Forex dealers’ risk management systems: basic standard
From 1 September 2024, forex dealers should adjust their approaches to risk management. The Bank of Russia has approved a new basic standard. It specifies requirements for maintaining a risk register and evaluating risks and delineates the powers of a forex dealer’s governance bodies and risk management function when they organise such procedures.
Risk management is a single and continuous process. It involves identifying risk events, evaluating their consequences, determining an acceptable risk level and developing measures to mitigate it as well as controlling all of the above stages.
The document contains a list of core risks. They include financial risks (market, credit, and liquidity risks) and non-financial ones (commercial, reputational, operational, legal, and other risks). Forex dealers should identify risks, evaluate them, and prepare response measures. Also, organisations should establish acceptable risk levels and maintain risk registers in order to better control the risk levels.
In addition, the standard determines the procedure for calculating overall financial results obtained by forex dealers’ clients under contracts concluded. A separate section of the document stipulates the requirements for forex dealers’ software and hardware and for ensuring information security of automated systems when they are developed and operated. The document recommends that forex dealers audit their software and hardware at least every three years.