the
revised terms of reference for the Board and Board
committees.
The Board also reviewed and monitored
the implications of geopolitical and macroeconomic developments
during the year, both directly and by way of updates from the Group
Risk Committee, and received regular updates on the Group's risk
profile, including in relation to financial crime risk.
Technology
Throughout the year, the Board
received detailed updates on technology and innovation from the
Group Chief Operating Officer, including on the implementation of
the technology strategy and key strategic business
initiatives.
Following a detailed update at the
Board meeting in May 2023, at the Board's request, management
engaged a third party professional services firm to review the
technology strategy and provide industry and peer insights. The
Board received a number of updates on the review during the second
half of 2023, and recommendations were presented at the December
2023 Board meeting.
Members of the Board were also
closely involved in the hiring process for the new Group Chief
Information Officer, who will join the Group at the end of February
2024.
In addition, the Technology
Governance Working Group continued to oversee the Group's
governance of technology, and supported connectivity with the
principal subsidiaries on key technology initiatives. From 1 March
2024, the Technology Governance Working Group will be demised and
the Group Technology Committee will be established on the same
date.
People and culture
The Board continued to dedicate time
in its meetings to discuss people-related and culture-related
issues, with these topics remaining an important part of its focus.
Each scheduled Board meeting begins with a 'culture moment', which
helps to ensure that the right cultural tone is set from the top,
and sets the right cultural tone for Board discussion. To help
raise its awareness of employee and other stakeholder perspectives,
Board meetings and dedicated reports feature insights into
behaviours within the Group, which demonstrate alignment to its
purpose and values. Board papers highlight relevant stakeholder
considerations, including in connection with employees. The Board
also gains valuable cultural insights through its many personal
interactions with the workforce and other stakeholders. For further
details see 'Board decision making and engagement with
stakeholders' on page 20.
The Board also learns of people and
culture matters by way of presentations at the Chairman's Forum.
The principal subsidiary chairs report on their respective
approaches to workforce engagement as well as what they have
learned from such engagements and other cultural insights. The
Board also receives cultural insights from the all-employee
Snapshot survey and broader reporting, which provide key data
indicators, including on people's behaviours, sentiment and
business outcomes. Through the work of the committees, the Board is
also able to monitor how the Group's culture is working in practice
by receiving people-related reports covering whistleblowing,
conduct and investigations.
Board engagement with management and
the wider workforce continued to remain a strong area of attention,
particularly with the ongoing activities carried out by the
dedicated workforce engagement non-executive Director. For further
details of the work carried out by the workforce engagement
non-executive Director, see page 257.
Governance
The Board continued to oversee the
governance, smooth operation and oversight of the Group and its
principal and material subsidiaries, including monitoring
compliance with the UK Corporate Governance Code, the Hong Kong
Corporate Governance Code and the Companies Act 2006. Governance
featured prominently in the Board agendas for the year and helped
to shape strategic direction and decision taking on key issues. To
see how the Board considered principal decisions in relation to our
strategy, see 'Principal strategic decisions' on pages 22 and 23.
The Board and senior management
continued to support further improvements to various governance
initiatives to encourage simplification and promote effective
decision making in the business. Guidance and training for Board
and committee paper templates took place across global businesses
and functions throughout the course of the year to ensure a
consistent approach for writing papers. In addition, to drive our
simplification agenda, the Group-wide delegations of authority
framework was reviewed and standardised, allowing for more
efficient signing and execution of contracts and other
documentation by directors and senior management across all
entities.
In 2023, Jackson Tai retired as an
independent non-executive Director. On 1 January 2023, Georges
Elhedery joined the Board as Group Chief Financial Officer, and the
following were appointed as independent non-executive Directors:
Kalpana Morparia on 1 March 2023; Ann Godbehere and Brendan Nelson
on 1 September 2023; and Swee Lian Teo on 1 October 2023. The
Board, supported by the Nomination & Corporate Governance
Committee, reviews the skills and experience of the Board on an
ongoing basis. This ensures that the Board and its committees
comprise the necessary skills, diversity, experience and
competencies to discharge their responsibilities effectively. For
further details of the review and changes to the Board, see the
Nomination & Corporate Governance report on page 262. For further details of diversity of the Board, see
page 247.
Board engagements with
shareholders
In 2023, the Group Chairman and Group
Chief Executive held a Q&A session with retail shareholders as
part of the Informal Shareholders' Meeting in Hong Kong, and the
Board held a Q&A session with shareholders as part of the 2023
AGM in the UK. Board members remained responsive to shareholder
requests, and were particularly active following the 2023 AGM poll
vote result. They continued to engage in constructive dialogue with
top investors, including Ping An Asset Management Co. Ltd. The
Group Chairman and the Senior Independent Director, often with the
Group Company Secretary and Chief Governance Officer, engaged with
a number of our large institutional investors in 16 meetings,
including a large group gathering held with the members of The
Investor Forum. The Group Chief Executive and the Group Chief
Financial Officer, together and separately, attended over 100
meetings with investors. Key topics included our financial
performance, updates on strategy and market presence, geopolitical
risks and the macroeconomic outlook in key geographies.
For further details of the Group
Remuneration Committee Chair's engagements with key investors and
proxy advisory firms, and how they were taken into account by the
Group Remuneration Committee in its decision making, see the
Directors' remuneration report on page 279.
For further details of how the Board
engaged with shareholders during 2023, see 'Board decision making
and engagement with stakeholders' on page 20.
Board matters considered in
2023
|
Main topic
|
Sub-topic
|
Meetings
at which topics were discussed1
|
|
|
Jan
|
Feb
|
Mar
|
May
|
Jun
|
Jul
|
Sep
|
Nov
|
Dec
|
Strategy
|
Group strategy
|
ô
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
Regional strategy/global business
strategy
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
Environmental, social,
governance
|
ô
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
Business and financial performance
|
Region/global business
|
l
|
l
|
ô
|
l
|
l
|
l
|
l
|
l
|
l
|
Financial performance
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
ô
|
l
|
Financial
|
Results and accounts
|
l
|
l
|
ô
|
ô
|
ô
|
l
|
ô
|
ô
|
ô
|
Dividends
|
l
|
l
|
ô
|
ô
|
ô
|
l
|
ô
|
ô
|
ô
|
Group financial resource
planning
|
ô
|
ô
|
ô
|
ô
|
l
|
ô
|
l
|
ô
|
ô
|
Risk
|
Risk function
|
l
|
l
|
ô
|
l
|
l
|
l
|
l
|
ô
|
l
|
Risk appetite
|
l
|
ô
|
ô
|
ô
|
ô
|
l
|
ô
|
ô
|
ô
|
Capital and liquidity
adequacy
|
ô
|
ô
|
l
|
l
|
l
|
ô
|
ô
|
ô
|
ô
|
Regulatory
|
Regulatory and legal
matters2
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
ô
|
l
|
Regulatory matters with regulators in
attendance3
|
ô
|
ô
|
ô
|
ô
|
l
|
ô
|
l
|
ô
|
ô
|
External
|
External insights
|
ô
|
ô
|
ô
|
ô
|
l
|
ô
|
l
|
ô
|
ô
|
Technology
|
Strategic and operational
|
l
|
ô
|
ô
|
l
|
ô
|
ô
|
l
|
l
|
l
|
People and culture
|
Purpose, values and
engagement
|
l
|
l
|
ô
|
l
|
l
|
l
|
l
|
ô
|
l
|
Governance
|
Policies and terms of
reference
|
ô
|
ô
|
ô
|
ô
|
ô
|
l
|
ô
|
ô
|
ô
|
Board/committee
effectiveness
|
l
|
ô
|
ô
|
ô
|
ô
|
l
|
ô
|
ô
|
l
|
Appointment and succession
|
ô
|
l
|
l
|
ô
|
ô
|
l
|
l
|
ô
|
l
|
|
Conflicts of interest
|
ô
|
l
|
ô
|
l
|
ô
|
l
|
l
|
ô
|
l
|
|
Stakeholder/workforce
engagement
|
ô
|
l
|
ô
|
l
|
l
|
l
|
l
|
ô
|
l
|
|
Delegation of authority
|
l
|
l
|
ô
|
ô
|
ô
|
ô
|
l
|
ô
|
ô
|
|
AGM and resolutions
|
l
|
l
|
l
|
l
|
ô
|
ô
|
l
|
ô
|
ô
|
l
|
Matter considered
|
ô
|
Matter not considered
|
1 No Board meetings were held during
April, August and October 2023.
2 Includes recovery and resolution
planning, modern slavery and human trafficking, UK regulatory
activities, and listing authority renewals.
3 Meetings attended by members of the
Prudential Regulation Authority and the Financial Conduct
Authority.
Board stakeholder and workforce
engagement
The Board is committed to engaging
with colleagues, which takes place in a two-way dialogue in a
variety of forums. This helps build the Board's understanding of
key themes and topics that are important to the
workforce.
Since his appointment as dedicated
workforce engagement non-executive Director in 2022, and in line
with the Board's expectation of the role, José Meade has helped
deliver a progressive programme of engagements throughout 2023.
Outcomes from these engagements have helped inform discussions and
decision making in the Boardroom, by taking into account the
employee voice on related key themes and topics.
His dedicated role does not preclude
other Board members from engaging with the workforce. It remains
the responsibility of all Directors to consider diverse stakeholder
views, including employees, across the Group.
For more examples of how the Board
has engaged with the workforce and other stakeholders, see 'Board
decision making and engagement with stakeholders' on page
20.
Workforce engagement
programme
A structured workforce engagement
programme has been in place throughout 2023 with a focus on topics
aligned to the Group's four strategic pillars. The programme was
structured around the Board's priorities and agenda in 2023. These
included in-person engagements when the Board travelled to
different regions for Board meetings, which were highly valued by
colleagues and Board members alike.
The engagements formed the bases of
José Meade's reports to the Directors, aligned to key Board agenda
items including those in the geographies in which the Board met.
Further engagement events, town halls and meetings with the
workforce were scheduled with Board members based on their locality
or coincidental travel throughout the year.
The engagement events were held both
at scale and through more targeted dialogue in smaller groups, to
accommodate the breadth of experience, geographical spread and
range of seniority of our colleagues. These engagements were
designed to promote open dialogue and two-way discussions between
the Board and employees, allowing the Board to gain valuable
insight on employee perspectives, and in turn inform its
deliberations in decision making.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
living crisis support
|
|
International Women's Day
|
|
Pay,
reward and performance
|
|
Strategy
and performance
|
|
Branch
visit
|
|
HSBC
graduate insights
|
|
Mexico
town hall
|
|
Hyderabad
office event
|
|
|
↓
|
|
↓
|
|
↓
|
|
↓
|
|
↓
|
|
↓
|
|
↓
|
|
↓
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audience
|
London-based colleagues
|
|
Group-wide colleagues
|
|
Group-wide colleagues
|
|
Managing
Directors
|
|
Local
branch colleagues
|
|
US-based
graduates
|
|
Mexico
and Latin America-based colleagues
|
|
Hyderabad
and India-based colleagues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location
|
London,
UK
|
|
Various
global and local events
|
|
Birmingham, UK, videoconference
|
|
Videoconference
|
|
Hong
Kong
|
|
New York,
US, and videoconference
|
|
Mexico
City, Mexico, and videoconference
|
|
In person
visit to Hyderabad, India office and videoconference
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
José Meade's connectivity with the
employee resource groups formed part of the workforce engagement
programme. He took part in the annual employee resource group
summit in September to discuss his observations since taking on the
workforce engagement role, and to hear feedback on how the Board
could enhance support for employee resource groups. José also
participated in meetings with the employee resource group to which
he is aligned, UK Nurture. This helped him better understand their
successes, the value of the network and agree how often and through
which means he would connect with his employee resource group in
2024.
During the year, the Board
acknowledged that relevant aspects of Board discussions on
workforce engagement activities and matters, informed by the
employee voice, needed to make their way back to management. In
this way, relevant views could be taken into consideration when
progressing workforce-related matters at the executive level. To
facilitate this, José Meade committed to attending
the GEC and the Chairman's Forum to
discuss the key themes and outcomes from the 2023 workforce
engagements. Feedback gained from the GEC session attended in
November 2023 re-emphasised the value colleagues put on the two-way
dialogue with Board members. This feedback helped shape the 2024
workforce engagement programme.
The Board also regularly considers
other forms of employee engagement to help be informed of
initiatives and sentiment, and to plan for future engagement
activities. The Chairman's Forum, held in December 2023, also
discussed employee feedback gained through the Group's principal
subsidiaries. José Meade presented to the Chairman's Forum an
overview of workforce engagement over the course of 2023 and key
themes arising. He will continue to discuss workforce engagement
with the GEC and the Chairman's Forum during 2024.
Workforce engagement non-executive
Director
|
|
"The value of Board-employee engagement is rooted in the
Board's openness to challenge and ability to adopt new approaches
in response."
