HSBC’s Risk Management Framework: A Pillar of Operational Stability
Effective Risk Management at HSBC Bermuda
In a move to ensure the stability and sustainability of its operations, HSBC Bermuda has implemented an effective risk management framework that is overseen by the Board and monitored by various committees.
Risk Measurement and Reporting Structures
The bank’s risk measurement and reporting structures are deployed across its global businesses and major operating subsidiaries through a common operating model for integrated risk management and control. This model sets out the respective responsibilities of Group, global business, region, and country-level risk functions in areas such as:
- Risk governance
- Oversight
- Compliance risks
- Approval authorities
- Lending guidelines
- Global and local scorecards
- Management information
- Reporting
- Relations with third parties
Analytics and Model Development Management
HSBC Bermuda leverages the following functions for risk analytics and model development management, governance, and review:
- Global Risk Analytics
- Retail Risk Analytics
- Model Governance
- Independent Model Review
The bank’s models are subject to regular reviews and updates to reflect changes in law, regulation, markets, products, and emerging best practices.
Group Risk Management Policies
The Group’s risk management policies are encapsulated in the Functional Instructional Manuals, which communicate HSBC’s standards and provide guidance to employees. These policies support the formation of risk appetite and establish procedures for monitoring and controlling risks, with timely and reliable reporting to management.
Each business, function, and Digital Business Services is responsible for creating and maintaining its own business-specific procedures. Staff are trained using these procedures, which are reviewed on a regular basis.
Compliance Risk Management
The bank’s compliance risk meeting ensures effective enterprise-wide management of compliance risk and controls, while the Asset Liability Management Committee reviews all balance sheet risks to ensure adequate controls exist.
Pillar 3 Disclosures
The bank’s Pillar 3 Disclosures have been prepared in accordance with regulatory capital adequacy concepts and rules, rather than International Financial Reporting Standards (IFRSs). While some information may not be directly comparable with the financial information in the Consolidated Financial Statements, the disclosures provide a comprehensive overview of the bank’s risk management framework.
Valuation Adjustments
The bank’s fair value adjustments already reflect valuation uncertainty to some degree, but additional valuation adjustments are made to reach a specified degree of confidence. The immaterial adjustment amount as at December 31, 2022, was determined through a review of these adjustments.
Conclusion
HSBC Bermuda’s robust risk management framework is designed to ensure the stability and sustainability of its operations, and the bank continues to monitor and update its policies and procedures to reflect changing market conditions and regulatory requirements.