Operations and settlement risk in extreme market conditions

Abstract

Although in the aftermath of the 2007–08 crisis, commentators and regulators focused mainly on credit risk (as the primary cause) and on prudential regulation overhaul (as the primary remedy), operations practitioners, as well as the savviest risk managers, have learned a few other critical and highly practical risk management lessons. These lessons revolve around the challenge of providing continuity to oper­ations in extreme market conditions, the threat to the business from the default of key counterparts and/or agency services providers, the gap between the complexity of operations conceived in the front office, and the tools available in the bac/ office to handle them.