5. Approach to Risk Management
5.5 Operational Risks
|
Clearing houses generally use an array of internal controls and safeguards to limit the various operational risks they face. In particular, clearing houses depend critically on the operational infrastructure - computer systems, communication systems, power sources and data feeds that underlies their trade processing and risk management systems, and operational safeguards must address both availability and adequate capacity in each of these areas. Perhaps most fundamental is the clearing house's need to establish backup facilities for automation, communications and power sources. Clearing houses generally have off-site centres where data are stored and to which processing can be shifted within the day or within a few hours. Redundant power sources and communication lines are also common safeguards. Data security is important for clearing houses, both to prevent fraud and unauthorised use of information and to ensure that the information necessary for the completion of settlement is available. In order for markets to continue to function properly, it is important not only that the clearing house establish adequate operational safeguards, but also that clearing members take similar steps. Some clearing houses consider operational capabilities in their membership requirements and in their periodic examinations of member firms. Clearing houses also depend critically on qualified staff in order to avoid human errors that can compromise the reliability of even the most sophisticated systems. Hence, clearing houses seek to ensure that staff are appropriately trained and effectively supervised.
|
Contact us *
Risk Library *
Documents by Author *
Committees at the Bank for International Settlement (BIS) *
Clearing Arrangements for Exchange-Traded Derivatives *
5. Approach to Risk Management
