DTCC Connection

Dec 18, 2013 • DTCC Connection

DTCC Initiatives Focus on Systemic Risk Management

By Theresa Pagliocca

With systemic risk mitigation still a top concern among many financial firms, DTCC is continuing to engage with clients and other stakeholders to heighten industry awareness of this critical issue and to share insights on new tools and resources to protect against these potential threats.

As part of its latest outreach to the industry, DTCC recently hosted a live webinar and launched a four-part video series to draw greater attention to the issue of systemic risk and to continue the public dialogue it began earlier this year with the release of its white paper, Beyond the Horizon: A White Paper to the Industry on Systemic Risk. The white paper provides an overview of key systemic risks, including cyber, the impact of new regulations, counterparty and collateral risk.

“While the industry has made significant strides in reducing the level of risk in the system, we need to be vigilant because new systemic threats will continue to emerge and have the potential to destabilize the system,” said Walter Stewart, Managing Director, Operational Risk Management. “Client and stakeholder engagement is critical to this effort because it keeps the issue on the front burner and also helps focus industry-wide attention on the ongoing importance of anticipating, addressing and resolving future systemic risks.”


Connecting with Clients

The webinar allowed DTCC to gather nearly 60 stakeholders together for an interactive discussion on three key systemic risks featured in the white paper – cybersecurity, collateral processing and technology risk. Five DTCC subject matter experts provided an overview of the threats posed by each of these risks and steps the industry can take to mitigate them. They also highlighted new DTCC initiatives that are focused on more effective systemic risk management.

In addition to the webinar, DTCC’s four-part Systemic Risk video series, which launched in late November, allows clients to delve deeper into risks related to settlement, collateral, technology and compliance. The series, hosted by Mike Leibrock, Vice President, Systemic Risk and featuring several senior-level DTCC executives, was designed to raise greater awareness of these risks and spur an industry-wide discussion on solutions.

“History tells us that systemic risks will continue to evolve and morph over time and remain an ever-present threat to the stability and integrity of the global financial system,” said Leibrock. “While certain systemic shocks cannot be predicted, there are many more that can be anticipated and mitigated if we remain committed to addressing them before they grow too large or overwhelming. The outreach we’ve conducted with clients, regulators, policymakers and others since the release of the white paper has generated a lot of new ideas on how the industry can approach current and future risks and will enable DTCC to continue to play a broader role in this effort.”


An Eye on 2014

DTCC is expected to begin work on a new systemic risk survey in 2014, which will help inform future white papers and galvanize industry support for new initiatives to mitigate potential systemic threats.

“We view industry collaboration as essential to the success of this effort and look forward to partnering with a wide range of experts to advance the issue of systemic risk mitigation,” Leibrock said.


A Deep Dive on Systemic Threats

DTCC’s Systemic Risk Video series offers viewers a detailed discussion on four top systemic threats facing the industry. Here’s a short recap of the videos:

Settlement Risk: Dan Thieke, DTCC, Managing Director and General Manager, Settlement & Asset Services, discusses several key initiatives DTCC is advancing to reduce settlement risk, including settlement matching and shortening the settlement cycle, as well as the anticipated challenges in the settlement space in the coming year.

Collateral Risk: Mark Jennis, DTCC, Managing Director, Strategy and Business Development, highlights the industry’s collateral management infrastructure, the impact of regulations and key initiatives DTCC is advancing to reduce collateral risk.

Technology Risk: Bill Kapogiannis, DTCC Vice President, Equity Clearing, focuses on challenges in the trade capture and reporting space, including key initiatives DTCC is advancing to reduce technology risk as well as the anticipated upcoming challenges in the trade technology space.

Compliance Risk: Mihal Nihari, DTCC Managing Director, Chief Compliance Officer, talks about risks and compliance challenges facing the industry in addition to changes DTCC has recently made to help reduce compliance risk.


Systemic Risk Webinar Targets Three Systemic Risks

In the recent Systemic Risk Webinar, Adrien Vanderlinden, Director, Systemic Risk, provided attendees with an overview of cybersecurity, collateral processing and technology risks and was followed by more detailed information from DTCC subject matter experts. Here’s a short recap of the presentations:

  • Mahi Dontamsetti, DTCC’s global head of IT Risk & Application Security, explained why cyber security is expected to remain arguably the top systemic threat and provided examples of recently emerging threats, including malicious data encryption and data destruction.
  • John Abel, DTCC Vice President, Equity Clearance & Settlement, highlighted DTCC’s developing Margin Transit Service as a potential response to collateral processing risk. He explained how the service will provide a real-time window into the collateral processing lifecycle while offering straight-through processing from the point of agreement of the margin call through settlement.
  • Bill Kapogiannis, DTCC Vice President, Equity Clearing, discussed potential technology risks and outlined recent updates to NSCC’s trade capture and reporting system aimed at mitigating these risks.
dtccdotcom