Q&A with José Meade
Workforce engagement non-executive
Director
|
|
|
Q: Since being appointed as the
workforce engagement non-executive Director in 2022, what insights
have you gained?
|
A: When I reflect on the Board's
engagement with the workforce over the year, I am proud of the
evolution of our approach since I took on the role. Having a
dedicated programme aligned to Board priorities over the course of
the year has enabled me to report to the Board on the most
pertinent matters depending on our location and agenda. The year
2023 was a very productive year with respect to engaging with our
workforce. I met with a large number of our colleagues on a regular
basis during the year, and each event has provided me with
different and equally valuable insights. I have learnt the value
colleagues place on having two-way dialogue with the Board. Linked
to this is our non-executive Director engagement with our employee
resource groups. Each non-executive Director is aligned to one of
our employee resource groups, and we listened to feedback that a
more structured approach to non-executive Director engagement would
be valuable during 2024. As a result, we held dedicated meetings
for non-executive Directors to meet with their employee resource
groups to agree the cadence for engagement and priorities in
2024.
|
|
Q: What are your reflections on the
value of Board-employee engagement at HSBC?
|
A: Firstly, at every employee
engagement event I attended during the year, I was able to hear
directly from our colleagues - that is an irreplaceable and
extremely valuable insight to gain as a non-executive Director.
Having the employee voice in the Boardroom is crucial in equipping
Directors with important context to better understand successes and
challenges felt throughout the Group. It then helps empower the
Board to make better recommendations and feedback to executive
management with employee sentiment front-of-mind. At one of our
branch visits, I was able to experience first-hand the level of
care put into every single one of our clients, which was
extraordinary. Following the visit, we got great feedback from the
branch team that they were grateful for our time in recognising how
our colleagues put customers at the centre of their work, and they
said that our front-line staff were highly motivated by our kind
words and encouragement.
|
The value of Board-employee
engagement is rooted in the Board's openness to challenge and
ability to adopt new approaches in response. The key outcomes we
get from all our engagement events are discussed not only in the
Boardroom, but with executive management and between our principal
subsidiaries as well. It is this circular communication that is so
important to make sure not only is the employee voice heard, but it
forms a backdrop for Board and executive discussions and decisions.
For instance, it was interesting to hear from graduates the
importance of our hybrid working strategy to them, which was seen
as a differentiator compared with competitors. Our Chairman's Forum
discussed each of our regions' respective workforce engagement
programmes in December, which was an invaluable session to
understand regional differences in sentiment and where subsidiary
Directors were focusing their time for 2024 activities.
|
|
Q: Where do you see opportunities for
2024?
|
A: We plan to build on the successes
of 2023 and engage with more colleagues over the course of 2024.
Our workforce engagement plan will continue to be guided by our
Board priorities for the year and tightly aligned to our four
strategic pillars. The plan incorporates, where possible,
participation at colleague events already scheduled, which we will
supplement with targeted engagement events. We also plan to enhance
the visibility of management colleagues in critical roles or on
executive committee succession plans to boards across the Group.
Lastly, we will align Board member scheduled travel plans to
workforce engagement activities in various regions, as well as work
to identify how to engage with the workforce in geographies where
Board travel is not envisaged.
|
Mexico Town Hall, Mexico City, November 2023
"The insight and reflections provided by the speakers was
extremely useful as we had a mixture of local and global level
input."
Workforce engagement non-executive
Director activities during 2023
In 2023, José Meade undertook a
variety of engagements in his role including:
Mexico
|
- Attended the annual Leones event in Quintana Roo,
Mexico.
- Approximately 400 employees participated across businesses and
functions.
- This
event recognised our top performers in HSBC Mexico.
|
|
Hong Kong
|
- Visited employees at the HSBC Hong Kong flagship branch and
the K11 Atelier Wealth Centre (which opened in October 2021 to
provide high net worth wealth management services) to understand
their perspective on working life.
|
|
UK
|
- Participated in an in-person meeting with a small group of
local managers in London to discuss the cost of living crisis in
the UK.
- The
group discussed the support that HSBC had provided to its employees
in response, and considered ideas for further support.
|
|
US
|
- Met
with US-based graduates both in-person and virtually to hear the
perceptions of the next generation of talent at HSBC.
- Views
were sought on topics such as expectation versus the reality of
what it is like to work at HSBC, personal development opportunities
and hybrid working successes and challenges.
|
|
Türkiye
|
- Participated in an in-person meeting with a diverse group of
colleagues to share experiences and views on socio-economic
challenges, career development, and pay and performance.
|
|
Global employee resource group
summit
|
- Attended the virtual annual employee resource group summit and
heard about the groups' leaders' successes, challenges and their
respective look ahead for 2024.
- Connected with employee resource group representatives across
multiple regions in the Group.
|
|
India
|
- Spent
a day at our Hyderabad office learning about the history of our
presence in India and the impact of our global service centres, as
well as discussing the future of the workforce and how to create a
supportive environment for professional growth.
- Also
participated alongside nearly 5,000 colleagues in a 'Digitise' town
hall, which discussed HSBC's digital strategy and the role played
by colleagues in India.
|
Engagement highlights
Global Service Centre office visit, Hyderabad, December
2023
68
|
|
9,571
|
Virtual/physical sessions attended by
non-executive Directors
|
|
Number of employees engaged
virtually/physically
|
|
|
|
41
|
|
8,282
|
Virtual/physical sessions attended by
workforce engagement non-executive Director
|
|
Number of employees engaged
virtually/physically by workforce engagement non-executive
Director
|
|
|
|
8
|
|
69%
|
Countries of engagement
|
|
Highest employee engagement survey
response
|
|
|
|
Board and committee effectiveness,
performance and accountability
|
The Board and its committees are
committed to regular, independent evaluation of their
effectiveness. In 2023, the Board performance review comprised an
externally facilitated evaluation in accordance with the UK
Corporate Governance Code.
During 2023, the Nomination &
Corporate Governance Committee oversaw the process to appoint an
independent service provider to evaluate the Board and its
committees' effectiveness and performance. The Group Chairman led a
formal tender process, with the support of the Group Company
Secretary and Chief Governance Officer, which included a desktop
review of proposals and a panel interview with prospective firms to
discuss their approach to the evaluation. The panel interviews
included the Group Chairman, three non-executive Directors, and the
Group Company Secretary and Chief Governance Officer.
Following this process, and based on
the recommendation of the panel, the Nomination & Corporate
Governance Committee appointed Independent Board Evaluation ('IBE')
to conduct the Board review in 2023. IBE is an independent external
service provider with no other connection with the Group or any
individual Directors.
Board effectiveness review
format
A comprehensive brief was provided to
IBE by the Group Chairman and Company Secretary and Chief
Governance Officer. The review took the form of detailed interviews
with every Board member, regular attendees of the relevant meetings
and key advisers. IBE also observed the Board and its committees at
the September 2023 meetings and reviewed the meeting
materials.
A report was compiled by IBE based on
the information and views supplied by those interviewed and IBE's
observations from the September 2023 Board and committee
meetings.
Board and committee evaluation
process
The Board made good progress against
all of the action points identified during the 2022 evaluation. In
particular:
- Management developed a new key performance indicator
architecture relating to performance, execution and risk management
as well as other key value drivers.
- The
Sustainability Execution Committee, a management forum, was
established to provide greater focus and accountability for
progress against the Group's ESG deliverables and
milestones.
- An
independent review of the Group's technology strategy was performed
by a third party, with the outcomes, including lessons learned, and
next steps discussed and agreed by the Board.
- The
Board held focused sessions on prioritisation and
simplification.
-
Stakeholder engagement plans were
structured around the Board's visits to Paris, Hong Kong, New York
and India during the year, and broader non-executive Director
travel. These plans provided the Board with the opportunity to
engage with the full spectrum of stakeholder groups, including
employees. Further details of the Board's engagement activities are
detailed on page 21.
- Continued training and guidance was provided to key paper
authors and contributors to reinforce the importance of timely,
balanced and accurate reporting to the Board.
-
Findings and
recommendations
Overall, the review concluded that
the Board was performing well as an engaged, global governance
body. The Group Chairman is regarded as an excellent leader of the
Board, fostering a culture of openness, with encouragement for
Board members to speak freely on any issue. In particular, the
effectiveness review highlighted that the Board performed well in
various areas including:
- Stakeholder accountability: The Board takes its
responsibilities towards stakeholders seriously, positively and
sincerely.
- Board
culture: The culture of the Board is regarded as a key strength.
Preserving and sustaining this has been a key factor in considering
candidates for appointment to the Board. Communication is open and
transparent.
- Relationship with senior management: Board members value the
openness between, and access to, the senior management
team.
- Committee chairs: Chairs of committees are well supported by
the respective functional teams, including Risk, Finance, HR and
Corporate Governance and Secretariat.
- Board
resources and support: The Board appreciates the strategic advice
and counsel it receives on governance issues from the Group Company
Secretary and Chief Governance Officer and her team.
IBE presented its report to the
December 2023 Board meeting, and was present for the Board's
discussion, led by the Group Chairman, on the findings identified
through IBE's review. Among other recommendations for consideration
that could strengthen the end-to-end governance of the Board and
its committees, the Board focused on the following three specific
themes:
- Effecting change: A need for greater focus was identified in
relation to the prioritisation of execution, with clearer and more
timely progress reporting to the Board, in particular around
challenges faced.
- Board
information: Reporting to the Board requires more succinct
narrative and relevant key performance indicators. It was
reiterated that the Board would continue to hold the Group Chief
Executive and members of the GEC accountable for the quality of
reporting to the Board.
- Technology governance: Strengthened governance mechanisms were
agreed to support the Board's review and challenge of
technology-related deliverables and monitoring of delivery against
the Group-wide technology strategy.
Further details of the findings and
agreed actions to be taken can be found in the table below.
Completion of these actions will be monitored by the Board
throughout 2024.
The additional areas of feedback
gathered from members of the Board and regular attendees will be
taken forward at the discretion of the Group Chairman based on his
determination of their impact on the overall effectiveness of the
Board and its committees.
Similar discussions were led by each
of the Board committee chairs in their respective January 2024
meetings. Progress against these actions will be included in the
Annual Report and Accounts
2024.
Summary of 2023 Board effectiveness
findings and recommendations for action:
|
|
Findings from the evaluation
|
Agreed actions
|
|
- Although the
Board is performing well, there are areas where, working with
management, enhancements could be made to drive even greater
value.
- This would
reinforce a clear understanding of priorities and enhanced clarity
of management reporting, particularly in relation to areas of
challenge in, or delay to, execution of those key
deliverables.
- Greater rigour
was required in relation to the communication of, accountability
for, and execution against the Board's feedback.
|
- Consideration
will be given to the frequency and format of strategic updates to
the Board.
- The Group Company
Secretary and Chief Governance Officer will support the Group
Chairman and committee chairs to ensure that there is enhanced
consolidation of related discussion and actions across Board and
the committees, including clearer articulation of expected
outcomes.
- The Group Chief
Executive will drive an increased focus in addressing the Board's
feedback within the wider management team.
|
|
|
|
|
- The volume of
information provided to the Board and to committee meetings during
the year was a common area of discussion during the review.
Enhanced, dynamic and well-timed reporting of information to the
Board is required.
- Although the
Board welcomed the thoroughness of management's review of key
performance indicators, these required to be refined for Board
purposes to ensure better alignment with paper narrative to ensure
a clear, consistent basis for Board reporting.
|
- The
Board has commissioned a training programme, to be developed and
delivered by the Group Company Secretary and Chief Governance
Officer, to further support senior leaders and other subject matter
experts on reporting to, and interactions with, the
Board.
- A condensed key
performance indicators framework was approved by the Board at its
meeting in January 2024 and will be cascaded throughout the Group
by the Group Chief Executive, the Group Chief Financial Officer and
the Group Company Secretary and Chief Governance
Officer.
|
|
|
|
|
- Although the
Board welcomed the important and valuable role of the Technology
Governance Working Group, there is still more to do to develop a
holistic oversight of technology at Board-level.
- It was agreed
that the future approach to oversight of technology-related matters
needed to complement the existing responsibilities of the Board,
Group Risk Committee, Group Audit Committee and subsidiary
boards.
|
- A formal
Board-level governance committee consisting of non-executive
Directors - the Group Technology Committee - will be established to
provide oversight of technology-related matters across the Group.
This will be chaired by Eileen Murray and take effect from 1 March
2024.
