Corporate governance is the system that can efficiently direct and manage company via the good structure and policies. Companies can be encouraged in positive way by good corporate governance structure such as generate significant value, provide accountability and control systems commensurate with the risks involved. HSBC is one of the companies that committed to high standard of corporate governance.
There are several essentials of corporate governance that can be chosen to be main point of governance such as the board management effectively monitored, key business values, high level of integrity, high standards of accountability or high regard for shareholder value and equitable treatment of shareholders. However, HSBC has chosen internal control procedure to control the company and committees are appointed by the board to be representative. The principal committees are Group Management Board, Group Audit Committee, Remuneration Committee, Nomination Committee and Corporate Sustainability (CS) Committee. For more efficient, a code of conduct for transactions in HSBC Group securities has adopted by Directors of HSBC Holdings that complies with The Model Code in the Listing Rules of the Financial Services Authority and with The Model Code for Securities Transactions. Primarily, to take into account accepted practices in the UK, particularly in respect of employee share plans.
Furthermore, the directors are responsible to reviewing the effectiveness of internal control. Procedures are designed to manage rather than eliminate the risk of failure to achieve business objectives. They have been design for safeguarding assets against unauthorized use or disposition, maintaining proper accounting records and for the reliability of financial information used within the business or for publication. Such procedures that are established are designed to provide effective internal control within HSBC and accord with the internal control.
Internal control procedures of HSBC includes authority to operate the various subsidiaries, and responsibilities for financial performance against plans and for capital expenditure is delegated to their respective chief executive officers within limits set by the Board of Directors of HSBC Holdings. Functional and local management also can supplemented operating standards set as required for the type of business and geographical location of each subsidiary which these influence on effective governance. The committees who are responsible to monitor in risk, operational error, changes in the market prices of financial instruments, liquidity, operational error, breaches of law or regulations, unauthorized activities and fraud, have monthly meeting to minutes the risk and submit to the Group Audit Committee and then report to the Board of Directors.
Preparing periodic strategic plans and rolling operating plans and also set out the key business initiatives and the likely financial effects of those initiatives for key customer groups, global product groups, support functions and certain geographies within the framework of the Group Strategic Roadmap. Moreover, the authorities to enter into credit exposures and market risk exposures are limited to line management in the subsidiaries, which policies are set by functional management in Group Head office. The effectiveness of internal control structures across the whole of HSBC are monitored by the internal audit function which focus on areas of the greatest risk that should be determined. The recommendations that made by the internal audit function are responsible of management to deal within an appropriate and agreed timetable. Also, must confirm annually to internal audit that their controls have taken or are in the process of taking the proper action. In addition, the effectiveness review of this system of internal control and has reported regularly to the Board of Directors to figure out appropriate way to implemented. Especially, where unexpected losses or incidents have occurred the Group Audit Committee has reviewed special reports, which analyze the cause of the issue, prepared at the instigation of management, the lessons learned and the actions proposed by management to address the issue.
HSBC has 490 regulators around the world who have to regulate appropriate policy to apply on different subsidiaries area because the operations of HSBC are carried out by different operating subsidiaries, including HSBC Bank plc, HSBC Bank USA, HSBC Latin America, HSBC Mexico and The Hong Kong and Shanghai Banking Corporation. The regulation of HSBC defers to local regulatory; for instance, the UK Financial Services Authority (FSA) acts as the Group's lead regulator but still defers to local regulatory authority in respect of offices outside UK. Similarly, in Hong Kong the Hong Kong Monetary Authority (HKMA) is our regulator. It has issued its own corporate governance standards "Supervisory Policy Manual CG - 1: Corporate Governance of Locally Incorporated Authorized Institutions". This regulator has set minimum standards relating to composition and responsibilities of the board, obligations of directors, use of committees, and various specific requirements relating to risk management, connected lending, frequency of, and attendance at, board meetings and regular reviews. Moreover, HSBC regularly updates its policies and procedures for safeguarding against reputational and operational risks. HSBC emphasizes reputation safeguarding which is the responsibility of every member of staff.