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DTCCs Systemic Risk Office Strengthening Industry Ties to Combat Systemic Risk

By Michael Leibrock, DTCC Managing Director and Chief Systemic Risk Officer | July 30, 2018

DTCC’s Systemic Risk Office: Strengthening Industry Ties to Combat Systemic Risk

In recent years, the risk landscape has evolved into an array of threats that require a holistic view and collaborative response.

Given our unique position in the center of the global financial marketplace, our ability to identify and evaluate systemic risks is critical to maintaining the stable operation of the global financial system.

With that goal in mind, DTCC formed the Systemic Risk Office (SRO) in 2010 with the mission to focus on the unique risks facing DTCC due to its numerous touchpoints and exposures across the financial ecosystem. Headed by myself and Adrien Vanderlinden, DTCC Executive Director and SRO Team Lead – the SRO is organized around the following five (5) strategic pillars:

1. Identification and Assessment of Systemic Risks
2. Thought Leadership and Risk Educational Materials
3. Client Outreach and Industry Engagement
4. Regulatory Support
5. Internal Support and Engagement

Industry Engagement

One way we drive collaboration around systemic risk issues is through industry events, which offer a forum to exchange ideas among risk management professionals on a variety of topics, including how to collectively address current and emerging risks that are impacting the industry. As an example, we launched the DTCC Systemic Risk Roundtable Series in 2015 to meet this objective and now, in its fourth year, this cohort continues its work in developing collective strategies to mitigate risks. We have been very pleased with the positive momentum we’ve gained through this group’s collaboration as it underscores our client centric approach to doing business.

In fact, the most recent Systemic Risk Roundtable session generated several requests for additional dialogue, as well as invitations for my DTCC colleagues to join industry working groups and client meetings – all with the aim of increasing collaboration and engagement with our clients.

In addition to our Systemic Risk Roundtable Series, our client outreach initiatives include the Risk Advisory Council (RAC) and DTCC’s Annual Client Risk Forum. The RAC, which comprises senior risk managers from our client firms, provides clients the opportunity to offer their feedback and perspective on key risk DTCC initiatives, prior to implementation. The DTCC Annual Client Risk Forum serves as an opportunity to showcase current thought leadership and in-flight DTCC initiatives, while providing Forum members a preview of our solutions that are under development. Additionally, SRO conducts meetings with our clients (upon request) to continue focused discussions on systemic risk concerns.

What Do You Mean by “Systemic Risk”?

Systemic risk in the financial markets is defined as the risk transmitted across the financial services industry due to an adverse event/series of events within the markets. In turn, this transmission may lead to severe impairment, disruption, or degradation of the effectiveness and/or efficiency of the intermediation function, which may also impair the unencumbered functioning of critical infrastructures such as DTCC. This risk could be introduced by either financial industry members or external parties.

Sharing Information to Build Resilience

The SRO’s main objective is to collaborate with and protect the stability of the financial services industry. We focus on building and strengthening ties between members of the financial services industry, which enables more effective information-sharing so that we can identify, and where possible, contain potential systemic risk threats.

The insights we gained from these types of interactions provided the background for a series of white papers covering key risk topics such as fintech and financial stability, trends and risks in market liquidity, interconnectedness risk and cyber risk.

Our 2013 white paper, Beyond the Horizon a Whitepaper to the Industry on Systemic Risk, served as our initial external thought leadership effort to educate and raise awareness about systemic risk across the financial services industry. This white paper provided an industry playbook on how systemic risks could be addressed, and served as the foundation for DTCC’s Systemic Risk Barometer Survey. This white paper also generated momentum leading to the launch of DTCC’s cross-functional Interconnectedness Risk Initiative.

Systemic Risk Barometer Survey

First launched in 2013, the DTCC Systemic Risk Barometer Survey, is an effective tool we use to gather feedback from our clients to identify their top risks and concerns. It allows us to prioritize our internal and external initiatives and ensures we are aligned with client needs. The Survey also serves as an annual pulse check to monitor emerging trends. Survey results (coupled with client insights on risk mitigation strategies within their respective firms,) inform the SRO’s thought leadership campaigns, provide content topics for speaking opportunities and SRO’s Risk Assessment (included in our monthly Systemic Risk Flash Report).