- The existing
Technology Governance Working Group will be demised at that
time.
|
|
|
|
Nomination & Corporate Governance
Committee
|
|
"I
am confident that the changes to the composition of the Board over
the past year have further strengthened the Board's collective
knowledge and experience required to oversee, challenge and support
management."
|
|
Mark
E Tucker
Chair
Nomination & Corporate Governance
Committee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Membership
|
|
Key responsibilities
|
|
|
Member
since
|
Meeting attendance in
2023
|
|
The Committee's key responsibilities
include:
- overseeing and monitoring the corporate governance framework
of the Group and ensuring that this is consistent with best
practice;
- overseeing succession planning and leading the process for
identifying and nominating candidates for appointment to the Board
and its committees; and
- overseeing succession planning and development for the Group
Executive Committee and other senior executives.
|
|
|
Mark Tucker (Chair)
|
Oct 2017
|
9/9
|
|
|
|
Geraldine Buckingham
|
May 2022
|
9/9
|
|
|
|
Rachel Duan
|
Sep 2021
|
9/9
|
|
|
|
Dame Carolyn
Fairbairn1
|
Sep 2021
|
8/9
|
|
|
|
James Forese
|
May 2020
|
9/9
|
|
|
|
Ann Godbehere2
|
Sep 2023
|
2/2
|
|
|
|
Steven Guggenheimer
|
May 2020
|
9/9
|
|
|
|
José Antonio Meade
Kuribreña
|
Apr 2019
|
9/9
|
|
|
|
Kalpana
Morparia3
|
Mar 2023
|
6/6
|
|
|
|
Eileen Murray4
|
Jul 2020
|
8/9
|
|
|
|
Brendan Nelson2
|
Sep 2023
|
2/2
|
|
|
|
David Nish
|
Apr 2018
|
9/9
|
|
|
|
Jackson Tai5
|
Apr 2018
|
5/5
|
|
|
|
Swee Lian Teo6
|
Oct 2023
|
1/1
|
|
|
|
|
|
|
|
|
|
1 Dame Carolyn Fairbairn was unable to attend the
January meeting due to a prior commitment.
2 Ann Godbehere and Brendan Nelson joined the
Committee on their appointments to the Board on 1 September
2023.
3 Kalpana Morparia joined the Committee on her
appointment to the Board on 31 March
2023.
4 Eileen Murray was unable to attend the September
meeting due to a prior commitment.
5 Jackson Tai retired from the Board on 5 May
2023.
6 Swee Lian Teo joined the Committee on her
appointment to the Board on 1 October 2023.
|
|
|
I am pleased to present the
Nomination & Corporate Governance Committee report, which
provides an overview of the Committee's activities during
2023.
I signalled in last year's report
that succession for key roles on the Board would be a priority for
the Committee through 2023, and we announced in early December the
successors for the roles of Senior Independent Director and Chair
of the Group Audit Committee. This represented the culmination of
considerable work by the Committee over a number of
months.
As announced in December, David Nish
confirmed his plans to retire from the Board at the conclusion of
our AGM in May 2024. Brendan Nelson will succeed David as Chair of
the Group Audit Committee with effect from 21 February 2024, and
Ann Godbehere will succeed him as Senior Independent Director with
effect from the conclusion of the 2024 AGM. On
behalf of the Board, I want to take this opportunity to thank David
for his significant commitment and contribution to HSBC,
particularly in his role as Chair of the Group Audit Committee, and
for the valuable counsel he has provided to the Board and to me
personally. You can read more on the Committee's work on these
appointments later in this report.
We also welcomed Kalpana Morparia and
Swee Lian Teo and, together with Ann and Brendan's appointments, I
am confident that the changes to the composition of the Board over
the past year have further strengthened its collective knowledge
and experience required to oversee, challenge and support
management.
As a result of the changes to the
Board during 2023, our year-end 2023 target of at least 40% female
representation was achieved. We are committed to maintaining this
at or above 40% going forward. More broadly, we remain committed to
ensuring the compositions of the Board and senior management
reflect the wider workforce and communities in which we operate,
and you can read more on our efforts this year on page
313.
The annual review of the performance
of the Board and its committees is a critical part of ensuring that
our governance practices are aligned with best practice and are
working effectively. Independent Board Evaluation conducted the
2023 review for the Board and its committees, and its findings and
agreed actions can be found on pages 260 to 261.
These actions included the decision
to establish the Group Technology Committee, which was discussed by
the Committee. Further information on this new Board-level
committee is set out on page 252. In addition, the Committee
reviewed the approach to the Group's governance of developing areas
such as ESG and AI, and will continue to focus on whether these
remain appropriate and forward-looking as external standards and
practices develop.
There have been numerous
consultations issued over 2023, aimed at improving the
effectiveness of the UK audit, governance and regulatory regimes.
Given their potential impact, the Committee received updates on
these and their potential implications on governance arrangements.
The Committee also reviewed and provided input to the Group's
responses to relevant consultations, including the Financial
Reporting Council's ('FRC') consultation on proposed revisions to
the UK Corporate Governance Code. The Committee continues to
monitor potential future developments in the UK, Hong Kong and
elsewhere to ensure that the impact of any proposed governance and
regulatory changes on HSBC and its international operations is
considered.
As we look ahead to the remainder of
2024, the Committee will look to oversee and enhance the succession
pipeline at Board and senior management level, as well as efforts
to deliver consistent standards of governance best practice across
the Group.
Mark
E Tucker
Group Chairman
Committee governance
The Group Chief Executive, the Group
Chief Human Resources Officer, and the Group Head of Talent
routinely and selectively attended Committee meetings. The Group
Company Secretary and Chief Governance Officer attends all
Committee meetings and supports the Group Chairman in ensuring that
the Committee fulfils its governance responsibilities.
Russell Reynolds Associates supported
the Committee and the management team in relation to Board
succession planning and appointments. It also provides support to
management in relation to senior management succession, development
and recruitment. It regularly and selectively attended meetings
during the year, and has no other connection with the Group or
members of the Board.
Appointment and re-election of
Directors
A rigorous selection process is
followed for the appointment of Directors. Appointments are made on
merit and candidates are considered against objective criteria, and
with regard to the benefits of a diverse Board. Appointments are
made in accordance with HSBC Holdings' Articles of
Association.
The Board may at any time appoint any
person as a Director or secretary, either to fill a vacancy or as
an additional officer. The Board may appoint any Director or
secretary to hold any employment or executive office and may revoke
or terminate any such appointment.
Non-executive Directors are appointed
for an initial three-year term and, subject to continued
satisfactory performance based upon an assessment by the Group
Chairman and the Committee, are proposed for re-election by
shareholders at each AGM. They typically serve two three-year
terms, with any individual's appointment beyond six years to be for
a rolling one-year term and subject to thorough review and
challenge with reference to the needs of the Board. Where
non-executive Directors are appointed beyond six years, an
explanation will be provided in the Annual Report and Accounts.
Shareholders vote at each AGM on
whether to elect and re-elect individual Directors. All Directors
that stood for election and re-election at the 2023 AGM were
elected and re-elected by shareholders.
Non-executive Director
commitments
The terms and conditions of the
appointments of non-executive Directors are set out in a letter of
appointment, which includes the expectations of them, and the
estimated time required to perform their role. Letters of
appointment of each non-executive Director are available for
inspection at the registered office of HSBC Holdings.
Non-executive Directors serving on
the Board and as a member of any committees are expected to serve
up to 75 days per annum. The Senior Independent Director is
expected to serve an additional 30 days per annum. Those Directors
who also chair a large committee are expected to commit up to 100
days per annum, with the Group Risk Committee Chair expected to
commit up to 150 days per annum. Any additional time commitment
required of non-executive Directors in connection with Board and
committee activities is confirmed to them separately.
Board approval is required for any
non-executive Director's external commitments, with consideration
given to their total time commitments, potential conflicts of
interest, and regulatory and investor expectations.
Board composition and
succession
During 2023, the compositions of the
Board and its committees were reviewed, with assessments focused on
the skills, knowledge and experience necessary to oversee,
challenge and support management in the achievement of the Group's
strategic and business objectives. The assessments were focused on
the Board, both collectively and as individual members. The
Committee discussed succession planning for key roles on the Board
and committees, including the roles of Senior Independent Director
and Chair of the Group Audit Committee. The recruitment process for
the new Directors provided an opportunity to add significant
executive experience in banking. It also provided an opportunity to
add deep business and cultural expertise across Asia that the Board
had previously identified as a priority, and to meet our target for
a woman to hold at least one of the senior Board positions by the
end of 2025. In line with these objectives, a list of potential
candidates was identified and considered by the Committee. Members
of the Board, including the Group Chief Executive and Group Chief
Financial Officer, met with potential candidates and their feedback
helped inform the Committee's discussions and recommendations to
the Board. The Board then approved the Committee's recommendations
to appoint Kalpana Morparia with effect from 1 March 2023, Ann
Godbehere and Brendan Nelson with effect from 1 September 2023, and
Swee Lian Teo with effect from 1 October 2023.
Kalpana Morparia and Swee Lian Teo
each bring significant banking, risk and regulatory experience in
Asia. Ann's deep financial acumen and extensive financial services
experience gained over a 30-year career, as well as her extensive
large, public-listed company board experience as a non-executive
director, makes her the right successor for the role of Senior
Independent Director. Brendan's UK and international financial
expertise and significant experience as statutory audit partner,
and as audit committee chair at UK-listed companies, as well as
previously being President of the Institute of Chartered
Accountants of Scotland, will be particularly valuable in the
leadership of the Group Audit Committee given the evolving audit,
regulatory and disclosure environment in which the Group operates.
Their biographies can be found on pages 239 to 243.
Following the annual review of the
Board skills matrix, the Committee remains focused on identifying
candidates for future appointments with deep business and cultural
expertise across Hong Kong and mainland China.
The Committee will continue to
monitor the market during 2024 for potential candidates for
appointment to the Board in both the short and medium term, to
ensure that the Board has a pipeline of credible
successors.
Neither Jackson Tai, who retired from
the Board during the year, nor David Nish, who is not offering
himself for re-election at the 2024 AGM, have raised concerns about
the operation of the Board or the management of the
company.
Committee composition
As part of the decision to establish
the Group Technology Committee, when reviewing the Committee
composition, it was agreed that Eileen Murray would be appointed as
Chair, and Steven Guggenheimer, Kalpana Morparia, Swee Lian Teo and
Brendan Nelson would be appointed as members of the Group
Technology Committee with effect from 1 March 2024.
The Committee also reviewed the
composition of the Board committees more broadly to ensure that
these remained appropriate and diverse, with consideration of the
Board diversity and inclusion policy while utilising the respective
skills and expertise of the Board members as set out in the Board
skills matrix on page 247. As a result, and in addition to the
appointments of members to the Group Technology Committee, it was
agreed that Ann Godbehere would be appointed to the Group Audit
Committee with effect from 21 February 2024.
Board diversity
The Board recognises the importance
of gender, social and ethnic diversity, and the benefits diversity
brings to Board effectiveness. Diversity is taken into account when
considering succession plans and appointments at both Board and
senior management level, as well as more broadly across the Group.
The Committee also considered the diversity and representation on
Board committees when reviewing their composition.
At the end of 2023, the Board had 47%
female representation, with seven female Board members out of 15,
ahead of the year-end 2025 target set by the FTSE Women Leaders
Review. Ann Godbehere's appointment as Senior Independent Director
will mean the Board achieves the FTSE Women Leaders Review target
that at least one of the senior Board positions of Chair, Chief
Executive Officer, Senior Independent Director or Chief Financial
Officer is held by a woman. In accordance with the UK Listing
Rules, the Board is on track to be compliant with these diversity
targets and will be fully compliant with effect from the conclusion
of the 2024 AGM. Beyond gender, the Board continues to exceed the
Parker Review target of having at least one Director of ethnic
heritage. However, given the international nature of our business,
including our heritage in Asia, the Board has set a target to
maintain or improve the current representation of Directors from a
diverse ethnic heritage.
The Board's diversity and inclusion
policy was updated in December 2023. The policy confirms our
commitment to, and also details the approach to achieving, our
diversity ambitions. Further details on activities to improve
diversity across senior management and the wider workforce,
together with representation statistics, can be found from page 76.
The Board's diversity and inclusion policy is available on
www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities
Independence
Independence is a critical component
of good corporate governance, and a principle that is applied
consistently at both HSBC Holdings and subsidiary level. The
Committee has delegated authority from the Board in relation to the
assessment of the independence of non-executive Directors. In
accordance with the UK and Hong Kong Corporate Governance Codes,
the Committee has reviewed and confirmed that all non-executive
Directors who have submitted themselves for election and
re-election at the AGM are considered to be independent. This
conclusion was reached after consideration of all relevant
circumstances that are likely to impair, or could appear to impair,
independence.
In line with the requirements of the
Hong Kong Corporate Governance Code, the Committee also reviewed
and considered the mechanisms in place to ensure independent views
and input are available to the Board. These mechanisms
include:
- having the appropriate Board and committee structure in place,
including rules on the appointment and tenure of non-executive
Directors;
- facilitating the option of having brokers and external
industry experts in attendance at Board meetings during 2023, as
well as having representatives from the Group's key regulators
attend Board meetings in relation to specific regulatory
items;
- ensuring non-executive Directors are entitled to obtain
independent professional advice relating to their personal
responsibilities as a Director at the Group's expense;
- having terms of reference for each committee and the Board
provide authority to engage independent professional advisers;
and
- holding annual Board and committee effectiveness reviews, with
feedback sought from members on the quality of, and access to,
independent external advice.
Senior executive succession and
development
Following Georges Elhedery's
appointment as Group Chief Financial Officer from 1 January 2023,
the Committee monitored and received updates on his induction
plan.
The succession plans for the Group
Executive Committee members were approved by the Committee in
December 2023. These reflect continued efforts to support the
development and progression of diverse talent and promote the
long-term success of the Group, with the gender diversity and
proportion of Asian heritage successors improving year on year. The
approval of succession plans included future internal and external
succession options for the Group Chief Executive, to ensure that
the Committee has a robust and actionable plan when required. The
Committee also reviewed longer-term internal succession options for
the Group Chief Executive to enable the Committee to interact more
frequently with high potential and diverse talent in the
Group.
