In the wake of the global financial crisis of 2008 and in consultation with our Board, we have been extensively strengthening our risk management capabilities. During 2011 many elements of this transformation yielded results. We began formulating a multi-year strategic plan to guide this transformation and articulate a business end state. We remodeled our governance structure; upgraded our risk management talent and expanded our risk staff; reconfigured our quantitative risk models; and began enhancing our risk-monitoring reporting. We also initiated a broad educational program for our members about our risk management and mitigation activities, and equipped employees with additional risk management training. Working with our product areas, we have effectively reshaped some of our existing product offerings to better address risks in current and future market conditions. Several important risk-related product additions are also well along in the approval process.

A few words about our employees, the source of any effective risk management program: everyone at DTCC is expected to be a risk manager, and one of our highest priorities has been to cultivate this awareness throughout the organization. We have fostered employee education with a broad range of resources and activities. Senior management-led town hall meetings, coupled with in-depth discussions with business-unit heads, gave context and support to this transformation. Other educational guides ensured that staff members were fully versed in the issues and in their responsibilities. Risk management competencies and behaviors have been incorporated into job descriptions, performance management and reward systems. Ongoing training programs have increased employee understanding of operational risk, compliance controls, information security and privacy awareness, while other courses are helping employees develop the skills to think much more critically and deeply about risks in their areas of responsibility.

DTCC is also retooling our risk management practices to prepare for heightened regulatory standards and market expectations. In the coming years we expect to face a growing centralization of risk management and increased member concentrations at CCPs; the need for more comprehensive and precise margining calculations, enhanced liquidity resources, and more timely risk exposure data; and the continued expansion and interconnectedness of markets globally.