REG - HSBC Holdings PLC - Annual Financial Report - Part 7
21/02/2024 16:45
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RNS Number : 9468D HSBC Holdings PLC 21 February 2024
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The Board
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
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 management(2)
Number % Number of senior positions(1) Number %
Male 8 53 4 15 79
Female 7 47 0 4 21
Other - - - -
-
Not specified/prefer not to say - - - -
-
Board members Executive management(2)
Number % Number of senior positions(1) 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.
How we are governed
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 12/12 - Provides effective leadership of the Board and promotes the highest
standards of corporate governance practices.
Mark E Tucker(2,3)
- 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 12/12 - Leads and directs the implementation of the Group's business strategy,
embedding the organisation's culture and values.
Group Chief Executive
- Leads the Group Executive Committee with responsibility for the
Noel Quinn(3) 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 12/12 - Supports the Group Chief Executive in developing and implementing the
Group strategy, and recommends the annual budget and long-term strategic and
Group Chief Financial Officer financial resource plan.
Georges Elhedery(3,4) - 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 10/12 - Supports the Group Chairman, acting as intermediary for non-executive
Directors when necessary.
Senior Independent Director
- Leads the non-executive Directors in the oversight of the Group
David Nish(3,5,6) 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 Buckingham(3,5) 12/12
Rachel Duan(3,5) 12/12
Dame Carolyn Fairbairn(3,5,6) 10/12
James Forese(3,5) 12/12
Ann Godbehere(4,5) 3/3
Steven Guggenheimer(3,5,6) 11/12
Dr José Antonio Meade Kuribreña(3,5,7) 12/12
Kalpana Morparia(3,4,5) 10/10
Eileen Murray(3,5,6) 11/12
Brendan Nelson(4,5) 3/3
Jackson Tai(3,5,6,8) 6/7
Swee Lian Teo(4,5) 2/2
Group Company Secretary and Chief Governance Officer - Maintains strong and consistent governance practices at Board level and
throughout the Group.
Aileen Taylor
- 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 Canada(1) 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 Nish(1) 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 Group(2)
1 Brendan Nelson will be appointed as chair from 21 February 2024. Co-Chairs: Eileen Murray and Steven Guggenheimer
2 The Technology Governance Working Group will be demised on 1 March 2024.
The Group Technology Committee will be established on the same date.
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 Induction(1) Strategy and business briefings(2) Risk and Corporate governance, ESG and other reporting matters(4) Board global mandatory training(5)
control(3)
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 Godbehere(6) 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 Nelson(6) l l l l l
David Nish ô l l l l
Swee Lian Teo(6) 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 discussed(1)
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 matters(2) l l l l l l l ô l
Regulatory matters with regulators in attendance(3) 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 Local branch colleagues US-based graduates Mexico and Latin America-based colleagues Hyderabad and India-based colleagues
Directors
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 Number of employees engaged virtually/physically by workforce engagement
Director 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 - Consideration will be given to the frequency and format of strategic
with management, enhancements could be made to drive even greater value. updates to the Board.
- This would reinforce a clear understanding of priorities and enhanced - The Group Company Secretary and Chief Governance Officer will support
clarity of management reporting, particularly in relation to areas of the Group Chairman and committee chairs to ensure that there is enhanced
challenge in, or delay to, execution of those key deliverables. consolidation of related discussion and actions across Board and the
committees, including clearer articulation of expected outcomes.
- Greater rigour was required in relation to the communication of,
accountability for, and execution against the Board's feedback. - 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 - The Board has commissioned a training programme, to be developed and
meetings during the year was a common area of discussion during the review. delivered by the Group Company Secretary and Chief Governance Officer, to
Enhanced, dynamic and well-timed reporting of information to the Board is further support senior leaders and other subject matter experts on reporting
required. to, and interactions with, the Board.
- Although the Board welcomed the thoroughness of management's review of - A condensed key performance indicators framework was approved by the
key performance indicators, these required to be refined for Board purposes to Board at its meeting in January 2024 and will be cascaded throughout the Group
ensure better alignment with paper narrative to ensure a clear, consistent by the Group Chief Executive, the Group Chief Financial Officer and the Group
basis for Board reporting. Company Secretary and Chief Governance Officer.
- Although the Board welcomed the important and valuable role of the - A formal Board-level governance committee consisting of non-executive
Technology Governance Working Group, there is still more to do to develop a Directors - the Group Technology Committee - will be established to provide
holistic oversight of technology at Board-level. oversight of technology-related matters across the Group. This will be chaired
by Eileen Murray and take effect from 1 March 2024.