The Committee continued to receive
updates on the development of our talent programme within the
Asia-Pacific region. Since its launch in 2020, significant progress
has been made towards ensuring that we have a deeper and more
diverse leadership bench-strength. Succession plans are more
robust, with greater diversity and good succession fulfilment
outcomes.
Committee evaluation
The annual review of the
effectiveness of the Board and Board committees, including the
Committee, was conducted externally by Independent Board Evaluation
for 2023. It determined that the Committee continued to operate
effectively, with no specific actions identified for the Committee.
Positive feedback was received on the effectiveness of the
recruitment processes of new Board members and the succession
planning for senior management.
Further details of the annual review
of the Board and committee effectiveness can be found on pages 260
to 261.
Subsidiary governance
In line with the subsidiary
accountability framework, the Committee continued to oversee the
corporate governance and succession arrangements across the
principal and material subsidiary portfolio. The Committee also
reviewed the succession plans for the principal subsidiary chairs
to ensure future successors had the necessary skills and experience
to effectively oversee and monitor delivery of the Group's
strategic and business priorities within their territory, in
accordance with the Group's governance
expectations.
Where a subsidiary was unable to
fully comply with the subsidiary accountability framework, the
Committee endorsed exceptions, where appropriate, subject to strong
rationale, including consideration of local laws and regulations
and market practice. Endorsement requests were also subject to
thorough review and consideration by the Group Company Secretary
and Chief Governance Officer in advance of consideration by the
Committee.
The Committee reviewed succession
plans and oversaw compliance with the Group's governance
expectations of principal and material subsidiaries. The overall
quality of succession plans has improved markedly over the past
three years, with plans demonstrating a clear focus on
strengthening boards' overall diversity and experience, in line
with strategic and business objectives.
The Committee continued to support
and seek opportunities to enhance subsidiary connectivity,
including through the Chairman's Forum and Remuneration Committee
Chairs' Forum, which regularly brought together the chairs of the
principal subsidiaries to discuss common issues, and the
Non-Executive Director Summit which brought over 100 non-executive
Directors together in Hong Kong in May 2023.
Subsidiaries also provided
opportunities for internal talent to serve on their boards,
following the training that they received through the HSBC Bank
Director Programme. The Committee continues to support and look for
opportunities to enhance subsidiary connectivity through
Non-Executive Director Summits and other engagement
forums.
Matters considered during
2023
|
|
Jan
|
Feb
|
Mar
|
Apr
|
May
|
Jun
|
Jul
|
Sep
|
Dec
|
Board composition and succession
|
|
|
|
|
|
|
|
|
|
Board composition, including
succession planning and skills matrices
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
Approval of diversity and inclusion
policy
|
ô
|
ô
|
ô
|
ô
|
ô
|
ô
|
ô
|
ô
|
l
|
Executive talent and development
|
|
|
|
|
|
|
|
|
|
Senior executive
succession
|
l
|
l
|
ô
|
ô
|
ô
|
l
|
l
|
l
|
l
|
Approval of executive succession
plans
|
ô
|
ô
|
ô
|
ô
|
ô
|
ô
|
ô
|
ô
|
l
|
Talent programmes
|
ô
|
ô
|
ô
|
ô
|
ô
|
ô
|
l
|
ô
|
ô
|
Governance
|
|
|
|
|
|
|
|
|
|
Board and committee
evaluation
|
l
|
ô
|
l
|
ô
|
ô
|
ô
|
l
|
ô
|
ô
|
Subsidiary governance
|
ô
|
ô
|
ô
|
ô
|
l
|
ô
|
l
|
l
|
l
|
Subsidiary and executive
appointments
|
l
|
l
|
ô
|
ô
|
l
|
ô
|
l
|
ô
|
l
|
l
|
Matter considered
|
ô
|
Matter not considered
|
|
"Given the uncertain external environment, as well as HSBC's
growth ambitions, the GAC will continue to play an important role
in monitoring the effectiveness of the control
environment."
|
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David Nish
Chair
Group Audit Committee
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Membership
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Key responsibilities
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Member
since
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Meeting attendance in
20231
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The Committee's key responsibilities
include:
- monitoring and assessing the integrity of the financial
statements, formal announcements and regulatory information in
relation to the Group's financial performance, as well as
significant accounting judgements;
- reviewing the effectiveness of, and ensuring that management
has appropriate internal controls over, financial
reporting;
- reviewing management's arrangements for compliance with
prudential regulatory financial reporting;
- reviewing and monitoring the relationship with the external
auditor and overseeing its appointment, remuneration and
independence;
- overseeing the Group's policies, procedures and arrangements
for capturing and responding to whistleblower concerns and ensuring
they are operating effectively; and
- overseeing the work of Global Internal Audit and monitoring
and assessing the effectiveness, performance, resourcing,
independence and standing of the function.
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David Nish (Chair)
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May 2016
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10/10
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Rachel Duan2
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Apr 2022
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9/10
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James Forese3
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May 2020
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7/7
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Eileen Murray4
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Jun 2022
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8/10
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Brendan Nelson5
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Sep 2023
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4/4
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Jackson Tai6
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Dec 2018
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3/3
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1 These included two joint meetings with the Group
Risk Committee ('GRC') and the Technology Governance Working
Group.
2 Rachel Duan was unable to join one meeting, a
joint meeting with the GRC and Technology Governance Working Group,
due to prior a commitment.
3 James Forese rejoined the GAC on 5 May 2023
following his appointment as GRC Chair.
4 Eileen Murray was unable to join two meetings
due to prior commitments.
5 Brendan Nelson joined the GAC upon appointment
to the Board with effect from 1 September 2023 and has been
appointed GAC Chair with effect from 21 February
2024.
6 Jackson Tai retired from the GAC on 5 May 2023
upon his retirement from the Board.
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I am pleased to introduce the Group
Audit Committee ('GAC') report setting out the key matters and
issues considered in 2023.
As well as the GAC's usual
obligations for financial reporting and the associated control
environment, the GAC spent significant time on the oversight of the
Group's ESG disclosures and improvement of the Group's regulatory
reporting, specifically assurance of the Group's ESG disclosures
for the Annual Report and
Accounts 2023 and the net zero transition plan and related
policies, which were published in January 2024.
Internal financial control also
remained a key area of focus for the GAC during 2023. This will
continue to be a priority going ahead due to the need for a robust
control environment given the ongoing the volume of regulatory- and
strategy-driven change across the Group. This included oversight of
regulatory and accounting deliverables, such as the enhancement of
Finance systems and controls and the progress in the implementation
of Basel III.
Significant time was also spent at
GAC meetings on the positioning and forward-looking financial
guidance provided to the market as part of our financial reporting
for both the current and prior year, notably in relation to
returns, costs and expected credit losses ('ECL'), including those
associated with the Group's exposure to the China corporate real
estate market.
Given the uncertain external
environment, as well as HSBC's growth ambitions, the GAC will
continue to play an important role in monitoring the effectiveness
of the control environment in supporting sustainability of these
ambitions.
The GAC continued to strengthen our
relationships and understanding of issues at the local level
through regular information sharing with the principal subsidiary
audit committee chairs. This was supplemented with regular meetings
with the chairs to discuss key issues, and through their periodic
attendance at GAC meetings. I also joined a number of principal
subsidiary audit committee meetings throughout the year, which
supported connectivity and information flows across the
Group.
The Group's whistleblowing
arrangements continue to satisfy regulatory obligations. I
regularly met the whistleblowing team to discuss material
whistleblowing cases, and the progress made in enhancing the
Group's whistleblowing arrangements.
The GAC's performance and
effectiveness were reviewed as part of the Board effectiveness
review undertaken during the year. I was pleased that the review
concluded that the GAC continued to operate effectively, with no
material areas for improvement identified.
Finally, as announced on 6 December,
Brendan Nelson will succeed me as Chair of the GAC following the
publication of HSBC's Annual
Report and Accounts 2023 on 21 February 2024. The Board has
determined that Brendan's previous experience, notably as audit
chair at NatWest and bp, makes him ideally suited to chair the
GAC.
David Nish
Chair of the Group Audit
Committee
The Committee operates under
delegated authority from the Board, and advises the Board on
matters concerning the Group's financial reporting requirements.
The Committee Chair reports on the key matters and discussions at
the subsequent Board meeting, and the Board also receives copies of
the Committee agendas and minutes. This supports the Board's
oversight of the work carried out by management, Global Internal
Audit and PricewaterhouseCoopers LLP ('PwC'), as the Group's
statutory auditor.
The Nomination & Corporate
Governance Committee has confirmed that each member of the
Committee is independent according to the criteria from the US
Securities and Exchange Commission; and the Committee and
individual members continue to possess competence relevant to the
banking and broader financial services sector in which the Group
operates. The Board has determined that David Nish, Brendan Nelson
and Eileen Murray are the audit committee 'financial experts' for
the purposes of section 407 of the Sarbanes-Oxley Act and have
recent and relevant financial experience for the purposes of the UK
and Hong Kong Corporate Governance Codes.
The Committee Chair continued to
engage with various key stakeholders, including regulators such as
the UK's PRA and the Financial Reporting Council, to understand
their views, key themes and areas of focus within the broader
financial services sector. These included trilateral meetings
involving the Group's external auditor, PwC, and the
PRA.
The Group Chief Executive, Group
Chief Financial Officer, Global Financial Controller, Group Head of
Internal Audit, Group Chief Risk and Compliance Officer, Group
Company Secretary and Chief Governance Officer and other members of
senior management routinely attended meetings of the GAC. The
external auditor attended all meetings.
The Chair holds regular meetings with
management, Global Internal Audit and PwC, as the external auditor,
to discuss relevant items as they had arisen during the year
outside the formal Committee process. The Committee also regularly
meets with the internal and external auditors, without management
present. Private discussions are also held with relevant members of
senior management, including the Group Chief Financial Officer and
Group Chief Risk and Compliance Officer.
Matters considered during
2023
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Jan
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Feb
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Apr
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Jun
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Jul
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Sep
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Oct
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Dec
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Reporting
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Financial reporting matters
including:
- review of financial statements, ensuring that disclosures are
fair, balanced and understandable
- significant accounting judgements
- going
concern assumptions and viability statement
- supplementary regulatory information
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l
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l
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l
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l
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l
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l
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l
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ESG and climate reporting
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l
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l
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l
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l
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l
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l
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l
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l
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Regulatory reporting-related matters
including:
- oversight of the Group's engagement with PRA-requested skilled
person reviews
- reports from the principal subsidiaries on progress and
learnings in relation to their local remediation efforts
- adequacy of resources across Finance and other SME teams to
deliver the Group-wide remediation programme
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l
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l
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l
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l
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l
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l
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l
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l
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Certificates from principal
subsidiary audit committees
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ô
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l
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ô
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ô
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l
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ô
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ô
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Control environment
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Control enhancement
programmes
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l
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l
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l
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l
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l
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l
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l
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l
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Group transformation
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ô
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ô
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ô
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l
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l
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ô
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Review of deficiencies and
effectiveness of internal financial controls
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l
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l
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l
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l
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l
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l
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l
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l
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Internal audit
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Reports from Global Internal
Audit
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l
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l
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l
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l
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l
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Audit plan updates, independence and
effectiveness
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l
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l
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ô
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l
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l
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External audit
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Reports from external audit,
including external audit plan
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l
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l
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l
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l
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l
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Appointment, remuneration, non-audit
services and effectiveness
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Compliance
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Accounting standards and critical
accounting policies
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l
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Corporate governance codes and
listing rules
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Whistleblowing
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Whistleblowing arrangements and
effectiveness
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l
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ô
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l
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l
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l
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Matter considered
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Matter not considered
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How the Committee discharged its
responsibilities
Financial, ESG and climate reporting
The GAC is responsible for reviewing
the Group's financial reporting during the year, including the
Annual Report and
Accounts, Interim
Report, quarterly earnings releases, analyst presentations
and Pillar 3 disclosures.
Furthermore, as an area of expanded
assurance, the GAC, supported by the executive-level ESG Committee,
provided close oversight of the disclosure risks in relation to ESG
and climate reporting, amid rising stakeholder
expectations.
As part of its review, the
GAC:
- reviewed the narrative commentary on our financial and
non-financial performance to ensure it remained fair, balanced and
understandable;
- challenged and evaluated management's application of critical
accounting policies and material areas in which significant
accounting judgements were applied;
- gave
particular regard to the analysis and measurement of IFRS 9 ECL,
including the key judgements and management adjustments made in
relation to the forward economic guidance, underlying economic
scenarios and reasonableness of the weightings, as well as
modelling and adjustments;
- focused on preparation for disclosures to ensure these were
consistent, appropriate and acceptable under the relevant financial
and governance reporting requirements;
- tracked and monitored developments relating to the strategy
and scope of ESG and climate disclosures, in particular the
assurance related to the Group's net zero transition plan, which
was published at the end of January 2024. The GAC also focused on
internal and external assurance within ESG reporting in line with
wider market developments to ensure ESG and climate disclosures
were materially accurate and consistent;
- tracked and monitored the delivery against the external audit
plan;
- provided advice to the Board on the form and basis underlying
the long-term viability statement; and
- considered the key performance metrics related to strategic
priorities, and ensured that the performance and outlook statements
reflected the risks and uncertainties appropriately.
