- operational risk is arising from an unforeseen situation associated with the
operation of information and communication facilities, in particular human error,
technical failure of software or other means or systems of communication, as well as
hacking or terrorist attacks on systems;
- legal risk is a risk of loss due to unexpected changes, the enactment or repeal of
legislative or other standards or due to the impossibility of enforcing contracts in a
compulsory legal order.
Figure 2. Classification of risks
Source: Own elaboration
In the case of «Lehman Brothers» bankruptcy in 2008, a working group from the
study of the situation has found that no one seriously manage risk agreements which
are concluded in the post-trade infrastructure. It was in 2008, when the financial crisis
has already entered into force, the Chairman of the Board of Governors of the Federal
Reserve asked for Congressional authority to oversee systemically important payment,
clearing and settlement systems, arguing that the fact that many major central banks
around the world already has such powers established by law. However, the stability
of financial systems is constantly expanding and demands that key payment, clearing
and settlement systems continuously worked in stressful situations and to effectively
manage the risks of default of counterparties.
What about the post-trade infrastructure, the legislation of foreign countries
defined it through the concepts of payment, clearing and settlement activities as
activities carried out by one or more financial institutions in order to facilitate closing
of financial transactions. At the same time, the term “financial transactions” included,
among other things, money transfers, futures contracts and securities, repo, foreign
exchange contracts, contracts with derivative financial instruments and swaps. The
activities of payment, clearing and settlement did not include any offers or sales of
securities, or any pre-trade operations, or the implementation of quotation procedures
or issuance of orders at tenders.
Risks on the stock market of
financial derivatives
Systemic
Liquidity
Credit
Legal
Operational
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