- It was agreed that the future approach to oversight of
technology-related matters needed to complement the existing responsibilities - The existing Technology Governance Working Group will be demised at that
of the Board, Group Risk Committee, Group Audit Committee and subsidiary time.
boards.
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
Tuck
er
Chai
r
Nomi
nati
on
&
;
Corp
orat
e
Gove
rnan
ce
Comm
itte
e
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 Fairbairn(1) Sep 2021 8/9
James Forese May 2020 9/9
Ann Godbehere(2) Sep 2023 2/2
Steven Guggenheimer May 2020 9/9
José Antonio Meade Kuribreña Apr 2019 9/9
Kalpana Morparia(3) Mar 2023 6/6
Eileen Murray(4) Jul 2020 8/9
Brendan Nelson(2) Sep 2023 2/2
David Nish Apr 2018 9/9
Jackson Tai(5) Apr 2018 5/5
Swee Lian Teo(6) 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
Group Audit Committee
"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."
Davi
d
Nish
Chai
r
Grou
p
Audi
t
Comm
itte
e
Membership Key responsibilities
Member since Meeting attendance in 2023(1) 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.
David Nish (Chair) May 2016 10/10
Rachel Duan(2) Apr 2022 9/10
James Forese(3) May 2020 7/7
Eileen Murray(4) Jun 2022 8/10
Brendan Nelson(5) Sep 2023 4/4
Jackson Tai(6) Dec 2018 3/3
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.
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
Committee governance
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
Jan Feb Apr Jun Jul Sep Oct Dec
Reporting
Financial reporting matters including: l l l l l l l l
- review of financial statements, ensuring that disclosures are fair,
balanced and understandable
- significant accounting judgements
- going concern assumptions and viability statement
- supplementary regulatory information
ESG and climate reporting l l l l l l l l
Regulatory reporting-related matters including: l l l l l l l l
- 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
Certificates from principal subsidiary audit committees ô l ô ô l ô ô ô
Control environment
Control enhancement programmes l l l l l l l l
Group transformation ô ô ô ô l l ô ô
Review of deficiencies and effectiveness of internal financial controls l l l l l l l l
Internal audit
Reports from Global Internal Audit l l l ô l ô l l
Audit plan updates, independence and effectiveness l l l ô l ô l l
External audit
Reports from external audit, including external audit plan l l l l l l l l
Appointment, remuneration, non-audit services and effectiveness l l l l ô l l l
Compliance
Accounting standards and critical accounting policies ô l ô ô l ô l l
Corporate governance codes and listing rules ô l ô ô l ô ô ô
Whistleblowing
Whistleblowing arrangements and effectiveness ô l ô ô ô l ô l
l Matter considered ô Matter not considered
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.
2023 2022
Auditors' remuneration $m $m
Total fees payable 155.9 148.1
of which fees for non-audit services 46.1 50.5
Ratio of non-audit fees to audit fees(1) 42.0% 51.7%
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 ESG disclosures for the Annual Report and Accounts
2023 in detail, to ensure these were fair and balanced, and were also
The Committee considered management's efforts to enhance ESG disclosures and transparent on the challenges faced and aligned with the Group's progress in
associated verification and assurance activities, with a specific focus on the the embedding of sustainable and climate-related policies across the business.
net zero transition plan and climate-related disclosures made in the Annual
Report and Accounts 2023. 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 Committee reflected on the continued focus on the quality and reliability
of regulatory reporting by the PRA and other regulators globally. The GAC
The GAC monitored the progress of the regulatory reporting assurance programme reviewed management's proposals on remediation efforts, and endorsed the
to enhance the Group's regulatory reporting, impact on the control environment strategy for the remediation of the errors in the Group's reporting
and oversight of regulatory reviews and engagement. 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 Committee reviewed economic scenarios for the key countries and
territories in which the Group operates and challenged management's judgements
The measurement of expected credit losses involves significant judgements, on the weightings assigned to the scenarios. The Committee also challenged
particularly under current economic conditions. There remains uncertainty over management's judgemental adjustments to account for uncertainty in specific
ECL estimation due to sustained high inflation, a high interest rate sectors and geographies, including the controls underpinning the adjustments
environment and weaker economic growth in the Group's key operating markets. 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 The Committee considered the recoverability of deferred tax assets, in
particular in the US, the UK and France.
HSBC has recognised deferred tax assets to the extent that they are
recoverable through expected future taxable profits. Significant judgement The Committee also considered management's judgements relating to tax
continues to be exercised in assessing the probability and sufficiency of positions in respect of which the appropriate tax treatment is uncertain, open
future taxable profits, future reversals of existing taxable temporary to interpretation or has been challenged by the tax authority.
differences and expected outcomes relating to uncertain tax treatments.