In addition to its work on the
Group's financial disclosures, PwC also provided limited standalone
assurance on the Group's climate reporting. Further details can be
found in 'Assurance relating to ESG data' on page 43.
In conjunction with the GRC, the GAC
considered the current position of the Group, along with the
emerging and principal risks, and carried out a robust assessment
of the Group's prospects. This assessment informed the GAC's
recommendation to the Board on the Group's long-term viability. The
GAC also undertook a detailed review before recommending to the
Board that the Group continues to adopt the going concern basis in
preparing the annual and interim financial statements. Further
details can be found on page 40.
Fair, balanced and understandable
Following review and challenge of the
disclosures, the Committee recommended to the Board that the
Annual Report and
Accounts, taken as a whole, were fair, balanced and
understandable. These provided the shareholders with the necessary
information to assess the Group's position and performance,
business model, strategy and risks facing the business, including
in relation to the increasingly important ESG
considerations.
The Committee reviewed the draft
Annual Report and Accounts
2023 and results announcements to provide feedback and
challenge to management. It was supported by the work of the Group
Disclosure and Controls Committee, which also reviewed and assessed
the Annual Report and Accounts
2023 and investor communications.
This work enables the GAC to
discharge its responsibilities and support the Board in making the
statement required under the UK and Hong Kong Corporate Governance
Codes.
Internal controls
Regular updates and confirmations are
provided to the GAC on the action management takes to remediate any
failings or weaknesses identified through the operation of the
Group's framework of internal financial controls. This is
supplemented by reviews of these controls by the second line of
defence and internal audit, and the external auditors, who provided
additional comfort to the Committee on the effectiveness of these
controls. These reviews confirmed that there were no material
weaknesses as at the year-end.
These updates included the Group's
work on compliance with section 404 of the Sarbanes-Oxley Act.
Based on this work, the GAC recommended that the Board support its
assessment of the internal controls over financial
reporting.
The GAC continues to focus on
controls over the Group's insurance business following the
implementation of the IFRS 17 'Insurance Contracts' accounting
standards. This will remain a focus through 2024, with the GAC
scheduled to receive further updates on the control environment for
this business and in relation to the change programme more
generally through the first half of 2024.
For further details of how the Board
reviewed the effectiveness of key aspects of internal control, see
page 311.
Regulatory reporting
Regulatory reporting has been a key
priority for the Committee over recent years, and will continue to
be a priority for 2024. The Committee is focused on monitoring the
programme of work to address the quality and reliability of
regulatory reporting to meet regulatory expectations.
The Committee approved the Integrity
of Regulatory Reporting programme, management's strategy for
remediation of deficiencies in relation to the Group's regulatory
reporting governance, process and controls. The Committee also
provided oversight of the Group's engagement with PRA-requested
skilled-persons reviews including the initiation of a review of the
sustainability of the Group's ongoing remediation efforts for
regulatory reporting, which commenced in 2023 for an initial period
to 31 December 2025. Regular updates will be provided to the
Committee by the skilled person throughout the course of their
review.
Management provided updates on the
status of ongoing HSBC-specific external reviews, and discussed the
issues and themes identified from the increased assurance work and
focus on regulatory reporting. The GAC also discussed root cause
themes, remediation of known issues and new issues identified
through the increased assurance work and focus on regulatory
reporting. The Committee challenged management on remediation
plans, to ensure there was a sustainable reduction in issues and
that dependencies with other key programmes were well
understood.
The Committee Chair initiated a
schedule under which certain principal subsidiary audit committee
chairs, chief executive officers and chief financial officers
attended GAC meetings to share progress and learnings in relation
to their local remediation efforts.
Further details can be found in the
'Principal activities and significant issues considered during
2023' table on page 271.
Adequacy of resources
The Committee is responsible, under
the Hong Kong Listing Rules, to annually assess the adequacy of
resources of the accounting, internal audit, financial reporting
and ESG performance and reporting functions. It also monitored the
legal and regulatory environment relevant to its
responsibilities.
The Committee determined that each of
the functions provided thorough information with regards to people
capacity and capability and endorsed the annual update to the
Board.
In recognition that the enhancement
of the Group's regulatory reporting processes and controls was a
priority for both the Committee and the Group's regulators, the GAC
also considered the adequacy of regulatory reporting resources as
part of the year-end activities.
Connectivity with principal subsidiary audit
committees
The Committee recognises the
importance of strong connectivity and alignment with principal
subsidiary audit committees. The mechanisms to support this are
well established and continued to operate effectively during the
year.
This included information sharing and
targeted collaboration between audit committee chairs and
management to ensure there was appropriate focus on the local
implementation of programmes. During 2023 this included a
particular focus on regulatory reporting, with the subsidiary audit
committee chairs, chief executive officers and chief financial
officers, attending Committee meetings to update on progress, share
local challenges, and areas of focus with the Committee.
In addition to the Chair's regular
meetings with the audit chairs of the Group's UK, European, US and
Asian principal subsidiaries, and their attendance at Committee
meetings for reference items, escalations were received by the
Committee for its information and action.
On a half-year basis, principal
subsidiary audit committees provided certifications to the GAC that
regarded the preparation of their financial statements, adherence
to Group policies and escalation of any issues that required the
attention of the GAC. These certifications also included
information regarding the governance, review and assurance
activities undertaken by principal subsidiary audit committees in
relation to prudential regulatory reporting.
External auditor
The GAC has the primary
responsibility for overseeing the relationship with the Group's
external auditor, PwC. The GAC undertook a formal competitive
tender process for the Group's statutory audit during 2022
following PwC's appointment for the Annual Report and Accounts 2015. This
process concluded that PwC would remain as the statutory auditor,
which was announced in January 2023. As part of the tender process,
PwC committed to a number of initiatives to enhance the
effectiveness and efficiency of the Group audit, and progress
against these is reported to the Committee on a regular basis to
allow these to be monitored.
PwC completed its ninth audit,
providing robust challenge to management and sound independent
advice to the Committee on specific financial reporting judgements
and the control environment. The senior audit partner is Scott
Berryman who has been in the role since 2019. It was announced
during 2023 that Matthew Falconer would become the senior audit
partner from 2024 as part of the rotation of auditors. The
Committee reviewed the external auditor's approach and strategy for
the annual audit and received regular updates on the audit,
including observations on the control environment. Key audit
matters discussed with PwC are set out in its report on page
318.
Following the publication of the
Financial Reporting Council's ('FRC') Audit Committee and the
External Audit: Minimum Standard ('the Standard') during 2023, the
Committee confirmed that all requirements of the standard have been
complied with.
External audit plan
The GAC reviewed the PwC external
audit approach, including the materiality, risk assessment and
scope of the audit. PwC highlighted the changes being made to its
approach to enhance the quality and effectiveness of the audit.
PwC's plan supports its, and the GAC's, focus on audit quality
through standardisation, centralisation and the use of technology.
The GAC has questioned PwC on its plans to utilise more digital
solutions on the HSBC audit, and updates on this will be provided
through 2024.
Effectiveness of external audit process
The GAC assessed the effectiveness of
PwC as the Group's external auditor, using a questionnaire that
focused on the overall audit process, its effectiveness and the
quality of output.
In addition, the GAC Chair, certain
principal subsidiary audit chairs and members of the Group
Executive Committee met with the Senior Audit Partner to
discuss findings from the questionnaire and provide in-depth
feedback on the interaction with the PwC audit team.
PwC highlighted the actions being
taken in response to the HSBC effectiveness review, including the
development of audit quality indicators. These provide a balanced
scorecard and transparent reporting to the GAC on the work of both
HSBC teams and PwC during the course of the audit. These audit
quality indicators focused on the following areas:
- findings from inspections across the Group and regulators on
PwC as a firm;
- the
hours of audit work delivered by senior PwC audit team members, the
extent of specialist and expert involvement, delivery against
agreed timetable and milestones and the use of
technology;
- any
new control deficiencies in Sarbanes-Oxley locations, proportion of
management identified deficiencies and delivery of audit
deliverables to agreed timelines; and
- matters occurring in PwC's global network that could be
relevant to the audit of HSBC.
Specifically in 2023, PwC reported to
the GAC on the recommended actions taken in response to the
independent review of governance, culture and accountability that
was undertaken by Dr Ziggy Switkowski AO, as well as further detail
on audit quality controls across PwC's global
operations.
The GAC receives regular updates from
PwC and management on performance across the audit quality
indicators, which provides wider visibility of ongoing and emerging
issues. The GAC requested that these indicators included metrics in
relation to PwC's IT security, reflecting the significant volume of
information that is shared between HSBC and PwC as part of the
audit activity.
There were no breaches of the policy
on hiring employees or former employees of the external auditor
during the year. The external auditor attended all Committee
meetings and the GAC Chair maintains regular contact with the
senior audit partner and his team throughout the year.
The FRC's Quality Review team
routinely monitors the quality of the audit work of certain UK
audit firms through inspections of sample audits and related
quality processes. PwC was reviewed on the audit of our financial
reporting for the 2022 financial year. The Chair had discussions
with the FRC as part of the process, and also discussed the outcome
of the inspection with the Senior Audit Partner and the other
members of the Committee. The Committee was pleased with the
outcome of the inspection, which reported no key findings as well
as a number of specific examples of good audit practice.
Independence and objectivity
The Committee assessed any potential
threats to independence that were self-identified or reported by
PwC. The GAC considered PwC to be independent and PwC, in
accordance with professional ethical standards and applicable rules
and regulations, provided the GAC with written confirmation of its
independence for the duration of 2023.
The Committee confirms it has
complied with the provisions of The Statutory Audit Services for
Large Companies Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities) Order 2014
for the financial statements.
Following the recommendation to
reappoint PwC as the auditor, the associated resolutions concerning
the reappointment and the audit fee for 2023 were approved at the
2023 AGM by the shareholders of the Group.
Non-audit services
The Committee is responsible for
setting, reviewing and monitoring the appropriateness of the
provision of non-audit services by the external auditor. It also
applies the Group's policy on the award of non-audit services to
the external auditor. The non-audit services are carried out in
accordance with the external auditor independence policy to ensure
that services do not create a conflict of interest. All non-audit
services are either approved by the GAC, or by Group Finance when
acting within delegated limits and criteria set by the
GAC.
The non-audit services carried out by
PwC included 64 engagements approved during the year where the fees
were over $100,000 but less than $1m. Global Finance, as a delegate
of the GAC, considered that it was in the best interests of the
Group to use PwC for these services because they were:
- audit-related engagements that were largely carried out by
members of the audit engagement team, with the work closely related
to the work performed in the audit;
- engagements covered under other assurance services that
require obtaining appropriate audit evidence to express a
conclusion designed to enhance the degree of confidence of the
intended users other than the responsible party about the subject
matter information;
- other
permitted services such as advisory attestation reports on internal
controls of a service organisation primarily prepared for and used
by third-party end users; or
- required or permitted by local regulators to be performed by
the external auditor.
Eight engagements during the year
were approved where the fees exceeded $1m. These were mainly
engagements required by the regulator and incremental fees related
to previously approved engagements, including the provision of
independent assurance reports on global controls for
2023.
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2023
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2022
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Auditors' remuneration
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$m
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$m
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Total fees payable
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155.9
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148.1
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of
which fees for non-audit services
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46.1
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50.5
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Ratio of non-audit fees to audit
fees1
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42.0%
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51.7%
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1 The calculation is on a simple ratio and is not
based on FRC guidance on non-audit fees ratio
thresholds.
Whistleblowing and speak-up culture
An important part of HSBC's values is
speaking up when something does not feel right. HSBC remains
committed to ensuring colleagues have confidence to speak up and
acting when they do. A wide variety of channels are provided for
colleagues to raise concerns, including the Group's whistleblowing
channel, HSBC Confidential (see page 94 for
further information).
The Board has delegated
responsibility to the GAC to oversee the effectiveness of HSBC's
whistleblowing procedures. The Chair of the GAC is a Group Senior
Manager (SMF7), and has a prescribed responsibility as the
whistleblowers' champion, to ensure integrity of HSBC's policies on
whistleblowing and protecting those who report concerns. As part of
his responsibility, the GAC Chair reports to the Board on the GAC's
oversight of whistleblowing as part of his regular reporting
updates.
The Group Head of Regulatory
Compliance regularly updates the GAC on whistleblowing
effectiveness, including controls assessments and internal audit
findings. The Committee is briefed on culture and conduct risks
from whistleblowing cases and actions taken.
In 2023, the GAC received updates on
topics such as cultural insights from internal HR-led
investigations relating to matters reported through HSBC
Confidential. Reports were also provided on the actions taken to
support different functional areas collaborate post-investigation.
The Chair met with the Group Head of Conduct, Policy and
Whistleblowing for briefings on significant whistleblowing matters.
In 2024, the GAC will continue to receive briefings on these
actions and the ongoing efficiency of the HSBC Confidential
channel.
