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Operational Risk Management at HSBC

Operational Risk Management at HSBC. David Breden HSBC Operational Risk Consultancy. Context - the HSBC Group. We operate in 76 countries Not all are EU or G-10 members We have diverse portfolios and operations. The HSBC Approach.

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Operational Risk Management at HSBC

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  1. Operational Risk Management at HSBC David Breden HSBC Operational Risk Consultancy

  2. Context - the HSBC Group • We operate in 76 countries • Not all are EU or G-10 members • We have diverse portfolios and operations

  3. The HSBC Approach • Harness the intellectual expertise dispersed in Group • Avoid pointless bureaucracy • Constructive partnership with colleagues around the world

  4. Components of the OpR framework • Risk identification and assessment • Actions/controls • loss data collection • KRIs (being developed)

  5. Risk self-assessment • Brainstorming sessions • What risks keep you awake at night? • Distinguish between inherent risk and controls in place • Express in common risk language

  6. HSBC Operational Risk Matrix • Impact x Likelihood = Inherent level of Risk • Exposure = effect of controls/mitigation

  7. Action plans and controls • Assigned to high inherent risks • Tracked by line management • May be no action - accept risk • Record of the risk reward profile judgement

  8. Operational Risk Loss Reporting • Integral part of Operational Risk Management process • Benefits are: • Improved risk management • Improved efficiencies • Improved business decision making

  9. Individual incident loss reporting • Many issues about quantification of individual losses • Boundary issues between credit and OpRisk • Near misses and potential losses • Validation (not reconciliation) against the financial records • We provide individual guidance, then standardise

  10. How do we record our Operational Risk framework? • Group Operational Risk Database Online Network (GORDON) • Web-based browser • Risks input and approved by business line

  11. Governance • Group manuals structure used • Approved by Board • Reporting to committees of Board • Locally, challenge process by the ORMG

  12. ORMG • Oversees Operational Risk framework in site/business • Challenges business Operational Risk assessments and loss data • Reviews exposures and mitigation • Escalates issues to executive management

  13. Management - Training • Local sites implemented training to meet business needs e.g. case studies, workshops. • Material live on Group Intranet People Process Systems External

  14. Operational Risk Umbrella People Process System External IT Security Money Laundering Legal Business Recovery Compliance ORMG E-Risk Fraud Risk Regulatory

  15. Role of measurement - HSBC philosophy (1) • We plan to adopt the Standardised Approach for the Group • But we comply where the local regulator requires AMA, e.g. in the USA

  16. The role of measurement - HSBC philosophy (2) • Measurement adds value only if it contributes to management • We have an AMA which directly harnesses our risk assessments • The development is being closely monitored

  17. Any Questions?

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