Professional Documents
Culture Documents
TM
Systems Professional (CIPSP)
Module 2
Risks in Payment Systems
Module Objective
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Settlement Risk
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X
X
Roger makes payment to Sports Shop. Sports Shop does not deliver.
This is called the First Payers Risk
Roger makes payment to Sports Shop. Sports Shop delivers the Kit.
Subsequently, the cheque issued by Roger bounces.
In this instance, Sports Shop delivered the kit thinking that Roger has paid.
This is called the Receivers Risk
Roger makes payment to Sports Shop. Sports Shop delivers the Kit.
Subsequently, Dhoni issues Stop Payment instructions to his bank.
In this instance, Sports Shop delivered the kit thinking that Roger has paid.
This is called the Unwinding Risk
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Herstatt Risk June 26, 1974 3.30 PM
Newsflash:
Bankhaus Herstatt is liquidated
by German Central Bank
X
it paid US Banks
US Banks
paid Herstatt
Transaction
US Banks to pay DEM equivalent of USD 620 Mio
Herstatt Bank to pay US Banks USD 620 Mio
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Settlement Risk
Time
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Liquidity Risk
X
X
Roger walks into Sports Shop Sports Store and purchases a kit
While checking out, he finds that he has forgotten his wallet at Home.
Roger now faces what is called as the Liquidity Risk
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Systemic risk
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What is operational risk?
The risk of direct or indirect loss resulting from
inadequate or failed internal processes, people and
systems or from external events.
Excludes reputational and strategic risks
Includes legal risks
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THANK YOU!
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