Global Internal Audit
The primary role of the Global
Internal Audit function is to help the Board and management protect
the assets, reputation and sustainability of the Group. Global
Internal Audit does this by providing independent and objective
assurance on the design and operating effectiveness of the Group's
governance, risk management and control framework and processes,
prioritising the greatest areas of risk. The independence of Global
Internal Audit from day-to-day line management responsibility is
critical to its ability to deliver objective audit coverage by
maintaining an independent and objective stance. Global Internal
Audit is free from interference by any element in the organisation,
including on matters of audit selection, scope, procedures,
frequency, timing, or internal audit report content. The Group Head
of Internal Audit reports to, and meets frequently with, the Chair
of the GAC. In addition, in 2023, there was more interaction
between Global Internal Audit senior management and the members of
the GAC, aimed at increasing knowledge and awareness of the audit
universe and existing and emerging risks identified by Global
Internal Audit. Global Internal Audit adheres to The Institute of
Internal Auditors' mandatory guidance.
Consistent with previous years, the
2024 audit planning process includes assessing the inherent risks
and strength of the control environment across the audit entities
representing the Group. Results
of this assessment are combined with
a top-down analysis of risk themes by risk category to ensure that
themes identified are addressed in the annual plan. Audit coverage
is achieved using a combination of business and functional audits
of processes and controls, risk management frameworks and major
change initiatives, as well as regulatory audits, investigations
and special reviews. In addition to the ongoing importance of
regulatory-focused work, key risk theme categories for 2024 audit
coverage remain as: strategy, governance and culture; financial
crime, conduct and compliance; financial resilience; and
operational resilience. A quarterly continuous monitoring
assessment of key risk themes will form the basis of thematic
reporting and plan updates and will ultimately drive the 2025
planning process.
In 2024, Global Internal Audit's new
or heightened areas of coverage are: transformation including
regulatory change; people capacity and capability; ESG; material
regulatory obligations; Consumer Duty implementation; retail and
wholesale credit risk management; Basel III; regulatory
reporting; treasury; operational resilience; enterprise-wide risk
management; model risk management; machine learning and artificial
intelligence; data management and technology. In addition, Global
Internal Audit will continue its programme of culture audits to
assess the extent that behaviours reflect HSBC's purpose, ambition,
values and strategy, and expand its coverage of franchise audits
for locally significant countries. The annual audit plan and
material plan updates made in response to changes in the Group's
structure and risk profile are approved by the GAC.
The results of audit work, together
with an assessment of the Group's overall governance, risk
management and control framework and processes are reported to the
GAC, GRC and local audit and risk committees, as appropriate. This
reporting highlights key themes identified through audit activity,
and the output from continuous monitoring. This includes business
and regulatory developments and an independent view of emerging and
horizon risk, together with details of audit coverage and any
required changes to the annual audit plan. Based on regular
internal audit reporting to the GAC, private sessions with the
Group Head of Internal Audit, the Global Professional Practices
annual assessment and quarterly quality assurance updates, the GAC
is satisfied with the effectiveness of the Global Internal Audit
function and the appropriateness of its resources.
Executive management is accountable
for addressing the matters raised by Global Internal Audit, which
must be addressed within an appropriate and agreed timetable.
Confirmation to this effect must be provided to Global Internal
Audit, which validates closure on a risk basis.
Global Internal Audit maintains a
close working relationship with HSBC's external auditor, PwC. The
external auditor is kept informed of Global Internal Audit's
activities and results, and is afforded free access to all internal
audit reports and supporting records.
Principal activities and significant
issues considered during 2023 (continued)
|
Areas of focus
|
Key
issues
|
Conclusions and actions
|
|
Environmental, social and governance ('ESG')
reporting
The Committee considered management's
efforts to enhance ESG disclosures and associated verification and
assurance activities, with a specific focus on the net zero
transition plan and climate-related disclosures made in the
Annual Report and Accounts
2023.
|
The Committee considered ESG
disclosures for the Annual Report
and Accounts 2023 in detail, to ensure these were fair and
balanced, and were also transparent on the challenges faced and
aligned with the Group's progress in the embedding of sustainable
and climate-related policies across the business.
The Committee also focused on the
evolution of the control environment for ESG disclosures,
particularly data sourcing and policy adherence. Management
provided updates on additional assurance performed over these
disclosures while the control environment matures and the progress
of the sustainability enhancement programme (to upgrade our
capabilities in this growing area).
|
Regulatory reporting
The GAC monitored the progress of the
regulatory reporting assurance programme to enhance the Group's
regulatory reporting, impact on the control environment and
oversight of regulatory reviews and engagement.
|
The Committee reflected on the
continued focus on the quality and reliability of regulatory
reporting by the PRA and other regulators globally. The GAC
reviewed management's proposals on remediation efforts, and
endorsed the strategy for the remediation of the errors in the
Group's reporting submissions to regulators globally.
The chief executive officers, chief
financial officers and audit committee chair of the US, UK
ring-fenced bank, European and Asian subsidiaries attended
Committee meetings during the year to report on the remediation
activities and priorities with regards to regulatory reporting in
their respective markets.
We continue to keep the PRA and other
relevant regulators informed of our progress.
|
|
Expected credit losses
The measurement of expected credit
losses involves significant judgements, particularly under current
economic conditions. There remains uncertainty over ECL estimation
due to sustained high inflation, a high interest rate environment
and weaker economic growth in the Group's key operating
markets.
|
The Committee reviewed economic
scenarios for the key countries and territories in which the Group
operates and challenged management's judgements on the weightings
assigned to the scenarios. The Committee also challenged
management's judgemental adjustments to account for uncertainty in
specific sectors and geographies, including the controls
underpinning the adjustments process and conditions under which the
adjustments would be reduced or removed.
The Committee continued to monitor
management's updates on areas of particular focus, including
downside risk on mainland China and Hong Kong commercial real
estate.
|
Tax-related judgements
HSBC has recognised deferred tax
assets to the extent that they are recoverable through expected
future taxable profits. Significant judgement continues to be
exercised in assessing the probability and sufficiency of future
taxable profits, future reversals of existing taxable temporary
differences and expected outcomes relating to uncertain tax
treatments.
|
The Committee considered the
recoverability of deferred tax assets, in particular in the US, the
UK and France.
The Committee also considered
management's judgements relating to tax positions in respect of
which the appropriate tax treatment is uncertain, open to
interpretation or has been challenged by the tax
authority.
|
Valuation of defined benefit pension
obligations
The valuation of defined benefit
pension obligations involves highly judgemental inputs and
actuarial assumptions which includes rate, inflation rate,
mortality rates and other demographic assumptions. Management
considered these assumptions in consultation with actuarial experts
to determine the valuation of the defined benefit
obligations.
|
The GAC has considered the effect of
changes in key assumptions on the HSBC UK Bank plc section of the
HSBC Bank (UK) Pensions Scheme, which is the principal plan of HSBC
Group. Details of key assumptions can be found on pages
366 to 368 of the
'Notes on the financial statements'.
|
Valuation of financial instruments
During 2023, management continuously
refined its methodology and approach to valuing the Group's
portfolio in relation to investments, trading assets and
liabilities and derivatives.
|
The Committee considered the key
valuation metrics and judgements involved in the determination of
the fair value of financial instruments, and agreed with the
judgements applied by management, which were validated through
appropriate governance and control forums.
|
Investment in subsidiaries
Management has reviewed investments
in subsidiaries for indicators of impairment and conducted
impairment reviews where relevant. These involve exercising
significant judgement to assess the recoverable amounts of
subsidiaries, by reference to projected future cash flows, discount
rates and regulatory capital assumptions.
|
The Committee reviewed the judgements
in relation to the impairment review of HSBC Overseas Holdings (UK)
Limited and the key inputs such as projected profits, underpinning
the recoverable amounts of its subsidiaries.
|
|
|
|
|
Investment in an associate - Bank of Communications Co.,
Limited
During the year, management performed
impairment reviews of HSBC's investment in Bank of Communications
Co., Ltd ('BoCom'). This included consideration of the potential
impact of BoCom's designation as a globally systemically important
bank in November 2023.
The impairment reviews are complex
and require significant judgements, such as the appropriateness of
projected future cash flows, discount rate, and regulatory capital
assumptions.
|
The Committee reviewed and challenged
management's judgements in relation to impairment reviews of HSBC's
investment in BoCom, performed using a value-in-use methodology.
The GAC reviewed the appropriateness of key assumptions such as
projected future cash flows, with a particular focus on the loan
growth and net interest margin outlook, and potential impacts of
the recent designation of BoCom as a globally systemically
important bank.
The Committee held a dedicated
meeting to challenge management on the impairment charge taken in
the fourth quarter of 2023, considering sensitivity analysis of
value-in-use to reasonably possible changes in key assumptions and
consistency of judgements with prior impairment reviews, which we
have disclosed previously.
|
Interest rate management, including disposal of
hold-to-collect-and-sell portfolio
During 2023, management proposed a
framework for the disposal of selected hold-to-collect-and-sell
securities to improve risk management of hold-to-collect-and-sell
positions and to stabilise and protect net interest income over the
medium term.
|
The GAC received regular management
updates on hedging strategy, including the repositioning of
structural interest rate hedges.
The Committee reviewed controls on,
and financial outcomes of, disposals of hold-to-collect-and-sell
securities.
|
Impairment of goodwill and non-financial
assets
During the year, management tested
for impairment goodwill and non-financial assets. Key judgements in
this area relate to long-term growth rates, discount rates and
projected future cash flows to include for each cash-generating
unit tested, both in terms of compliance with the accounting
standards and reasonableness of the forecasts.
|
The Committee reviewed and challenged
management's approach and methodology used for the impairment
testing of goodwill and non-financial assets, with a key focus on
the projected cash flows included in the forecasts and discount
rates used. The GAC also challenged management's key judgements and
considered the reasonableness of the outcomes against business
forecasts and strategic objectives of HSBC.
|
Legal proceedings and regulatory matters
Management has used judgement in
relation to the recognition and measurement of provisions, as well
as the existence of contingent liabilities for legal and regulatory
matters.
|
The Committee reviewed reports from
management on legal proceedings and regulatory matters, and
challenged related accounting judgements and
disclosures.
|
Long-term viability and going concern
statement
The GAC has considered a wide range
of information relating to present and future projections of
profitability, cash flows, capital requirements and capital
resources. These considerations include stressed scenarios that
reflect the implications of:
(i) the ongoing Russia-Ukraine and
Middle East conflicts, and the consequential impacts on the supply
chains globally;
(ii) macroeconomic risks including
inflationary risks, which were expected to remain heightened in
most markets; and
(iii) climate risk, operational
resilience, and other top and emerging risks, and the related
impact on profitability, capital and liquidity.
|
In accordance with the UK and Hong
Kong Corporate Governance Codes, the Directors carried out a robust
assessment of the principal risks of the Group and parent company.
The GAC considered the statement to be made by the Directors and
concluded that the Group and parent company will be able to
continue in operation and meet liabilities as they fall due, and
that it is appropriate that the long-term viability statement
covers a period of three years.
|
Impact of acquisitions and disposals
HSBC engaged in a number of business
acquisitions and disposals, notably in the UK, Canada, France,
Greece, China, Oman and Russia.
Significant judgement was involved in
determining the timing of recognition of assets held-for-sale,
gains or losses, and the measurement of assets and liabilities on
acquisition or disposal.
|
The Committee reviewed management's
judgements related to the planned sales of our banking business in
Canada, our retail banking operations in France and our banking
business in Russia, such as the timing of classification as
held-for-sale and the remeasurement of assets.
The Committee considered the
financial and accounting impacts of the merger of HSBC Oman with
Sohar International Bank of Oman, and the acquisitions of Silicon
Valley Bank UK Limited, Silkroad Property Partners Pte Limited and
Citi's retail wealth management portfolio in China.
|
|
|
|
|
Sustainable control environment
The GAC will oversee the impact on
the risk and control environment.
|
The Committee received regular
updates on the control environment, and broader change framework,
to review the impact on financial reporting and tax risk within the
Group, with particular focus on the implementation of IFRS 17 in
the year.
In these updates the Committee
monitored the assessment of the financial reporting risk, tax risk
and progress made on remediation of Sarbanes Oxley significant
deficiencies. This oversight helped the Committee to understand the
progress being made by management to set out strategic actions to
remediate identified issues and uplift the control environment to
enable a sustainable reduction in risk.
Management's updates were
supplemented by further focus and assurance work from Global
Internal Audit, including audits of significant programmes of
activity during 2023.
|
|
|
|
|
Basel III Reform
The GAC considered the implementation
of the Basel III Reform and the impact on the capital requirements
and RWA assurance. This was considered in the context of the
strategy and structure of the balance sheet.
|
The Committee received updates on the
progress and impact of the Basel III programme on the
Group.
Management discussed the delayed
implementation dates due to ongoing uncertainty over the final
definition of the rules by regulators, and the work undertaken to
mitigate delivery risks given the concentration of delivery during
2024. The discussion highlighted the dependencies of the Basel III
programme with data and management. Management focus was on
ensuring that the data required and evolving internal standards
were delivered by the end of 2023 to allow for integrated testing
in the first quarter of 2024.
