Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 232

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 232
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 with a programme of work in progress to implement these changes across our model landscape. – We completed a review of model tiering across the organisation assessing the materiality and complexity of all models and assigning a new tier which will drive the level of oversight required at model level. – We introduced a new framework to govern and manage the risks associated with Deterministic Quantitative Methods. These are complex and material calculators, which although not technically models, still present similar risks. – Model Risk Governance committees at the Group, business and functional levels continue to provide oversight of model risk. – Model Risk Management works closely with businesses to help develop IRB/IMM/IMA/IFRS 9/stress testing models to meet risk

| HSBC Holdings plcAnnual Report on Form 20-F | 153 |

management, pricing, capital management, and credit risk measurement needs. – Additional assurance work is performed by the model risk governance teams, which act as second lines of defence. The teams test whether controls implemented by model users comply with model risk policy and if model risk procedures are adequate. – Models using AI or generative AI techniques are reviewed by the relevant risk teams and monitored by the business to help ensure that identified risks have adequate oversight and review. A framework to manage the range of risks that are generated by these advanced techniques and to recognise the multidisciplinary nature of these risks has been developed. Change execution risk The needs of our customers are evolving faster than ever, and the complexity and pace of strategic, regulatory and technological change require us to improve the way we prioritise resources and deliver strategic outcomes safely and sustainably. The embedding of structural changes throughout the Group, arising as part of the reorganisation of our businesses announced in October 2024, is expected to enable the strategy to be executed more efficiently but may elevate the level of change execution risk in the near to medium term. Mitigating actions – We have strengthened our investment case and prioritisation processes, while improving the monitoring and oversight of our change portfolio and overall operating control environment. – The Change Prioritisation and Oversight Committee continues to oversee the prioritisation, strategic alignment, and management of execution risk for strategic change portfolios and initiatives. Additionally, the HSBC Holdings Board provides enhanced oversight over the simplification programme, directly supervising its mobilisation and delivery. – Change benefits and funding will be aligned to the new Group organisational structure. Consideration of integrated business and technology architecture design will be a critical input to our prioritisation of future change investment. Risks associated with workforce capability,