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Good morning everyone. We are really pleased to have our Me mbers, MAS, FIA, and SAS join us today for our presentation of the newly published Credit Risk Management Guide.
You will recall that last year, in response to heightened volatility and surging volumes during COVID, we issued the Algorithmic Trading Guide to share best practices on governance and risk controls that SGX members should have when using algorithms in trading.
This year, the industry has been hit by several high-profile client defaults, resulting in some serious losses.
While the majority of our membership was relatively unscathed because of the overall robust level of controls and by virtue of having to adhere to a prescriptive margining framework, the collapse of multiple clients nonetheless holds many lessons for us, including the importance of having in place effective credit risk management.
We hope to reinforce through the Credit Risk Guide, the 3 key drivers in risk management: People, Processes, and Policies and Procedures.
You will of course be familiar with the tools of the trade, the processes, putting in place proper risk limits, calculating and monitoring exposures, diligent margining, and having a maker checker workflow.
Even more important is how you use these tools, the policies and procedures that determine how sensitive you are to early warning signals, how willing you are to escalate your concerns, and how ready you are to make difficult unpopular decisions with business and clients, including order and trade rejection if the situation warrants it.
Most important of all, is the people, the people wielding all these tools, starting with the people setting the tone at the top to encourage a strong risk culture. Then, the people at each level: are the people adequately resourced and experienced and senior? Do they have the character and caliber and independence to stand up to business and clients and do the right thing?
The Guide articulates the best that we have seen from our Members in these 3 key areas. We want to work together with all of you to raise standards across the board in credit risk management, to ensure that we continue to operate effectively as our firms move to a hybrid model of working, for a more sustainable and prudent business growth. Thank you.