The Committee reviewed the
ongoing management of risks, issues and dependencies and challenged
management to prioritise deliverables across each jurisdiction in
line with regulatory timelines. The Committee discussed focus on
ensuring, in each case, solutions were delivered to the
minimum required standards.
|
|
|
|
|
Collaboration with GAC/GRC/Technology Governance Working
Group
The GAC and GRC worked closely to
ensure there were procedures to manage risk and oversee the
internal control framework. The Chairs are members of both
committees and engage on the agendas of each other's committees to
further enhance connectivity, coordination and flow of
information.
|
Given that all material remediation
plans within the Group rely heavily on data, the committees held
joint meetings to develop an understanding of the HSBC data
strategy and execution plan. The joint meetings
discussed:
- the
review undertaken of data within the Group and the associated
baseline established as part of the review;
- actions taken to prioritise execution to deliver key
capabilities and remediate data quality, including pilots to
provide clarity around scale, key milestones and expected execution
timelines; and
- the
three-year Group data programme delivery roadmap including detailed
plans to address data quality issues, improve the data control
landscape, engage with colleagues to actively mature data culture,
and build sustainable capabilities that meet a growing global trend
towards localisation of data.
|
Committee evaluation and
effectiveness
The annual review of the
effectiveness of the Board committees, including the GAC, was
conducted by IBE, Independent Board Evaluation during 2023. The
review determined that the GAC continued to operate
effectively.
Positive feedback was noted on the
leadership of the Committee Chair, the composition of the Committee
and the focus and balance of time dedicated to discussion at
Committee meetings. The review highlighted the continued importance
of strong interaction between the GAC, GRC, Technology Governance
Working Group and the Board, on key issues including
ESG.
Further details of the annual review
of the Board and Committee effectiveness can be found on pages
260 to 261.
Committee priorities
At its meeting in December 2023, the
Committee agreed a number of priorities for 2024. These
included:
- Regulatory reporting: Given the criticality of accurate and
timely regulatory reporting to the Group's licence to operate, the
Committee will have a key focus on delivery of the Integrity of
Regulatory Reporting programme during 2024.
- ESG:
As competent authorities in the markets in which the Group operates
launch market-specific disclosure requirements under new
regulation, the Committee will continue to focus on the assurance
of reporting and disclosure at both a Group and subsidiary level,
as well as the effectiveness of the supporting control environment
and governance.
- Data:
The Committee plans to monitor and provide input into the data
strategy, remediation, and controls for the purposes of financial
and regulatory reporting, including that data management strategies
are embedded across the Group.
|
"The Committee takes continuous and active steps to safeguard
the Group's capital and liquidity positions, keeping it secure in
the face of macroeconomic headwinds, enabling it to effectively
deploy capital dynamically to take advantage of
opportunities"
|
|
James Forese
Chair
Group Risk Committee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Membership
|
|
Key responsibilities
|
|
|
Member
since
|
Meeting attendance in
20231
|
|
The GRC has overall non-executive
responsibility for the oversight of risk-related matters and the
risks impacting the Group. The GRC's key responsibilities
include:
- overseeing and advising the Board on all risk-related matters,
including financial and non-financial risks;
- advising the Board on risk appetite-related matters, and key
regulatory submissions;
- reviewing the effectiveness of the Group's risk management
framework and internal controls systems (other than internal
financial controls overseen by the GAC);
- reviewing and challenging the Group's stress testing
exercises; and
- overseeing the Group's approach to conduct, fairness and
preventing financial crime.
|
|
|
James Forese
(Chair)2
|
Jun 2022
|
10/10
|
|
|
|
Geraldine Buckingham
|
Jun 2022
|
10/10
|
|
|
|
Dame Carolyn
Fairbairn3
|
Sep 2021
|
7/10
|
|
|
|
Steven
Guggenheimer4
|
May 2020
|
9/10
|
|
|
|
Kalpana
Morparia5
|
Jul 2020
|
7/8
|
|
|
|
Brendan Nelson6
|
Sep 2023
|
3/3
|
|
|
|
David Nish
|
Feb 2020
|
10/10
|
|
|
|
Jackson Tai7
|
Sep 2016
|
4/4
|
|
|
|
Swee Lian Teo8
|
Oct 2023
|
2/2
|
|
|
|
|
|
|
|
|
|
1 These included six scheduled meetings, three ad
hoc meetings and one joint meeting with the Group Audit Committee
and the Technology Governance Working Group.
2 James Forese was appointed Chair of the
Committee on 5 May 2023.
3 Dame Carolyn Fairbairn was unable to attend
three meetings due to prior commitments.
4 Steven Guggenheimer was unable to attend one
meeting due to a prior commitment.
5 Kalpana Morparia joined the GRC on 1 March 2023.
She was unable to attend one meeting due to a prior
commitment.
6 Brendan Nelson joined the GRC on 1 September
2023.
7 Jackson Tai stepped down from the GRC on 5 May
2023.
8 Swee Lian Teo joined the GRC on 1 October
2023.
|
|
|
|
|
I am pleased to present my first
Group Risk Committee ('GRC') report, having taken over the role of
Chair of the Committee in May 2023. I would like to take this
opportunity to express my sincere gratitude to Jackson Tai for his
service to GRC, and the Group more broadly, prior to stepping down
as Committee Chair. I am also pleased to welcome Kalpana Morparia,
Brendan Nelson and Swee Lian Teo, all of whom joined as members of
the GRC during 2023, and each of whom brings unique skills and
experience to the business of the Committee.
Geopolitical risks and the
macroeconomic environment continued to dominate the landscape in
2023, with turmoil in the financial markets leading to the collapse
of several banks in the US and Europe in the first half of the
year. Commercial real estate in both the US and Asia also
came under increasing pressure due to the high interest rate
environment, inflationary trends and recessionary concerns. Central
banks' efforts to lower inflation by rapidly raising interest rates
also had a wide-ranging impact on retail borrowers as the cost of
living increased globally. The GRC has closely monitored the
Group's credit exposures, market risk and settlement limits in
response to these events, and has endorsed management's proactive
execution in reducing high risk exposures and accelerating
portfolio transformation.
Oversight of financial risks has been
critical against this external backdrop, and the GRC has paid close
focus to the Group's ongoing treasury, capital and liquidity risk
management activities, including early warning indicators, delivery
of the interest rate risk in the
banking book strategy, prudential
sensitivity analysis and capital and liquidity adequacy. Throughout
the year, the GRC reviewed and challenged management on the Group's
regulatory submissions, including the Bank of England's
requirements for the Resolvability Assessment Framework, internal
capital adequacy assessment process ('ICAAP') and internal
liquidity adequacy assessment process ('ILAAP'). The GRC had
primary non-executive responsibility for reviewing the outcomes of
regulatory stress tests, including the 2023 annual cyclical
scenario hybrid mortgage models update and the post-wind-down
business restructuring analysis.
Non-financial risks were also a key
focus of the GRC in 2023. The GRC carefully considered the
Group's regulatory remediation and change programmes, and worked
closely with management to better prioritise and understand where
there are key interdependencies. In particular, the Committee
reviewed and challenged the Group's data strategy and other key
areas of regulatory focus, including oversight of the operational
resilience enhancements, conduct and financial crime, technology
and cyber risk. The GRC also provided oversight and support to risk
transformation activities to develop stronger risk management
capabilities and outcomes across the Group. Climate also continues
to be a priority area of oversight with regular reports on areas of
risk, such as greenwashing, compliance with regulatory
requirements, and ESG policy changes.
Further details on these and other
areas of GRC oversight during the year are set out
below.
The Group Chief Risk and Compliance
Officer, Group Chief Financial Officer, Group Chief Operating
Officer, Group Company Secretary and Chief Governance Officer,
Group Chief Legal Officer, and Group Head of Internal Audit are
standing attendees at GRC meetings. The Chair and members of the
GRC also hold private meetings with the Group Chief Risk and
Compliance Officer, the Group Head of Internal Audit and the
external auditor, PwC, following scheduled GRC meetings.
The participation of our senior
business leaders, including the Group Chief Executive who attended
five scheduled GRC meetings in 2023, and the chief executive
officers of the three global businesses
reaffirmed the ownership and
accountability of risks in the first line of defence.
The Chair meets regularly with the
Group Chief Risk and Compliance Officer, and, where appropriate,
members of senior management, to discuss priorities and track
progress on key actions. The Chair also meets regularly with the
GRC Secretary to ensure the GRC addresses its governance
responsibilities. A summary of coverage is set out in the 'Matters
considered during 2023' table.
Matters considered during
2023
|
|
Jan
|
Feb
|
Mar
|
May
|
Jun
|
Jul
|
Sep
|
Dec
|
Holistic enterprise risk monitoring
including Group risk profile1
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
Risk framework and
policies
|
l
|
l
|
ô
|
ô
|
ô
|
l
|
ô
|
ô
|
Treasury and traded risk
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
Wholesale/retail credit
risk
|
l
|
l
|
ô
|
l
|
l
|
l
|
l
|
ô
|
Financial reporting risk
|
ô
|
l
|
ô
|
ô
|
ô
|
l
|
ô
|
ô
|
Resilience risk (including IT and
operational risk)
|
ô
|
ô
|
ô
|
l
|
l
|
ô
|
l
|
l
|
Financial crime risk
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
People and conduct risk
|
ô
|
ô
|
ô
|
l
|
l
|
ô
|
l
|
l
|
Regulatory compliance risk
|
ô
|
ô
|
l
|
l
|
ô
|
l
|
l
|
l
|
Legal risk
|
ô
|
l
|
ô
|
l
|
l
|
l
|
l
|
l
|
Model risk
|
ô
|
ô
|
ô
|
ô
|
ô
|
l
|
ô
|
l
|
Climate risk
|
ô
|
l
|
ô
|
l
|
l
|
ô
|
l
|
l
|
l
|
Matter considered
|
ô
|
Matter not considered
|
1 The GRC receives updates on all risk types
through the Group risk profile, which is presented to the majority
of meetings. The Committee also met with the Group Chief Risk and
Compliance Officer and Risk and Compliance Executive Committee
members in October 2023 to review matters relating to risk
transformation, wholesale credit risk, treasury risk, model risk,
operational risk, data and climate risk.
How the Committee discharged its
responsibilities
Activities outside formal meetings
The GRC held a number of meetings
outside its regular schedule to facilitate deeper and more
effective oversight of the risks impacting the Group. Areas covered
included capital management, stress testing, ICAAP and ILAAP
preparations, as well as briefings on the Resolvability Assessment
Framework. Further details of these sessions are included in the
'Principal activities and significant issues considered during
2023' table starting on page
276.
Connectivity with principal subsidiary risk
committees
During 2023, the GRC continued to
actively engage with principal subsidiary risk committees through
the scheduled participation of principal subsidiary risk committee
chairs at relevant GRC meetings, and through a quarterly
connectivity meeting with the principal subsidiary risk committee
chairs. This meeting is also attended by the Group Chief Risk and
Compliance Officer. This participation and connectivity promoted
the sharing of information and best practices between the GRC and
principal subsidiary risk committees.
The GRC also received reports at its
regular meetings on the key risks facing principal subsidiaries
including escalations and certifications from the principal
subsidiary risk committees. The certifications confirmed that the
principal subsidiary risk committees had challenged management on
the quality of the information provided, reviewed the actions
proposed by management to address any emerging issues and that risk
management and internal control systems had been operating
effectively.
These interactions furthered the
GRC's understanding of the risk profile of the principal
subsidiaries, leading to more comprehensive review and challenge by
the GRC.
Engagement with the Risk and Compliance Executive
Committee
During 2023, the GRC met with the
Risk and Compliance Executive Committee to promote information
sharing, meet and assess the Group Risk and Compliance function
leadership team, and encourage active engagement with executive
management.
During the engagement meeting, the
GRC developed a better understanding of the efforts to strengthen
our capabilities across the Group Risk and Compliance function.
There were also in-depth discussions on the progress and
remediation of key regulatory concerns. The engagement promoted a
healthy working relationship between GRC members and executive
management.
Collaborative oversight by the GRC, GAC and Technology
Governance Working Group
The GRC worked closely with the GAC
and the Technology Governance Working Group to address any areas of
significant overlap, and to oversee risk more comprehensively
through inter-committee communications and joint
meetings.
The GRC, GAC and the Technology
Governance Working Group Chairs convened on two occasions to
consider the Group's data strategy and ambitions. Further details
of these sessions can be found under 'Collaboration with
GAC/GRC/Technology Governance Working Group' in the GAC report on
page 271.
The committees and working group
worked closely to ensure appropriate alignment in the review,
discussion, challenge and conclusions on topics including risk and
control issues relating to digital assets and currencies, and the
transition of core Finance capabilities to the Cloud. This ensured
that the committees benefited from each other's expertise and
challenge.
Coordination between the GRC, GAC and
the Technology Governance Working Group is supported by
cross-membership. The GRC and GAC Chairs are members of both
committees, and this strengthened connectivity and the flow of
information between the committees. Each of the co-chairs of the
Technology Governance Working Group are members of the GRC and GAC,
respectively.
