| Emmi
> Risk Management
AMIC recognizes three broad categories of risk
to which the IPA is susceptible - transactional
risk, operational risk and compliance
risk. Each of these categories of risk contain
sub-categories and all are addressed by user-specifiable
automated processes and real-time dashboard-like
facilities allowing the user to manage risk using
one of the following recognized methodologies:
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Risk
avoidance: raising or lowering
monitoring parameters to meet changing market
conditions. |
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Risk
control: enacting real-time monitoring
processes to automatically block or flag
out of bounds transactions. |
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Risk
transfer: the use of risk monitoring
parameters to automatically flag out of
bounds transactional parameters resulting
in either the mandatory acceptance of a
transactional parameter change or the blocking
of the transaction. |
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Risk
monitoring: the ability to view
current and future risk conditions on an
aggregate basis. |
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Risk
acceptance: Acknowledgment of risk
but not taking any action. |
Transactional Risk
Emmi views transactional risk as the acceptance
of a transaction, either entered directly into
the system or received by the system from an external
source (PIMMS/EPIMS or broker/dealer system such
as CanDeal), where the terms of the transaction,
or the aggregate obligation resulting from the
acceptance of the transaction, might result in
a default.
Emmi allows the creation of risk management
rules to govern the use of rate, yield, calculation
and currency exchange rates (spot and forward).
These rules can be applied on a per-transaction
basis and on an aggregate basis to governing
both current and future payment obligations.
Out of bounds parameters can be managed using
hard or soft actions where
transactions are blocked, flagged or returned
to the originator for change of parameter.
Emmi provides extensive reporting capabilities,
including custom ad-hoc reporting, that can
be used by department external to the IPA group
to manage specific types of risk exposure. An
example of this capability might be the monitoring
of treasury obligations pertaining to transactions
involving currency swaps. If desired, these
parameters can be stored by the system as a
procedure that is run on a schedules
basis automatically creating reports that are
delivered to a distribution list by email.
Because risk management is an ongoing process
driven by changing market conditions and evolving
types of instruments being offered, AMIC is
willing to work with IPAs to modify and refine
Emmi's risk management suite.
Operational Risk
Emmi views operational risk in much the same way
as it has been defined by the Basel Committee on
Banking Supervision (BCBS), "The risk of loss resulting
from inadequate or failed internal processes, people
and systems or from external events." Basel II goes
on to further define "processes, people and systems"
terms of execution, delivery or timing errors and
"external events" in terms of business disruption
resulting from utility or hardware failures. Execution,
delivery and timing errors are
addressed by Emmi in the following manners:
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Where possible,
trade initiation by an all-parties approved
external system such as DTCC's PIMs or Thompson's
CanDeal is allowed creating an environment
where there is a single transactional entry
shared by all participants (STP). |
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In all cases, regardless
of the transactional initiation source,
Emmi extends the opportunity to affirm trades
to all non-originating participants and
in instances where trade initiation is the
result of transactional input into the Emmi
interface by an issuer, Emmi provides the
option to establish rules requiring second-party
validation by the issuer. |
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Emmi provides the ability
to establish logical parameters governing
transactional terms such as rate, yield,
spot and forward rates minimizing the possibility
of transactional input errors. |
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Emmi automatically enforces
established parameters for existing instrument
types based upon their country of issuance
(day count basis, term, calculation method,
etc) and allows the user to define new parameters
as new instrument types evolve. |
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Compliance Risk
Most compliance mandates pertaining to IPA activities
govern reporting and business continuity
and, as noted above
in the Basel II definition of risk, actually fall
under the classification of operational risk.
That said, the activities required to meet compliance
mandates are usually managed separately and deserve
separate attention.
Emmi provides extensive reporting capabilities,
including the self-documentation (audit trail)
of all setup system, user, and issuance program
parameters as well as a complete audit trail of
all phases of the issuance process
Business continuity is provided, if needed, through
optional offerings such as fault tolerance, disaster
tolerance, remote-site hosting and disaster recovery.
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