We will take it as understood that it is always best to avoid physical conflicts, and to try to resolve conflicts without violence. There will always be injuries in a physical fight; even the person throwing the punch feels pain. There are often legal problems for all involved.
If the other person is looking to start the fight you will want to calm them. If you clench your fists it can send the message that you want to retaliate; they may think a fight is imminent. This is probably why a person holding up upon hands is understood to be backing off.
Even if you cannot avoid a fight the open hand leave you more possibilities. If the opponent tries to kick you your open hand is ready to catch their leg; an open hand is also better if they are wielding a weapon. A clenched fist is only good for a punch, which is an attack. Concentrate on defence.
The open is much better for blocking a punch; all the better if you want to counter strike. It is also an advantage for feinting, where you divert the opponent with a move or an apparent attack. An incoming open hand seems a bigger threat to an opponent than it actually is. They will move to avoid a perceived threat.
For those who think clenched fist are an advantage, consider the number of injuries sustained to clenched fists even by professional boxers. Broken fingers (a boxer’s fracture) is not something you want to contend with.
One of the biggest problems with the treat of an attack is not so much the knowledge of defence moves as the ability to handle the situation well. How we react in a crisis is paramount. All the technique in the world is useless if we freeze up when threatened. Some of this can be countered with reflex reactions. If we have been trained to automatically throw somebody when they grab us from behind we can find that we respond correctly, even without considering the situation.