Outside the comfort zone: FX e-commerce operates in a new era of Risk

Dr Andrew Aziz, Executive Vice President, Risk Solutions, Algorithmics, Justyn Trenner, CEO of ClientKnowledge and and Steve White, Executive Director, RiskCare discuss the importance of forward-looking risk frameworks that link transaction level decisions with high level strategy and their applicability to the FX market.

Dr Andrew Aziz, Justyn Trenner and Steve White Do we live in a new world of foreign exchange risk? The thing is, it is much like the old world, only a great deal faster and a great deal busier. So the old paradigms of risk seem to apply – counterparty risk, processing or settlement risk, technology risk, market risk, criminal risk and of course, the more general risk of losing your clients. However, read into this volumes that are three times those at the start of the decade, messaging volumes that are more than ten-fold, frequency of trading that is multiples per second and technology specifications leading to microsecond measurements (as against old-school refresh rates measured in the once-a-second frame). Speed does funny things to people’s thinking. It makes them focus with remarkable intensity on some elements of the spectrum – the one that showed itself last month at your competitor, or the one that seems to be generating previously wholly unpredictable losses, or the one that...continued

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