Valuation of defined benefit pension 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
The valuation of defined benefit pension obligations involves highly plan of HSBC Group. Details of key assumptions can be found on pages 366 to
judgemental inputs and actuarial assumptions which includes rate, inflation 368 of the 'Notes on the financial statements'.
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.
Valuation of financial instruments The Committee considered the key valuation metrics and judgements involved in
the determination of the fair value of financial instruments, and agreed with
During 2023, management continuously refined its methodology and approach to the judgements applied by management, which were validated through appropriate
valuing the Group's portfolio in relation to investments, trading assets and governance and control forums.
liabilities and derivatives.
Investment in subsidiaries The Committee reviewed the judgements in relation to the impairment review of
HSBC Overseas Holdings (UK) Limited and the key inputs such as projected
Management has reviewed investments in subsidiaries for indicators of profits, underpinning the recoverable amounts of its subsidiaries.
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.
Investment in an associate - Bank of Communications Co., Limited The Committee reviewed and challenged management's judgements in relation to
impairment reviews of HSBC's investment in BoCom, performed using a
During the year, management performed impairment reviews of HSBC's investment value-in-use methodology. The GAC reviewed the appropriateness of key
in Bank of Communications Co., Ltd ('BoCom'). This included consideration of assumptions such as projected future cash flows, with a particular focus on
the potential impact of BoCom's designation as a globally systemically the loan growth and net interest margin outlook, and potential impacts of the
important bank in November 2023. recent designation of BoCom as a globally systemically important bank.
The impairment reviews are complex and require significant judgements, such as The Committee held a dedicated meeting to challenge management on the
the appropriateness of projected future cash flows, discount rate, and impairment charge taken in the fourth quarter of 2023, considering sensitivity
regulatory capital assumptions. 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 The GAC received regular management updates on hedging strategy, including the
portfolio repositioning of structural interest rate hedges.
During 2023, management proposed a framework for the disposal of selected The Committee reviewed controls on, and financial outcomes of, disposals of
hold-to-collect-and-sell securities to improve risk management of hold-to-collect-and-sell securities.
hold-to-collect-and-sell positions and to stabilise and protect net interest
income over the medium term.
Impairment of goodwill and non-financial assets The Committee reviewed and challenged management's approach and methodology
used for the impairment testing of goodwill and non-financial assets, with a
During the year, management tested for impairment goodwill and non-financial key focus on the projected cash flows included in the forecasts and discount
assets. Key judgements in this area relate to long-term growth rates, discount rates used. The GAC also challenged management's key judgements and considered
rates and projected future cash flows to include for each cash-generating unit the reasonableness of the outcomes against business forecasts and strategic
tested, both in terms of compliance with the accounting standards and objectives of HSBC.
reasonableness of the forecasts.
Legal proceedings and regulatory matters The Committee reviewed reports from management on legal proceedings and
regulatory matters, and challenged related accounting judgements and
Management has used judgement in relation to the recognition and measurement disclosures.
of provisions, as well as the existence of contingent liabilities for legal
and regulatory matters.
Long-term viability and going concern statement 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
The GAC has considered a wide range of information relating to present and and parent company. The GAC considered the statement to be made by the
future projections of profitability, cash flows, capital requirements and Directors and concluded that the Group and parent company will be able to
capital resources. These considerations include stressed scenarios that continue in operation and meet liabilities as they fall due, and that it is
reflect the implications of: appropriate that the long-term viability statement covers a period of three
years.
(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.
Impact of acquisitions and disposals The Committee reviewed management's judgements related to the planned sales of
our banking business in Canada, our retail banking operations in France and
HSBC engaged in a number of business acquisitions and disposals, notably in our banking business in Russia, such as the timing of classification as
the UK, Canada, France, Greece, China, Oman and Russia. held-for-sale and the remeasurement of assets.
Significant judgement was involved in determining the timing of recognition of The Committee considered the financial and accounting impacts of the merger of
assets held-for-sale, gains or losses, and the measurement of assets and HSBC Oman with Sohar International Bank of Oman, and the acquisitions of
liabilities on acquisition or disposal. Silicon Valley Bank UK Limited, Silkroad Property Partners Pte Limited and
Citi's retail wealth management portfolio in China.
Sustainable 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
The GAC will oversee the impact on the risk and control environment. 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 Committee received updates on the progress and impact of the Basel III
programme on the Group.