Principal activities and significant
issues considered during 2023
|
|
Risk
areas
|
Key
issues
|
Conclusions and actions
|
|
|
Macroeconomic, geopolitical and other
emerging risks have the potential to present significant challenges
to revenue growth, operational resilience and our commitment to
serve customers and local markets.
|
The GRC closely monitored
geopolitical and macroeconomic risks that could impact the Group's
strategy, business performance or operations. These risks were
exacerbated by the ongoing Russia-Ukraine war and the developing
Israel-Hamas war, as well as the expected 'higher for longer'
interest rate environment, inflation and impacts on the commercial
real estate portfolio.
The GRC continued to track top and
emerging risks, our risk appetite and other management information
metrics, as well as other early warning measures to understand
sensitivities and the likelihood of the potential impact to our
operations, customers and stakeholders. The GRC provided oversight
and challenge of a robust book of strategic management actions to
respond to potential downside scenarios.
Reflecting the Committee's ability to
travel to different jurisdictions and regions more frequently, the
GRC requested reports on the risk profile of key business areas in
local geographies and invited principal subsidiary chairs and
relevant management to attend and participate in
discussions.
|
|
|
|
|
|
|
Effective risk management policies,
frameworks and thresholds, and oversight of these, are essential
for HSBC to safely, consistently and sustainably support customers
and deliver strategic aims.
|
The Group has a risk appetite
statement to define risk appetite and tolerance thresholds, which
forms the basis of the risk management procedures for the first and
second lines of defence, the Group's capacity and capabilities to
support customers, and the achievement of strategic goals. The GRC
maintained oversight of the Group's risk management framework,
reviewing changes to the Group's risk appetite statements and
recommending these to the Board for approval. The agreed risk
appetite statement then provided the basis for the Committee's
interactive review of financial and non-financial risk management
information at each scheduled GRC meeting. The GRC continued to
promote the development of more dynamic and granular risk appetite
statements that were both forward looking and dynamically
responsive to emerging risk drivers, and linked to the Group's
strategy, stress testing and financial resource plan. Changes were
recommended by the GRC to the Group's risk appetite statement,
including in the areas of interest rate risk in the banking book,
wholesale credit risk, climate risk, model risk, digital assets and
currencies, resilience risk, reputational risk and regulatory
reporting risk.
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Capital and liquidity risk must be
effectively monitored. It presents key risks to banks globally, as
demonstrated in the first half of 2023 when there were a number of
bank failures in the US and Europe. Similarly, developing action
plans and guardrails to cover scenarios of recovery or resolution
at a subsidiary or Group level is an essential part of HSBC's
prudential management.
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The Group takes continuous and active
steps to safeguard its capital and liquidity positions. It performs
internal and regulatory stress tests to measure resilience and
performance against stress, and to consider strategic management
actions that could be applied against anticipated stress events and
headwinds.
The GRC conducted its annual review
and challenge of the Group's ICAAP and ILAAP, and provided
recommendation to the Board for approval. The GRC continued to
evaluate the Group's IRRBB strategy and progress made against the
multi-year liquidity improvement programme.
The GRC reviewed the Group's ongoing
activities to identify, manage and mitigate treasury, capital and
liquidity risks, including early warning indicators, sensitivity
analysis, capital and liquidity reporting and adequacy.
In relation to stress testing
exercises, the GRC reviewed the Bank of England's 2023 annual
cyclical scenario hybrid mortgage models update. The results were
approved by the Committee in March 2023. The GRC also considered
the 2024 financial resource plan and Group-wide internal stress
test overview, scenarios and outputs, which contribute to the
Group's commitment to regularly test the resilience of the balance
sheet and profit and loss under multiple scenarios of varying
severity.
In addition to oversight of capital
and liquidity risk, the GRC also reviewed and provided challenge to
ongoing plans to improve balance sheet velocity across the Group
through better distribution enabling further, targeted origination
and ensuring effective use of capital to support revenue
growth.
As part of its regulatory
obligations, the Group is required to show how its resolution
strategy could be carried out in an orderly way and identify any
risks to successful resolution. The GRC continued its oversight of
the Group's progress in developing its capabilities towards the
Bank of England's requirements for recovery and resolvability. In
February 2023, the GRC reviewed the planned approach for 2023
post-wind-down business restructuring analysis, prior to submission
to the PRA. The GRC reviewed and recommended the 2023 Resolvability
Assessment Framework self-assessment to the Board for approval. The
Chairs of the GRC and the GAC both received comprehensive briefings
prior to the presentation of the framework.
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HSBC faces risk from the possibility
of losses resulting from the failure of a counterparty to meet its
agreed obligations to pay the Group.
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The GRC reviewed updates on the
strategy and approach to managing credit risk and credit risk
capabilities. The GRC received regular updates on the Group's
expected credit losses and provisions, and the credit risk arising
from the wholesale portfolio and mortgage books. Throughout the
year, the GRC focused on oversight of management's enhancement
objectives for wholesale credit risk management, in particular to
improve the Group's approach to country and industry concentration
risks.
The GRC continued its emphasis on
building even stronger credit capabilities for specialty sectors,
the development of stronger portfolio management capabilities and
further improving the Group's credit risk culture. A key focus area
continued to be offering support to our retail customers
experiencing financial difficulty, by maintaining appropriate tools
and treatments and ensuring that conduct and good customer outcomes
was a priority.
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HSBC is exposed to risks where
controls supporting the reporting of its financial statements are
not effective, resulting in material error or
misstatement.
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While the GAC maintains primary
responsibility in relation to internal financial control systems,
with further detail on pages 266 to
271, the GRC receives reports on entity
level control assessments to enable the oversight of the
effectiveness of such controls in support of the Group's financial
reporting. The GRC also receives relevant audit reports that
provide an assessment of control effectiveness for financial
reporting risks.
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Resilience risks could lead to a
situation where we may be unable to provide our customers with
critical business services due to significant
disruption.
Technology risks could cause
unmanaged disruption to any IT system within HSBC, as a result of
malicious acts, accidental actions or poor IT practice, or IT
system failure.
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The GRC continued its oversight of
the Group's implementation of operational resilience capabilities
in line with PRA and FCA policies. The GRC reviewed and challenged
the operational resilience self-assessment against regulatory
expectations, and worked with management to ensure that ownership
and the delivery of resilience outcomes were embedded within the
business and with function leaders. The GRC also received reports
on system incidents and outages experienced across the Group,
including reports on immediate actions being taken to enhance
system continuity for, and communicate with customers, and measures
being implemented to improve resilience-related controls to prevent
reoccurrence.
The GRC regularly reviewed reports on
the Group's technology risk profile, as well as receiving bi-annual
updates in relation to the risk and control environment, as
well as the current threat landscape and emerging risks. The GRC
(working with the newly-created Group Technology Committee as
appropriate) will consider further the risks and opportunities
inherent in the use of AI (generative and advanced) in
2024.
The GRC maintained a strong focus on
understanding the Group's data risk landscape, its data strategy
and data management programme. The GRC collaborated with the GAC
and the Technology Governance Working Group on data strategy, the
execution plan and timeline for data remediation, the governance
approach and the investment model. Further details on the joint
meetings are included in the 'Collaboration with GAC/GRC/Technology
Governance Working Group' section on page 275.
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There is a risk that HSBC's products
and services could be exploited for criminal activity, including
fraud, bribery and corruption, tax evasion, sanctions and export
control violations, money laundering, terrorist financing and
proliferation financing.
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The GRC reviewed the Group's approach
to managing its financial crime risk across geographies and
businesses. This included reviewing updates to the Group's
financial crime policy, enhancing the approach to insider risk, and
monitoring the fraud landscape and strategies for managing fraud
risk.
The ongoing Russia-Ukraine war has
necessitated continued oversight of the ever-changing and
increasingly complex international sanctions landscape in which the
Group and its customers operate, as well as the Group's approach to
managing its compliance with multiple and differing sanctions
regimes globally.
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People are central to everything HSBC
does and it is essential to manage the risk of not having the right
people with the right skills, and to ensure staff always have the
customer's interest at the forefront.
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The GRC monitored people risk and
employee conduct, with support from the Group Chief Human Resources
Officer and Group Chief Risk and Compliance Officer. The GRC
considered people risk issues with a focus on the four 'c's:
capacity, capability, culture and conduct. It also considered
remuneration risks, and strategies to retain talent and acquire new
capabilities in key areas.
Of key importance, the GRC placed
strong emphasis on policies and practices relating to conduct and
fairness to customers, especially vulnerable customers given
heightened macroeconomic pressures and stress on customers across
markets.
The GRC met in November to review the
Group's risk and reward alignment framework to promote sound and
effective risk management in meeting PRA and FCA remuneration rules
and expectations.
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As a result of operating in multiple
jurisdictions globally, HSBC is exposed to risks associated with
inappropriate market conduct or breaching related financial
services regulatory standards or expectations.
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The GRC and its members actively
engage with regulators and act on feedback. The Committee closely
monitors the progress of any regulatory remediation activities,
with support from the Group Chief Risk and Compliance Officer as
well as principal subsidiary risk committee chairs. Throughout the
year, the GRC had oversight over reports providing feedback from
regulators, including a summary of regulatory deliverables to
ensure HSBC remains in line with regulatory standards and
expectations.
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HSBC is exposed to the risk of
financial loss, legal or regulatory action resulting from
contractual risk, dispute management risk, breach of competition
law or intellectual property risk.
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The GRC oversees and receives regular
updates on key legal developments and material legal issues from
the Group Chief Legal Officer. The updates also cover material
litigation and regulatory enforcement matters and an overview of
the legal risk profile of HSBC.
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If models have been inadequately
designed, implemented or used, or do not perform in line with
expectations and predictions, then HSBC can face risks from
inappropriate or incorrect business decisions arising from their
use.
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The GRC continued to oversee the
Group's progress in managing model risk through the Group Chief
Risk and Compliance Officer's Group risk profile report. The GRC
oversaw the progress in achieving our model risk vision,
strengthening our model risk management capabilities and addressing
regulatory requirements across global jurisdictions. In particular,
the GRC reviewed the PRA Supervisory Statement 1/23 and the impact
on the Group. The GRC reviewed the new guidance, potential resource
implications and the planned programme of changes across all three
lines of defence. It also noted the enhanced governance
expectations in relation to model oversight.
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Environmental, social and governance
risks present significant risks to organisations both in terms of
their own operations and how they engage with stakeholders and
communities.
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The GRC remained focused on climate
risk and greenwashing risk. The GRC received reports on climate
risk management and energy policies, while maintaining oversight of
delivery plans to ensure that the Group develops robust climate
risk management capabilities.
The GRC approved the 2023 internal
climate scenario analysis and nature scenario analysis pilot in
July 2023. The outcomes will be used to respond to multiple
regional regulatory climate exercises as well as meeting regulatory
expectations on incorporating climate change within the Group's
strategic plans and ICAAP.
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Committee evaluation
2022/2023
During 2023, the GRC implemented the
recommendations of the 2022 committee evaluation conducted by
Lintstock in consultation with the Group Company Secretary and
Chief Governance Officer and Chief Risk and Compliance Officer.
This included the need for continued focus on the quality of
reporting, the importance of focusing limited agenda time to the
most critical issues, and further clarity in roles and coordination
between the GRC and other Board committees. The outcomes of the
evaluation were reported to the Board, and progress was tracked by
the GRC through the year.
2023/2024
During the year, the annual review of
the effectiveness of the Board committees, including the GRC, was
conducted externally by Independent Board Evaluation. The review
determined that the GRC continued to operate
effectively.
Areas for enhancement were
identified, including the need for: increased focus on the most
significant enterprise risks recognising the breadth of the risk
agenda; continued close engagement with subsidiaries; and
enhancement of induction programmes for new members given the
complexity of much of the subject matter under discussion. A review
of escalation parameters and filters will also be undertaken by the
GRC in 2024.
The outcomes of the evaluation have
been reported to the Board and the GRC will track progress in
implementing recommendations during 2024.
Further details of the annual review
of effectiveness can be found on pages 260
to 261.
The Committee will continue to
monitor progress to deliver enhancements in response to feedback
from the evaluations in 2024.
Focus of future activities
The GRC's focus for 2024 will include
the following activities:
- oversee risk transformation activities to develop even
stronger risk management capabilities, including the continued
enhancement of the Group's risk appetite and risk management
framework, especially in light of continued geopolitical and
macroeconomic headwinds;
- continue to assess the Group's operational resilience
capability and the implementation of enhancements to the operating
model;
- continue to oversee treasury risk to strengthen our capital
and liquidity management capabilities;
- monitor delivery against our climate ambitions and the
development of appropriate data and model management tools and
capabilities;
- continue the oversight of recovery and resolution planning
activities to assess our resolvability capabilities if such
situation arises;
- continue the oversight of the delivery of technology-related
programmes including the data remediation programme, and
enhancement of the Group's IT systems/platform;
- continue to oversee financial crime risk and the strengthening
of the financial crime control framework, including proactive
management by the business; and
- assess our strategic opportunities and risks including
exposures to digital currencies or assets and use of timely
application of technology such as machine learning or artificial
intelligence.