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 Management discussed the delayed implementation dates due to ongoing
context of the strategy and structure of the balance sheet. 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 Given that all material remediation plans within the Group rely heavily on
data, the committees held joint meetings to develop an understanding of the
The GAC and GRC worked closely to ensure there were procedures to manage risk HSBC data strategy and execution plan. The joint meetings discussed:
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 - the review undertaken of data within the Group and the associated
enhance connectivity, coordination and flow of information. 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.
Group Risk Committee
"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"
Jame
s
Fore
se
Chai
r
Grou
p
Risk
Comm
itte
e
Membership Key responsibilities
Member since Meeting attendance in 2023(1) 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 Fairbairn(3) Sep 2021 7/10
Steven Guggenheimer(4) May 2020 9/10
Kalpana Morparia(5) Jul 2020 7/8
Brendan Nelson(6) Sep 2023 3/3
David Nish Feb 2020 10/10
Jackson Tai(7) Sep 2016 4/4
Swee Lian Teo(8) 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.
Committee governance
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 profile(1) 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 The GRC closely monitored geopolitical and macroeconomic risks that could
present significant challenges to revenue growth, operational resilience and impact the Group's strategy, business performance or operations. These risks
our commitment to serve customers and local markets. 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 The Group has a risk appetite statement to define risk appetite and tolerance
of these, are essential for HSBC to safely, consistently and sustainably thresholds, which forms the basis of the risk management procedures for the
support customers and deliver strategic aims. 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.
Capital and liquidity risk must be effectively monitored. It presents key The Group takes continuous and active steps to safeguard its capital and
risks to banks globally, as demonstrated in the first half of 2023 when there liquidity positions. It performs internal and regulatory stress tests to
were a number of bank failures in the US and Europe. Similarly, developing measure resilience and performance against stress, and to consider strategic
action plans and guardrails to cover scenarios of recovery or resolution at a management actions that could be applied against anticipated stress events and
subsidiary or Group level is an essential part of HSBC's prudential headwinds.
management.
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.
HSBC faces risk from the possibility of losses resulting from the failure of a The GRC reviewed updates on the strategy and approach to managing credit risk
counterparty to meet its agreed obligations to pay the Group. 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.
HSBC is exposed to risks where controls supporting the reporting of its While the GAC maintains primary responsibility in relation to internal
financial statements are not effective, resulting in material error or financial control systems, with further detail on pages 266 to 271, the GRC
misstatement. 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.
Resilience risks could lead to a situation where we may be unable to provide The GRC continued its oversight of the Group's implementation of operational
our customers with critical business services due to significant disruption. resilience capabilities in line with PRA and FCA policies. The GRC reviewed
and challenged the operational resilience self-assessment against regulatory
Technology risks could cause unmanaged disruption to any IT system within expectations, and worked with management to ensure that ownership and the
HSBC, as a result of malicious acts, accidental actions or poor IT practice, delivery of resilience outcomes were embedded within the business and with
or IT system failure. 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.
There is a risk that HSBC's products and services could be exploited for The GRC reviewed the Group's approach to managing its financial crime risk
criminal activity, including fraud, bribery and corruption, tax evasion, across geographies and businesses. This included reviewing updates to the
sanctions and export control violations, money laundering, terrorist financing Group's financial crime policy, enhancing the approach to insider risk, and
and proliferation financing. 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.
People are central to everything HSBC does and it is essential to manage the The GRC monitored people risk and employee conduct, with support from the
risk of not having the right people with the right skills, and to ensure staff Group Chief Human Resources Officer and Group Chief Risk and Compliance
always have the customer's interest at the forefront. 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.
As a result of operating in multiple jurisdictions globally, HSBC is exposed The GRC and its members actively engage with regulators and act on feedback.
to risks associated with inappropriate market conduct or breaching related The Committee closely monitors the progress of any regulatory remediation
financial services regulatory standards or expectations. 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.
HSBC is exposed to the risk of financial loss, legal or regulatory action The GRC oversees and receives regular updates on key legal developments and
resulting from contractual risk, dispute management risk, breach of material legal issues from the Group Chief Legal Officer. The updates also
competition law or intellectual property risk. cover material litigation and regulatory enforcement matters and an overview
of the legal risk profile of HSBC.
If models have been inadequately designed, implemented or used, or do not The GRC continued to oversee the Group's progress in managing model risk
perform in line with expectations and predictions, then HSBC can face risks through the Group Chief Risk and Compliance Officer's Group risk profile
from inappropriate or incorrect business decisions arising from their use. 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.
Environmental, social and governance risks present significant risks to The GRC remained focused on climate risk and greenwashing risk. The GRC
organisations both in terms of their own operations and how they engage with received reports on climate risk management and energy policies, while
stakeholders and communities. 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.
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.
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